- Cryptocurrency is a riskier investment than most others.
- Billionaire Mark Cuban believes it may deserve a place in your portfolio.
- Cuban says to treat cryptocurrency as a “flyer” and compares it to other things like art.
Crypto investments can make sense, but with limitations.
Deciding where to invest your money is complicated, especially with many different investment options out there, including proven choices such as stocks and bonds. Sometimes, listening to the advice of experts can help you make informed choices about what to do with your money to help you build wealth.
Mark Cuban is a self-made billionaire, and is one of the financial experts you may want to listen to. This is especially true if you're thinking about a higher-risk investment option, such as cryptocurrencies. If you're contemplating buying virtual currencies, Cuban’s advice could potentially help you make the right choice.
Here's what Mark Cuban says about buying cryptocurrencies
Unlike some finance experts who are against cryptocurrencies, such as Warren Buffett, Cuban doesn't think that putting your money into virtual coins is a bad idea. In fact, he has made it clear that he believes taking calculated risks is worthwhile when building wealth, as millionaires and billionaires usually don't amass their fortune by always taking the safe approach.
However, while he thinks crypto could be worth taking a chance on, he has also acknowledged that the asset is an untested one with plenty of risks. He's referred to crypto as a "flyer" and compared it to collecting art, baseball cards, or shoes. He's also suggested putting money into it only if "you're a true adventurer and you really want to throw the hail mary."
Cuban specifically called out Bitcoin and Ethereum as potential coins you might want to invest in, but also warned that "if you do that, you've got to pretend you've already lost your money."
Despite his warnings, though, Cuban personally owns crypto himself, and has made investments in blockchain companies. He's willing to put some of his own money on the line due to the fact he clearly believes virtual currencies have potential.
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How much of your money should be in cryptocurrencies?
Although Cuban has endorsed crypto investing, both through his words and actions, he definitely believes the amount of money you use to buy virtual currencies should be limited.
"I'd limit it to 10 percent," he said. And he urged investors in crypto to find a cheap index fund tied to the S&P 500 to put the rest of their money in. The S&P 500 is a financial index tracking the performance of large U.S. companies and is one of the safest, most reliable investments you can make over the long run.
In other words, Cuban suggests you take a balanced approach. If you're going to take a chance on an untested asset like cryptocurrency, you should make certain you're only putting money into it you can afford to lose, and investing the bulk of your assets in a low-risk option with a proven track record.
This advice is sound, since you don't want to put all your eggs in one basket -- especially when that basket contains volatile investments that don't have the long performance history that S&P index funds do, and that could very well not pay off in the end. So if you're thinking about a crypto investment, you may want to heed Cuban's suggestion to limit your purchase to 10% of your portfolio and choose a safer investment for the rest of your cash.
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