The answer I like is to invest only the amount that you CAN absolutely afford to lose.
The concern is that it doesn’t have underlying value and can be worthless one day. The hype is all the projections of how high the price can grow in a very short time. There are many experts on both sides arguing passionately with strong conviction.
It is very hard to decide for our average folks. That’s why some financial experts like Suze Oman gave the above advice. However, you don’t have to if you don’t feel comfortable and your portfolio includes enough mix of growth stocks. A broad-based low cost ETF like S&P 500 index fund is a good choice. What is enough? It depends on your investment horizon, portfolio size, investment goals and risk tolerance. That is for another post.
Similar to gold or other commodities, it doesn’t generate dividend or interest. It is all about price appreciation. However, it is quite different from gold or commodities. It seems to go the opposition direction of the inflation rate. In this sense, it is quite similar to high growth stocks. If your portfolio is filled with high growth stock, Crypto is not a good way to diversify.
It reminds me that Warren Buffet didn’t invest in internet stocks. The only tech company he bought was Apple perhaps. I guessed the reason might be that it sells hardware – a solid product. His philosophy is that he does not invest in things that he does not fully understand. He is super disciplined about this principle which is rare quality considering the ranging sentiment of FOMO – fear of missing out. I guessed that he might believe that there are so many investment opportunities out there to choose from. He can be very selective.
Some said he missed out on the fast growth of tech stocks in the past decade, but it seems that his investment annual return is just fine.
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