Suze Orman is a popular financial guru, and millions of people follow her advice. Whether you’re a fan of Orman or not, though, you should make sure to heed her advice on investing in Bitcoin.
Orman loves Bitcoin as an investment. In fact, she suggests that you may even want to invest about $100 per month into buying it. However, this comes with an important caveat. Orman believes Bitcoin is a risky investment and stated to CNBC, “I would not be investing in bitcoin with money that I could not afford to lose.”
And that is a key piece of advice that everyone should take to heart if they are thinking about purchasing Bitcoin or any other type of cryptocurrency. Don’t do it, unless you can afford to lose the money.
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Why Suze Orman is right about Bitcoin
There’s a very simple reason why people shouldn’t invest money in Bitcoin or any other crypto that they can’t afford to lose. Cryptocurrencies are extremely risky investments and there’s much more volatility in the crypto market than with most other kinds of assets, including stocks and bonds.
Of course, any investment could result in losses, but the chances of that happening with Bitcoin or other cryptocurrencies are greater than with most assets. There’s a number of reasons why that’s the case.
The reality is that the crypto market is not subject to the same strict regulations that most other financial markets are. That means people who invest in crypto are more vulnerable to scams. And if that wasn’t a big enough problem, there’s also the fact that the value of cryptocurrencies is largely theoretical right now.
Most coins have value only because people have decided they do, so there’s demand for them. Few businesses actually accept them for payment — even Bitcoin, which has enjoyed more widespread adoption than most other coins. And with so many coins out there, investors often move on from one crypto craze to another, sending the prices of out-of-favor coins plummeting.
So while it’s possible to make money — and sometimes a lot of it — by investing in crypto, you need to have the timing just right. That means you’re taking a big gamble, since no one can time their investments perfectly every time.
Should you be investing in Bitcoin?
As Orman says, investing in Bitcoin could be a good idea if you can afford to lose the money. That means that you should only be putting money into that coin — or any crypto investment — if you have:
- An emergency fund. You don’t want to get stuck going into credit card debt to cover unexpected expenses just because you’ve sunk money into Bitcoin instead of putting it into savings. That’s especially true because the price of Bitcoin and other cryptos can fluctuate so widely. You could incur an emergency cost right when the price tumbles.
- No high-interest consumer debt. Paying back credit cards or other high-interest debt comes with a guaranteed return on investment (ROI) — and sometimes a very high ROI depending on your interest rate. Bitcoin and other cryptos definitely don’t come with any guarantees.
- Fully-funded retirement accounts. You shouldn’t be gambling with money you’re definitely going to need in your later years.
If you’re on track with your personal finances and you want to invest in Bitcoin or other cryptos, then you may end up making a tidy profit — or not. Just be sure you’re heeding Orman’s warning because the chances of loss are a lot higher with this type of investment.
View more information: https://www.fool.com/the-ascent/cryptocurrency/articles/take-this-suze-orman-warning-about-crypto-to-heart/