Can Bitcoin Bankroll Your Retirement?
Savvy investors know that one of the keys to successful retirement planning is diversification. Having all your money tied up in one type of asset is a huge risk. After stocks, bonds, and real estate, what else should you be considering? For some, that answer is Bitcoin. It’s meteoric rise into the financial zeitgeist has turned quite a few heads in the investment world.
What Is Bitcoin?
Bitcoin is a digital cryptocurrency. If you don’t know what that means, don’t feel bad. There’s an excellent primer explaining the basic concept from the New York Times. For now, the salient point to keep in mind is that Bitcoin is a currency – just like dollars, euros, and pounds – albeit with some very important differences that give it a unique cachet among investors.
The uniqueness of Bitcoin is also, for the time being, it’s achilles heel. While Bitcoin is almost a decade old, it’s only in the last few years that it’s begun to capture the attention of investors and consumers. Unfortunately, the value of Bitcoin tends to fluctuate quite heavily, making it a prime target for speculative investments and day traders, which in turn increases its market volatility.
Should You Add Bitcoin To Your Portfolio?
Unless you have a huge financial reserve that you feel comfortable placing in a high-risk investment scenario, the answer is “probably not”. While Bitcoin (and other digital currencies) are currently in the spotlight of the investment community, anyone looking for a stable, long-term investment that will help fund their retirement should look elsewhere.
One of the biggest problems is that, while buying bitcoins is fairly easy, using them to purchase actual goods and services is still quite difficult. Only a small handful of online retailers accept Bitcoin, and finding a local grocery store, gas station, or restaurant that takes them is akin to finding a needle in a haystack.
The reason there are so few merchants willing to accept Bitcoin is because the value of it fluctuates so heavily. Imagine going into a store to buy a can of Coke. The price of the can is either one dollar or one bitcoin, but when you go back the next day, the price is either one dollar or three hundred bitcoins. This is essentially what’s happening in many digital currency markets right now.
Safely Planning For Retirement
Unless you win the lottery or inherit a million dollars, the best way to save for retirement is to create a detailed financial plan, and stick with it.
If you are absolutely set on investing in Bitcoin, or some other exotic asset type, speaking with a financial planner beforehand may be helpful to mitigate as much risk as possible. For more information about retirement planning, investments, and financial advice, you can request a free consultation with us at your convenience.
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