I’m sure you’ve seen posts about bitcoin all over social media. Most of us know someone who’s put money into it (and are usually pretty vocal about it!).
But is bitcoin a good thing or not?
Where does it fit with other types of investments?
What are the risks?
If you feel like you don’t know enough to make an informed decision, about whether bitcoin is right for you…this week’s blog is REALLY going to help!
It’s a quick guide to all the essentials you need to know, to get a clearer picture.
So!
WHAT IS BITCOIN?
In a nutshell – bitcoin is an electronic currency, created by a computer. It only exists in the digital world but can be bought and sold like dollars, euros and other currencies.
Some people see it as exciting, new and progressive – a currency you can use online (although not many places accept it yet) that isn’t traceable.
But that’s one of the problems!
Because it’s not traceable, there’s a lot of concern around bitcoin potentially contributing to money laundering, organised crime and people disguising their income for tax purposes.
The main reason people want to get involved is because they know someone who says they’ve made load of money on it.
The truth is that some people have and some haven’t (the main different being you won’t see those that haven’t shouting about it on social media!).
SO HOW RISKY IS BITCOIN REALLY?
Well – it’s pretty high risk!
Like any other single investment, it all depends what price you buy at. And by putting all your eggs in one basket, all your money rides on the value of bitcoin on the day you decide to sell or cash out.
It’s the same if you decide to go to an online share broker and put £10k into Amazon stock or Coca Cola or Vodafone (or any other company you want).
All your money is riding on the performance of that one thing. If it goes up, it goes up…and if it goes down, it goes down.
And remember bitcoin is NOT regulated in any way. So there is NO financial protection if things go wrong.
IS BITCOIN A GOOD LONG-TERM INVESTMENT STRATEGY?
To be honest, I wouldn’t even use the word ‘investment’ to describe bitcoin!
It’s more like speculation or gambling – so I’d put it in the same category as playing the lottery or going to a casino.
If you spend £100 having fun in a casino on a night out with friends, that’s fine!
Assuming that when the money is gone, you stop and walk away. Which is where the problem lies.
You get that rush of endorphins when you win, which keeps you playing…and if you lose, you’re convinced you can get your money back if you just keep going.
The same can happen with bitcoin.
The endorphins and excitement as your money goes up, but the failure to walk away if things go badly.
And if eventually the authorities pull the plug on it – your money will all disappear!
SO WHAT WOULD BE A BETTER OPTION?
A safer option for long-term growth is to look at collective investments, where your money is split up into lots of different companies. So that if any one company fails, you don’t lose all your money.
If you like the fun aspect of bitcoin and a chance to win, you could consider Premium Bonds from National Savings and Investments. Every month your £1 could win £1 million, but you can have your money back at any point and it’s fully backed by the treasury, so your money is safe.
Ultimately, putting money into bitcoin is an entirely personal decision.
And while you could gamble on bitcoin, it’s not a sensible way to save for your retirement or think about growing your hard-earned money.
If you’d love some professional support and guidance, I’m an award-winning Financial Advisor and Money Coach. My work has been featured in The Telegraph, Moneywise and Sheerluxe and I’m a regular guest on BBC Radio Kent, as an expert in my field.
We’ll talk through your ambitions and your goals – what you want and how you want your future to look, whether that’s retiring to Hawaii, buying your dream home or taking the family to Disney.
Then together, we can make a clear plan, so you know EXACTLY how to get from where you are now, to where you want to be (including your business plans!).
We’ll cover everything, from setting up money pots and managing your income today, to saving and building enough for the future and the big things you want.
Wills, pensions, investments, insurances… not always sexy, but we’ll talk about your options so you’re clear which does what and what to do next!
All to make your money work harder for you, so you feel completely confident and in control…
Building the future of your dreams, while still enjoying life right now…
Whether your plan includes bitcoin (or not!).
Until next time,