Sunday, February 4, 2018

Investing in Bitcoin and cryptocurrencies for retirement is a young man's game

To date we here at The Daily Economist have always tried to paint cryptocurrencies with a neutral brush, although we readily admit our opinions have been much more in favor of resource backed cryptos versus those that are unbacked.

So with this in mind we are this one time getting down from that fence and speaking out strongly against a new trend that is taking place in the realm of pensions and retirement funds.  And that is where a growing number of individuals are putting extraordinary amounts their retirement savings into dabbling in the cryptocurrency markets under the belief that Bitcoin and other cryptos could and will replace the legacy style pensions that are forged in today's financial system.

Graphic courtesy of Cointelegraph

Retirement accounts, mutual funds, and 401K's have for the most part tracked a similar pattern over one's working lifetime.  During one's early working years more money is allocated to riskier investments in higher percentages because you had the element of time in your favor if the markets recessed, or a certain asset you owned crashed entirely.  Likewise as you grew that nest egg and got older in your life, one's investment decisions changed to less riskier options, albeit with a lesser potential for growth.

Thus when you are at a stage in life where people normally begin living off their principal, any risky investment should be considered a No Go venture.

Cryptocurrencies are extremely risky assets, and volatile to the point where they can rise and fall upwards of 65 - 300% in any given 30 day period.  Thus the time for dabbling in these markets is when you are much younger in your working years, and when you have the time on your side to recover should they collapse or even cease to exist in the future.

Additionally, one should allocate much smaller percentages of their investment monies to the most riskier of assets, despite what age one is investing at.  But unfortunately the greed and euphoria of the cryptocurrency mania is throwing conventional wisdom completely out the door, as we are now seeing people putting large portions of their principle into the cryptocurrency markets with the hope of being able to live off those profits in retirement.

It would be arrogant and especially fiscally irresponsible for us or anyone else to tell you what you should invest in, and thus we try to limit our opinions to showing all sides of a story whether it be in regards to stocks, real estate, precious metals, and cryptocurrencies.  And from there we would hope not only that you are able to make a sound decision on what to invest in, but that you would always in the long run profit from whatever choices you make.

And one of the most important rules we can try to convey to you is, ALWAYS have your exit strategy in place for any investment BEFORE you put one single dollar in towards that asset or security.

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