In the future, there may be plans to buy a house or a car, but usually it is for retirement. In order to achieve their financial goals, investors should consider which assets to own.
Stocks and bonds make up the opportunity set. An alternative investment option has emerged in recent years. Here's a closer look at whether cryptocurrencies should be included in your retirement plan.
Cryptocurrencies as retirement investments: Is it a good idea?
It depends on who you ask. In 2009, the Great Recession ended, making yield the top priority for investors.
Cryptocurrencies as retirement investments: Is it a good idea?
Investors in fixed-income securities have been experiencing difficulty at the moment.
Cryptocurrencies as retirement investments: Is it a good idea?
With an annualized total return of 13.2%, equity investors have benefited from easy-money policies over the past decade.
Cryptocurrencies as retirement investments: Is it a good idea?
Consequently, they have outperformed the broader index by about 10%.
Cryptocurrencies as retirement investments: Is it a good idea?
For those who are brave enough to follow the trend, cryptocurrencies promise even greater fortunes.
In the trailing five years, Bitcoin has returned 942% and Ethereum has returned 604%, respectively. Due to this, investors have begun to take note of this new asset class.
Young people who have decades before retirement should allocate some of their portfolios to cryptocurrencies if they have decades before retirement.
The amount that you should invest should not exceed 5%, depending on how much risk you are willing to take.
As you gain more knowledge and comfort in the space, you may want to consider increasing that allocation. Having an extended time horizon allows young people to be more aggressive and take more risks
On the other hand, someone approaching or in retirement should invest much more conservatively. As a matter of fact, I would suggest avoiding cryptocurrencies altogether.
Cryptocurrencies are incredibly volatile, as many observers are aware. In the past eight months, digital assets have lost roughly two-thirds of their value.
Crypto can also be staked or invested in decentralized finance protocols to earn a return. Despite the higher rates paid to investors, the risks here are greater than in traditional financial services
A crypto investor who is early in their investing journey has plenty of time to recover financially. Retirees, however, aren't so lucky.
Any financial decision requires assessing risk tolerance, time horizon, and annual cash expenditures. Financial freedom can be achieved by knowing this critical information before making investments.