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Everyday investors are overflowing with cryptocurrency questions, according to the financial advisors hired to answer them.
But for the average person focused on retirement planning and financial stability, is it time to consider investing in cryptocurrency?
The answer is complicated, so we asked financial advisors for their crypto advice, and here’s what 10 of them are telling clients. In an emerging field with few set rules and norms, we discovered some universal truths that everyone should know before putting money in cryptocurrency.
First of all, financial advisors say a healthy dose of skepticism is a crucial place to start, and you should never invest in crypto if it takes away from other goals and financial fundamentals like paying off debt, building an emergency fund, or maxing out your retirement accounts.
As difficult as it may be, do not become seduced by the intrigue and allure of this new technology, says Stanfield. Instead, employ the same mindset you bring to your regular investment strategy.
Here’s what else the experts want you to know about cryptocurrency investing:
Be Prepared for Loss
As with any investment, financial gains are far from guaranteed with cryptocurrency investing. For some financial advisors, crypto looks more like a lottery ticket than an investment strategy.
That means you should only put in what you’re OK with losing. “On a spectrum between gambling and investing, I think it’s closer to the former,” says Matt Morris, principal advisor at Sanderling Finance in Columbia, South Carolina.
As a high-risk, high-reward investment, keep any crypto investments in perspective amid your broader goals and finances. As with certain types of gambling, “you have a high chance of losing it all, but a small chance of winning it big,” says Nate Nieri, a CFP with Modern Money Management in San Diego, California. “Just don’t gamble an amount that would burden your family or prevent you from achieving your goals” if you lost it all.
Steer Clear if You’re Risk Averse
If you’re risk averse, crypto isn’t the investment for you.
“How well can you sleep at night knowing that this is an emerging asset class with high volatility? And if you were to wake one morning to find that crypto has been banned by the developed nations and it became worthless, would you be OK?” asks Stanield.
If you’re going to be constantly stressing about your crypto investment, or tempted to change your investments in light of the volatility that comes with crypto, then you’re better off…