Bitcoin has been heavily marketed to investors and would-be investors. This cryptocurrency was once a word that floated around the internet in certain circles. Now it’s becoming a household name. Even if you don’t know what bitcoins is, you’ve probably heard of it.
If you are investing in bitcoin, don’t neglect to diversify. In my book, Money Matters: 21 Practical Lessons To Everyday Success, I explain that investing isn’t gambling. Through diversification, returns can be averaged over a longer period of time, allowing investors to take advantage of compounding. I consider bitcoins to still be on the speculative side of investing and advise many of my clients to invest no more than 5%-10% of their overall portfolio into exploratory or speculative investments. This includes speculative stock of companies that do not have a track record.
So, is bitcoins a fad? Or will it be here to stay?
Ultimately, we will not know exactly how cryptocurrency will fit into the overall market until the next crash happens. Will merchants still exchange goods for bitcoins then? When the next crash happens, the weak hands will be wiped out as they usually are and we will see where the cards fall. This happens in every business cycle, though; we just haven’t experienced one yet in the age of bitcoin.
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Contributor Adam Torres CFP®, AAMS® is CEO of Century City Wealth Management and serves as an independent financial advisor to small business and individuals. He has been featured in media such as Forbes, Inc., Fox Business, U.S News & World Report, and Investors Business Daily to name a few.