Should you buy Bitcoin?
That is a question which YOU and only YOU can answer. It is similar to asking the question: should you buy lottery tickets?
It all depends on your personal circumstances and whether losing money in cryptocurrency will affect your lifestyle.
It is all a matter of priority.
Any money used for buying cryptocurrency should be discretionary spending money. This is money used for entertainment purposes. It is your choice what you do with this money, but your choices can make or break you.
Here are some questions which need to be asked first before you consider investing in crypto currency.
- Is this money better invested elsewhere?
- Do I have commitments which make investing in cryptocurrency inappropriate?
- Do I have any debts which need to be paid off?
- Do I have an emergency fund?
- Am I contributing to a retirement fund?
- Am I saving for that special something? (car, holiday, etc…)
There is a wide range of investments available for the average person so there is no excuse for not making the most of your money. These days, with so many investing apps available, ordinary people can get involved in the share market on a shoestring.
So the question has to be “Is this money better allocated elsewhere?”
Commitments are a big factor to consider. If you have kids then investing in cryptocurrency is just as inappropriate as going out to the pub until all hours. It is not just you and your financial goals you have to consider as well, and in particular, their future.
It is also not appropriate to invest in cryptocurrency if you are in debt; as a matter of fact it is downright irresponsible and dumb. If someone is good enough to lend you money then you should be good enough to pay it back.
Investing in cryptocurrency must be done with discretionary spending money, but if you have debt then you do not have any discretionary spending money.
Do you have an emergency fund to fall back on when an unexpected expense crops up? This is basic common sense and the responsible thing to do. You just never know what kind of a curveball life is going to throw at you so being prepared will give you some peace of mind.
Joining a retirement scheme is something you must do if you have not already done so. There will be no one who reaches the age of 65 who will regret having contributed to a retirement scheme all of their lives. Your future self will thank the present you for contributing to a retirement fund all of your life.
The choices you make in the present will affect the choices which you have available in the future, so make good choices.
Finally, what you are saving for and your timeline is a big factor in where you invest. In the share market, investing in growth funds is for long term goals such as your retirement savings.
Conservative funds are at the other end of the risk scale. These are for short-term goals.
What about cryptocurrency?
There is a fundamental difference between investing in growth funds and Bitcoin.
Growth funds and Bitcoin are both high risk, but high profit potential, but the difference is that Bitcoin is not only more volatile, but there are other risks such as hacking which can happen. Cryptocurrency has only a short history which means there is less data available to make decisions on its history. Not so, with the share market which gives investors the opportunity to spread their portfolio among several companies. This is called diversifying. An option not available to Bitcoin investors.
Investing in cryptocurrency should only be done with discretionary spending money, as another string to your financial portfolio.
About this article
The contents of this article are of the opinion of the writer and may not be applicable to your personal circumstances, therefore discretion is advised. You may use this article as content for your website, blog, or ebook.
Read my other articles on www.robertastewart.com
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