- Many investors have enjoyed great success with cryptocurrency.
- Dave Ramsey, however, is not a fan for a few reasons.
Crypto can be risky. Should you take a chance on it?
Any money you might need for a near-term goal, like buying a home, should be tucked away in a safe place, like a savings account. It's also important to keep enough money in your savings account to cover three to six months of essential living expenses.
But if you have money at your disposal beyond that, you may be eager to invest it. And that's a smart idea.
Investing is a great way to grow wealth over many years. Frankly, it's something you pretty much need to do if you want a shot at a comfortable retirement.
When it comes to investing, you have different assets you can look at. Stocks and bonds have long been popular choices, but these days, a growing number of people are having success by investing in cryptocurrency.
But is that the right move for you? If you ask financial guru Dave Ramsey, he advises against it for a few big reasons.
Why Ramsey doesn't like crypto
Although cryptocurrency seems to be a pretty trendy investment, Ramsey has a few major problems with it. First of all, cryptocurrency is pretty unstable. Granted, the same can be said about the stock market, which has certainly seen its share of volatility over the past two months.
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But the cryptocurrency market tends to experience even wilder, more drastic swings than the stock market. While stocks can plunge overnight, they tend to drop gradually and get stuck in a rut before regaining value. With cryptocurrency, you might see your portfolio value tank overnight, soar the next day, and plummet the day after that.
What’s more, the future of cryptocurrency is somewhat uncertain, namely because it's an asset that hasn't been around that long. There was no such thing as cryptocurrency 20 years ago, whereas many investors today own stocks that have been around for decades. As such, we don't know how much long-term staying power cryptocurrency has. That alone could make it a precarious choice for a long-term investment.
Finally, Ramsey thinks cryptocurrency is just a difficult thing to wrap one's mind around. As he puts it, if you can’t explain your investments to a 10-year-old, then you have no business investing in them to begin with.
How much risk are you willing to take?
Dave Ramsey is only one financial expert, and to be clear, there are plenty of financial wizards who would recommend cryptocurrency. But ultimately, the decision of whether to buy it should boil down to your specific appetite for risk.
Ramsey insists that cryptocurrency is not a great way to build long-term wealth. Instead, he advocates putting your money into the broad stock market. You can do so by buying mutual funds or lower-cost index funds.
If you decide to buy some cryptocurrency, you're not necessarily setting yourself up for losses. You may, in fact, earn a lot of money by investing in digital coins. But make sure you understand the risks involved before diving in.
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