Financial Tip of the Month
Topic: What I'm Telling Clients about Bitcoin
"The consistent losers in the market, from my personal experience, are those who are unable to resist being swept up in some kind of tulip-bulb craze. It is not hard to make money in the market. What is hard to avoid is the alluring temptation to throw your money away on short, get-rich quick speculative binges. It is an obvious lesson, but one frequently ignored."
Burton G. Malkiel
A Random Walk Down Wall Street: The Time Tested Strategy for Successful Investing
Tulip-bulbs, dot-com stocks, mortgage-backed securities, and beanie babies. Will Bitcoin join the ranks of these historical bubbles? Time will tell. But I won't have my financial future join that ride. I may be wrong and I'm fine with that because I'll position my financial future on elements that I can control and investments I can understand.
That's an element of my Investment Philosophy but how do I handle my clients asking bout Bitcoin?
I tell them to invest in it if they really want to. However (you knew a 'however' was coming, right?), be sensible and boring with 90% of your money for your future - aka grey haired self - and then go have fun with 10% of your assets.
If you want to invest in Bitcoin with that 10% of your money, then go ahead. If you want to spend that money on future vacations, home improvements, or other things. Then that's fine too. See this portion of money as money you're comfortable winning big or going to zero.
We steer clients to not get caught up with the herd mentality and ask these questions to help them identify if Bitcoin is part of their investment philosophy:
- Please describe how Bitcoin is an investment for your future self?
- Please tell us what Bitcoin is as an investment vehicle?
- Are you investing in Bitcoin because you feel like you're missing out or because you feel like its a good investment for your goals?
- Are you setting up your future self responsibly or trying to hit a Financial Market home run? What will happen if this investment decision in Bitcoin doesn't work out?
Again, we could be wrong. Bitcoin could replace all government-backed currencies in our future. Also,we may be missing out on the tax-deferred growth if Bitcoin continues its incline. Yet, after years of studying behavioral finance, investments, and money in general, I'll choose to be that boring guy at a cocktail party not talking about Bitcoin. I rather talk about corny jokes anyway!
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A short video explaining this challenge here
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Financial Quote of the Month
"Things like spending more time with the family, having more integrity in one's life, being more creative, taking more time for spiritual growth - these are far less expensive than a second home."
George Kinder, CFP® and Susan E. Galvan
Lighting the Torch: The Kinder Method™ of Life Planning
Well-Rounded Success Around The Web
Selected as the the Lead Article for XY Planning Network's blog
Good Financial Reads: Investing 101
Answered money questions with other Colorado Financial Planning Association members on
Denver's Channel 9: MoneyLine9
Quoted in Investor's Business Daily article
Extract Meaningful Input from Your Clients
Throwback Well-Rounded Success Article
4 Troubling Family Money Issues
What do you want to read? Give me a recommendation on what kind of articles you want to see: Submit an Idea