Huge swathes of millennials are betting big on cryptocurrency – perhaps too big, new research shows. In fact, more than a quarter of them are so confident in Bitcoin, Ethereum and the like that they are betting their retirement on wallets filled almost entirely with crypto.
Explore: Answers to your most important financial etiquette questions
Looking to diversify in a bear market? Consider These 6 Alternative Investments
There is no doubt that blockchain-based currency is poised to play a major role in the future of investing, the economy, and digital life in general. But when it comes to the trend of millennials betting their retirement on computer-generated tokens, GOBankingRates spoke to several experts who think they might be placing far too much faith in a trendy, but risky and uncertain investment. .
Here’s what these experts suggest.
Giving his opinion on whether teens and young adults should rely on crypto for their retirement funds, Clark Hodges, co-owner of Hodges Capital Managementis perfectly clear on its position.
“No, no, no,” he said. “As I sit here and contemplate the millennials who look to cryptocurrencies as the foundation of their retirement plans, I’m really concerned about their future.”
He’s not averse to crypto playing a role in any portfolio, but he does think betting on Bitcoin is a recipe for regret in old age — and it’s not just crypto. Any high-risk, high-reward asset should only be a small slice of your portfolio pie, especially an asset that’s still so new that its regulatory guidelines haven’t even finished cooking.
“A risky asset should be a small part of a retirement strategy, not the full strategy,” he said. “Cryptocurrencies are still very new and unregulated assets, which increases their risk. What will the landscape look like once the government steps in and has its effect on the cryptocurrency market? I wouldn’t want to own the cryptocurrency in a major way while this is unfolding before our eyes. Traditional stocks and bonds and real estate assets as a long-term retirement strategy are still the most proven way to grow wealth over time. Do what has worked for decades. Buy good quality US companies with good quality earnings that increase in value because the companies make more money year after year.
Take part in our survey: do you think you can retire at 65?
Do you have the self-discipline to run slow and steady?
It’s easy to see why crypto is such a tempting lure when your portfolio tracker chart is soaring.
“Investing in crypto is exciting,” said Matthew Robbs, founder of Smart Savings Tips. “If you choose the right coin at the right time, you can get five, 10, or 100 times your investment in a few months or years.”
However, picking the right coin at the right time is easier said than done, and overvalued speculative investments tend to flounder.
“Over the past two years Bitcoin went from $10,000 to $55,000 in five months and then from $55,000 to $33,000 in four months,” Robbs said. “Bitcoin then rose to $69,000 before dropping to $17,000 over a seven-month period.”
The remedy for such extreme volatility is the same that can smooth out stock market turbulence – by making steady, consistent contributions over time that will even out peaks and troughs. The simplest method is average buying, but it takes a lot of discipline when the highs are so high and the lows so low.
“Crypto’s volatility is great when it’s going up, but most people don’t have the guts to continue mid-cost crypto when it’s down 75% over a seven-month period, like it has. recently,” Robbs said. “Investing some of your retirement funds in crypto can be a good idea as long as you continue to do so on a monthly basis for many years to come.”
Whatever you do, don’t sink everything you have in the crypto markets all at once.
“Investing all of your retirement income into crypto for a 75% drop in a seven-month period will likely cause you to give up,” Robbs said. “Right before he started making another swing.”
The biggest mistake might be to assume that big crypto bets are okay for one generation but not for another. While younger investors generally have more time to absorb larger losses and can therefore afford to take greater risks, the ground rules of the game apply regardless of age demographic.
Remember, the future, you will live and die by today’s investment decisions. Make them count, because there will be no revamp.
“No one, let alone millennials, should rely on cryptocurrency to fund their retirement plan,” said Taylor Tepper, investment and retirement writer for Forbes Advisor. “You have a chance to accumulate enough savings to enjoy a secure stream of retirement income. It’s better to invest those savings in a well-diversified portfolio of stock and bond funds — a recipe that’s been proven over decades — than to estimate Bitcoin’s long-term success. Cryptocurrency fans would probably be better off investing a small portion of their savings – say, 5% – in order to satisfy their itch. Anything more, however, is too risky.
More from GOBankingRates
#millennials #rely #crypto #retirement #crypto strategy