These days, a lot of people I know are investing in cryptocurrency. And I can totally understand why they're going that route.
There's a lot of money to potentially be made in cryptocurrency. In recent years, more and more merchants have adopted cryptocurrency as a form of payment. If that trend really picks up to the point where cryptocurrency becomes as mainstream as the U.S. dollar, it could end up being worth a lot of money.
But I've never been the type of person to give into peer pressure or do things just because the people around me are doing them. And so while a lot of people I know are loading up on digital currencies in their investment portfolios, I'm continuing to stay away for these reasons.
1. It still scares me
Part of being successful as an investor is assembling a portfolio that doesn't make you lose sleep. If you're nervous about your investments, that alone could lead you to make rash decisions that ultimately cause you to lose money.
Now there was a time when I was scared to invest in stocks, but I educated myself on what that entailed and eventually got over my fears. I've also read up a lot on cryptocurrency. In spite of that, the idea of buying it still scares me.
Sure, I could put a few hundred dollars into cryptocurrency and see what happens. Maybe I'll make a quick buck.
But am I willing to sink thousands of dollars into digital coins in the hope that things work out well? No -- not when there are plenty of quality stocks I can still load up on instead.
2. It doesn't align with my investing strategy
My strategy as an investor is to buy stocks that are likely to gain value in the long run. In fact, the stocks I owe now are investments I hope to carry with me all the way into retirement.
Cryptocurrency doesn't fit into that strategy. I'm not convinced that cryptocurrency really has long-term staying power, and in light of that, I don't think it will help me meet my long-term goals.
I want to retire with enough money to enjoy a comfortable lifestyle. I also want to be in a position to gift some wealth to my children. Cryptocurrency could crash if regulations come down the pike that change the way its taxed, or that prevent it from being used as a form of payment. And that's not a risk I'm willing to take right now.
Is cryptocurrency right for you?
To be clear, plenty of people are enjoying financial success as a result of having bought cryptocurrency, and there are plenty of people who do feel that it's a good investment to hold onto for years. I just don't happen to be one of them.
If you feel differently, there's nothing wrong with dabbling in cryptocurrency. My advice, however, is to start small and do your research.
Don't throw $10,000 into cryptocurrency if you've never bought it before. Instead, maybe start with $1,000 and see where that takes you. And also, research the different coins out there. There are thousands, and choosing the right currency could spell the difference between making money or losing it.