When it comes to cryptocurrencies, it’s fair to say I’m adopting late. At first, I was determined to avoid anything to do with crypto. I recently changed my tune and I am doing research to see which coins might fit best in my portfolio. I do not want to rush Bitcoin (Crypto: BTC), For example, just because it’s the name I know best.
But even though I am willing to invest in cryptocurrencies in the near term, I still do not think it is a suitable investment for my retirement savings.
My pension portfolio is loaded with stocks in a wide variety of market segments. And I do agree that buying cryptocurrencies can lead to further diversification.
Despite this, I prefer to use cryptocurrencies as a means of short-term investment and stick with stocks for retirement planning purposes. While stocks are virtually risk-free, they are less volatile than digital currencies. And they exist much longer.
There are stocks in my portfolio that have been trading for many decades. Cryptocurrencies, however, have only been around for a little over a decade.
Also, I feel I have the knowledge to predict whether the stocks I own have long-term resilience. I am the owner Amazon (NASDAQ: AMZN), For example, and one of the reasons I did not sell it is that I think it still has the potential to take off.
The company has proven its ability to continue to innovate and branch out to different corners of the market. Recently, it has expanded to pharmacy services, showing how well it fits the needs of consumers. So it’s easy for me to look at a company like Amazon and see why demand for it might exist in 10, 20 or 30 years.
I have a problem doing the same with cryptocurrencies. First, we do not know what regulations may affect investors. Second, we do not know if digital currencies will become acceptable payment forms.
Currently, the value of cryptocurrencies depends on investor demand, while the value of Amazon depends on the company’s finances and various revenue streams. So even though I feel comfortable planning to own Amazon for many decades, I just can not bring myself to think about cryptocurrencies in a similar light.
In general, I like to take a buying and holding approach to investing – to load up on quality stocks and keep them in my portfolio for many years to come. I am not convinced that this approach works for cryptocurrencies. But that’s not necessarily a bad thing.
I will not invest a huge chunk of my money in crypto – just a small portion. Nor will I cleanse myself of this investment to fund my retirement. As such, I can really come in with a little less worry. If my investment crashes and burns down, I’ll learn my lesson – but my long-term plans will not be affected.
This is not to say that cryptocurrencies are not a suitable long-term investment for some people. It’s just not the way it fits into my plans.
This article represents the opinion of the author, who may not be in agreement with the “official” recommendation of Motley Fool’s premium consulting service. We are colorful! Investigating an investment thesis – even one of our own – helps us all think critically about investments and make decisions that help us be smarter, happier and richer.