According to new research, millennials are betting on cryptocurrency – maybe too big. More than a quarter of them are betting their retirements on cryptocurrency portfolios filled almost entirely with Bitcoin and Ethereum.
Cryptocurrencies based on blockchain are sure to play a significant role in the future of investing, the economy, and digital life in general. According to several experts, millennials are putting too much trust in trendy but risky computer-generated tokens as retirement investments.
Don’t risk your future on something unregulated and risky.
A co-owner of Hodges Capital Management, Clark Hodges, is clear on where he stands on crypto and its role in retirement funds for young and young-ish adults. “No, no, no,” he replied. In contemplating millennials considering cryptocurrencies as the basis for their retirement plans, he is concerned for their future. Despite his support for crypto as a part of any portfolio, he believes that banking on Bitcoin in old age isn’t a good plan, and it’s not just crypto. High-risk, high-reward assets should account for only a small portion of your portfolio, especially ones that are still so new that their regulatory guidelines haven’t even been finalized.
It’s important to keep a risky asset in a retirement portfolio as a small part of the portfolio, not as the entire strategy. A cryptocurrency is an asset that is still very new and unregulated, which increases its risk. After the government enters the cryptocurrency market and has its effect on it, how will the landscape look? Investing in cryptocurrency in a major way would be a mistake when things are unfolding right before our eyes. As a long-term retirement strategy, stocks, bonds, and real estate assets are still the most proven methods for growing wealth. The best method is the tried-and-true method.
Is Your Self-Discipline Strong Enough for Slow and Steady Racing?
With your portfolio tracker’s chart zooming upward, it’s easy to understand why crypto is such an appealing lure. According to Matthew Robbs, founder of Smart Saving Advice, cryptocurrency is an exciting investment. Investing in a coin at the right time can lead to five, ten, or 100 times your investment.
However, selecting the right coin at the right time is easier said than done, and overpriced speculative investments tend to crash hard.
Over the last two years, Bitcoin has gone from $10,000 to $55,000 in five months, then from $55,000 to $33,000 in four months, said Robbs. A seven-month period saw Bitcoin rise to $69,000, then plummet to $17,000.
Stock market volatility can be reduced by making regular contributions over time, which should level the peaks and valleys. When the highs and lows are so extreme, dollar-cost averaging is the easiest method, but it requires lots of discipline.
Crypto markets are volatile when they rise, but most investors don’t have the fortitude to continue dollar-cost averaging when they drop 75% in seven months, as they have recently, said Robbs. Investing a percentage of your retirement funds in crypto is good as long as you continue to do so every month for many years to come. Make sure you don’t invest everything you have into crypto markets at once.
Robbs said that cryptocurrency dropping 75% over seven months would likely cause you to give up (especially if you invest all your retirement income) in it just before it makes another run-up.
No matter your generation, the rules are the same.
It is a mistake to assume that big bets on crypto are OK for one generation but not for another. Younger investors have more time to absorb losses and can therefore take on more significant risks, but the game’s basic rules apply regardless of age.