Cryptocurrencies have become the talk of the town in recent years. Touted as the biggest innovation in the field of finance and wealth management, these investment instruments have garnered immense popularity despite their volatility. Given the attention, this segment is getting and the amount of money invested in them, younger generations that are planning retirement today are tempted to consider crypto investments in their portfolio.
However, Bill Schantz stresses that there are several questions that arise. Are cryptocurrencies a sustainable investment? Should a person look to this asset class as an avenue to reliable retirement planning? Most importantly, should an individual even consider investing in crypto long-term?
Bill Schantz Explains Why Digital Assets are Important
Cryptocurrencies, also known as digital currencies or assets are based on a decentralized ledger system known as Blockchain. While financial experts are still debating about the future of crypto, they are unanimous that the underlying technology, i.e., Blockchain is here to stay. That being said, many mainstream investment firms and financial institutions are opening up to cryptocurrencies, Bill Schantz notes.
Morgan Stanley recently announced that it would launch three funds that would allow investors to own Bitcoin as part of their investment portfolio. At the same time, Fidelity also announced that it was initiating a Bitcoin exchange-traded fund. Other organizations have also followed suit allowing the market to gain confidence. This, though, has not had a significant impact on the exceptional volatility that is prevalent in the crypto market.
Investments in Cryptocurrencies Should be Limited, Bill Schantz States
Despite their popularity and interest, cryptocurrencies are not to be corresponded with other asset classes especially when it comes to retirement planning. Although they are legitimate investments, a person thinking long-term should be careful about them. Digital assets are moonshot opportunities where investments can either drop to zero or grow more than 100% without any significant signals. It is a game of extreme risk or exceptional reward, Bill Schantz asserts.
Given this phenomenon, it is not wise for an individual to risk their child’s education savings or future healthcare expenses on cryptocurrencies. There is no harm in investing 1%-5% of the total investments that a person has into these digital currencies. For those who understand the market and know how to tread carefully, this percentage can be pushed to 10% but that is as high as it goes particularly if sustainable investments are an intention.
Bitcoin and Ethereum are amongst the few top coins that people can place their investments in. However, unless a sizable amount of Bitcoin is purchased, the returns are not formidable since the market cap for these two coins has become exceptionally large.
For Bill Schantz, cryptocurrencies are a lucrative market where fresh investors can make fortunes overnight. Still, they are not the asset class that can be considered when building a sustainable portfolio for the long term. Most of all, as far as retirement plans are concerned, it is best to stay away from this market or only invest a small amount that won’t hurt if lost completely.