- Many investors have made money with Bitcoin.
- You may decide to put some money into it, but you'll want to proceed with caution.
Don't move forward without hearing what she has to say.
It's been a rough go for cryptocurrency investors, to say the least. Over the past few months, Bitcoin and other digital currencies have seen their value plunge. And while that's a bad thing for the people who own those assets, it could spell opportunity for those looking to add Bitcoin to their portfolios.
You may be interested in buying Bitcoin because you like the idea of investing in an alternative asset to the stocks you have in your brokerage account. And you'll often hear that diversification is an important thing to have in your portfolio, and Bitcoin or other digital currencies might lend to that.
But if you're going to put money into Bitcoin, you'll want to proceed carefully. In fact, it pays to take some key advice from financial expert Suze Orman into account in the context of crypto investing.
Only invest money you can afford to lose
Like all digital currencies, Bitcoin is still considered to be a speculative investment. As such, it's generally considered to be a riskier investment than something like a stock or bond.
That's why Orman insists that if you're going to buy Bitcoin, you should only invest money you can afford to lose. That way, if the value of your investment sinks, it won't mess up your financial plans or prevent you from meeting key goals, like being able to retire when you want to.
Now, one thing it's important to realize is that all investments carry risk. If you want to eliminate risk completely in the course of putting your money to work, then you'll need to stick to a savings account or CD and hope it pays you enough interest to make your goals achievable.
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But most of us know that keeping all of our money in savings isn't the most effective way to grow wealth over time. Rather, it's a good idea to invest cash you don't need right away and don't have earmarked for emergencies. But it's also important to recognize the risk you take on in doing so. And while stocks carry plenty of risk, it's easy to argue that crypto is even riskier because it's newer, less established, and subject to different regulations down the line -- among other things.
Should you be buying Bitcoin?
Let's imagine you have a fully loaded emergency fund and a nice portfolio of stocks in your brokerage account or IRA. If you're sitting on $5,000 you don't need for a near-term goal like buying a house, then you may decide to put it into Bitcoin, and that's okay -- as long as you first come to the terms with the idea of potentially losing it all.
Of course, there's a very good chance the crypto market will rebound and the value of Bitcoin will once again soar. So if you buy it at a low, you might profit nicely. But keep Orman's advice and warning in mind before you make that choice so you don't wind up regretting it sorely after the fact.
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