Cryptocurrencies, namely bitcoin— a once nebulous internet currency, was minting new millionaires daily as its price spiked up the charts.
Everyone from genius billionaire investor Warren Buffett to rapper 50 Cent was talking about bitcoin. The conversations were also talking place in our office, and I was advising certain clients to steer clear of fancy new trend.
Late 2017 was a WILD time! Once the bitcoin bubble bursts, another investing fad will have its moment in the sun.
Let’s explore the fancy window dressings of investments like bitcoin, fomo and why you shouldn’t be a slave to investing trends.
LESSONS AND REFLECTIONS FROM A CLIENT
I love when a clients’ level of excitement and enthusiasm for their finances matches my excitement and enthusiasm for their finances. I recently met with a client who showed a great interest in investing. Before we even met, they had their portfolio wireframed out to include start ups, pet projects, blue chip stocks and bitcoin. What was lurking below the surface of their ideas was mountains of credit card debt.
The client making great strides in zeroing out their balances, but then lost their way. The glittery lure of “sexy” investments beckoned and made the mundane 401k contribution look dull.
We were at an impasse.
I strongly advised against investing in cryptocurrency while a credit card balance was still present and before a strong financial foundation was in place. The client’s reaction was oddly similar to the look my five-year-old gives me when I tell them to eat their broccoli.
Let me be clear: this doesn’t just happen with younger clients. I recently met someone who was close to retirement and we had a similar conversation.
THE FOMO IS SO REAL
People don’t want to miss out or have a trend pass them by. Bitcoin invariable comes up during conversations and clients firmly believe in their bones that they need to buy at the the bottom.
We all know of a so-and-so tangentially related to us and their monumental success story about how they were an early investor at Google, Apple or Uber and now they’re rolling in it.
OUR ADVICE: GIVE UP ON TRYING TO BECOME ONE OF THOSE PEOPLE.
It’s a big pill to swallow, but it’s the truth.
GOOD INVESTING IS METHODICAL AND BORING AS ALL GET OUT.
There’s no such thing as get rich quick.
I met with a financially well off client in her 50s and she boldly exclaimed that she made a big blunder. She made early gains in day trading but then things went south. Her college-aged daughter received student loans, but because of the early returns, the loan money seemed superfluous. Instead of declining the loans, she took the money out in her daughter's name and invested it in the market.
Tragically, she nearly lost it all.
With less than $100,000 to her name and on a retiree’s limited budget, the majority of her savings were wiped out and her daughter, a bystander, was saddled with the debt.
CONCEIT CAN GET THE BEST OF US
Trading isn’t easy. Unlike gambling, it’s not rooted in luck. Giving in to the temptation and allure of bitcoin, penny stocks, startups or hot stocks doesn’t lead to anywhere positive.
EXERCISE PRINCIPLES = INVESTING PRINCIPLES
You can’t go from couch potato to marathoner overnight. Start with shorter distances and slower speeds and gradually increase your stride.
Leverage proven methods over rising trends
If you’re sitting in this camp and you don’t know what to do to finance college, call me. We’ll look at your retirement accounts and see where we can draw funds from.
If you don’t know how to get started or need a second opinion deciding if a new investment opportunity is for you— that’s what we’re here for! We love to talk about your situation and create boring plans to help you reach your dreams.