It’s pretty clear that one of the hottest commodities in the financial world these days is a cryptocurrency, and with literally tons of investors thinking about getting involved, financial advisors all over the country are being deluged with queries. There has been so much hype surrounding cryptocurrency that everyone with some savings accumulated is considering investing in the commodity in order to get rich quickly.
Financial advisors have been fairly consistent in the advice they give to newcomers thinking about investing in cryptocurrency for the first time. Even though this is a wide-open field with very few established rules and standards, there are still some fairly consistent truths that are being passed on to potential investors by today’s financial advisers. Click here to know more.
Expect to lose money
Just like with any other kind of investment, there’s nothing guaranteed about cryptocurrency investment, and it’s entirely possible that you could lose your full investment. Some financial advisors have even expressed the opinion that cryptocurrency is a great deal more like purchasing a lottery ticket than it is about being a legitimate investment strategy.
What they mean by that is that investors should only be willing to put up as much money as they can comfortably afford to lose. One popular financial advisor has equated cryptocurrency investing to gambling, stating that it’s much closer to gambling than it is to real investing. Cryptocurrency investments tend to be high-risk, high-reward types of investments, and that’s something you should keep in mind for the duration of your involvement.
Just like with many kinds of gambling, there’s a very real chance of losing everything – and a relatively small chance of winning big with your investment. That’s why many financial advisers are recommending caution when investing in cryptocurrency – because the likelihood of losing money is greater than the likelihood of getting rich.
Don’t invest if risk bothers you
If risk worries you, cryptocurrency investment is not going to be your cup of tea. The world of cryptocurrency investment is still highly volatile and is subject to some fairly extreme actions that could completely upset the cryptocurrency apple cart. For instance, it’s possible that cryptocurrency could be banned by developing nations and become worthless overnight.
People who become very stressed and anxious about their investments should avoid cryptocurrency, due to the high degree of volatility associated with the commodity. There are many more stable investments that won’t keep you awake at night and will allow you to have more confidence in seeing a return.
Many financial advisers consider cryptocurrency investment to still be in its infancy, and as such, there is a tremendous level of uncertainty about what the future may bring. For that reason, financial advisors are recommending that cryptocurrency investment be avoided, at least for the time being.
Another aspect that contributes to the uncertainty is the fact that there is very little historical data available about investing in cryptocurrency. That means investors have scant information to base their investments on. Typically, crypto investors are only given poor or inaccurate trade data, competition from a number of other investors, supply and demand issues, energy consumption issues, government regulations, and even the loss of wallet passwords.
All these factors can, or at least should be, enough to scare away any new crypto investors. As one experienced financial advisor puts it, there is still no proven way to value the assets, which means that crypto investors are essentially operating in the dark and taking on all kinds of uncertainty associated with this new investment.
Why are you interested?
Some investors are attracted by the appeal of an emerging investment like cryptocurrency, while others see it as having the potential to become a global currency that could replace the US dollar and all other international currencies. However, at this point, it is still completely uncertain whether or not cryptocurrency has the staying power to achieve either one of these lofty goals.
Many financial advisors believe that the hordes of new investors in cryptocurrency are becoming involved for all the wrong reasons, and they don’t truly understand what it is they’re purchasing. That’s why one big piece of advice that the majority of advisers are passing along to new investors is to do plenty of research first, and have a good understanding of what you’re investing in.
It’s a bad idea to jump on the bandwagon and invest in cryptocurrency just because there’s so much hype currently surrounding the commodity. In addition to all that, there are now thousands of cryptocurrencies on the market, and there are vast differences between all these types.
The bottom line is that most financial advisors recommend to their clients that before they become involved in cryptocurrency investments, it’s a good idea to learn everything possible about the commodity first. When you think you have a good understanding, and you know what you’re investing in, then that might be the time to actually put some money into cryptocurrency.