How Much Should You Invest In Bitcoin?


If you follow the markets even casually, you're likely witnessing a modern day gold rush. It isn't the hills of California that are calling investors to find their fortunes, it's the ledgers of blockchain cryptocurrencies. Bitcoin, the best known of the cryptocurrencies, is exploding in value. If you're experiencing some serious fear of missing out, now might be a great time to question how much you should invest in Bitcoin.

Only as much as you can afford to lose.

A position in Bitcoin isn't a sure bet. After all, markets are fickle and what goes up can always come down. It's a mathematical certainty that Bitcoin cannot sustain its meteoric rise for much longer and with so many investors buying the coins with the sole intention of selling them as they appreciate, a good deal is getting harder than ever before to find. If you're willing to tolerate the risk of potentially violent market fluctuations, limit your Bitcoin position to only that which you're willing to lose.

Don't sacrifice traditional investments.

A famous financial adviser tells his callers that "I was so dumb that I had to get rich twice." If you'd prefer to get rich and stay rich, don't turn your back on the tried-and-true method of wealth accumulation. Bitcoin can be fun to invest in and it certainly has a lottery-like element to it, but boring investments in index funds and tax-advantaged accounts will bring a degree of stability to your life that you'll cherish as time goes on.

Never undermine long-term stability in the name of possible gain.

If it's too good to be true, it probably is. Bitcoin certainly made countless people millionaires, but the cryptocurrency is inherently unregulated. With investors losing their positions due to security breaches in their Bitcoin wallets and the inherent volatility of the market, it's entirely possible that we'll wake up one day and read stories of people who invested their life's savings win the cryptocurrency, only to find that they've lost it all. Just as you would never invest your life's work in a single company, putting an impossibly large bet in the cryptocurrency is just a bad idea.

Keep Good Track of Your Investments

When you're working with nontraditional money movement, definitely hire an accounting firm like DSJCPA to keep track of your money. When you have accurate, current reporting to work with, you can most clearly see what's happening with your money and whether you're happy with it.

If you're unsure and still want to invest...

Make Bitcoin a minority position in your portfolio. Limiting your Bitcoin exposure to 5% or less will let you experience the thrill of the cryptocurrency's market movement while limiting your downside potential. If you know that you've got a lottery ticket that might pay off and certainly will not leave you bankrupt if it doesn't, you can have some fun in the market. That same logic applies to Bitcoin investing. Keep a level head, define your objective, and keep your position small.


27 February 2018

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