Bitcoin (CRYPTO: BTC) is one of the most popular investments in 2021 – possibly even surpassing the meme stocks that created hype on the internet earlier this year. Since Bitcoin is one of the earliest and most recognized cryptocurrencies, it is easy to see why so many people would want to own it.
In fact, you can make money by buying bitcoins. But should you be confident in funding your retirement? maybe not.
Don’t risk old age
When you retire, you’ll need income outside of Social Security to cover your living expenses. This is your savings and investment. Whenever you want to add bitcoins to your wallet, you don’t need to pay another investment.
Bitcoin’s value has skyrocketed since its inception, but it’s also a particularly volatile investment. This is not unique to Bitcoin, but is common to all crypto markets.
Because Bitcoin is risky, it shouldn’t be the only place you deposit your savings. Not only could Bitcoin’s value recover in the future, we also don’t know how changes in the crypto space will affect its future value.
If regulation eventually makes digital currency a less attractive investment (especially from a tax perspective), the value of Bitcoin could plummet. This is a risk that you cannot take.
Diversity is key
Although stocks are considered a long-term investment, putting all your eggs in stocks is not a bad choice. Plus, you don’t have to throw all your retirement savings into one digital currency.
If you want to buy Bitcoin to hold later, make sure it’s only a small part of your overall portfolio and diversify your investment into other asset classes. In fact, it has a portfolio that includes several assets including:
- to bind
- Real Estate (if you don’t want real estate, you can invest in REITs or real estate investment trusts)
- electronic money
This setting protects you if a particular asset type loses all of its value. It also shows you different levels of risk. For example, bonds are less stable than stocks, so it’s better to own more bonds in retirement.
There’s nothing wrong with buying bitcoin, holding it for a while, and then watching it go away. But should you rely solely on Bitcoin to fund your retirement? Nothing.
We don’t know what the future holds for Bitcoin, and relying solely on an investment could spell disaster. This is especially true for investments that are more than ten years old and have an uncertain future.
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