This Ain’t Your Grand Dad’s Stock Market — Enter The World of Cryptocurrency
If you’ve invested in the stock market for any length of time, you’ve heard the adage that year over year you should expect a 10-12% return. Sure, for those of us who have been investing long enough and were in the market between the years 2007 to 2009, we remember the all time highs followed by 40% + losses. I remember hearing of co-workers who removed all funds from their 401K because they lost over 50% in a very short timeframe.
Again though, bear markets will come and go (some are predicting a bear market in the coming future) over the last 25 years the real rate of return might be slightly over 7%. When I was young, my dad said to set aside 10% of what I made for saving/investing. The thought process was if you are able to put 10% of your salary year after year into something like the stock market, you should do quite well if those funds aren’t touched for 30 years.
Now lets get back to reality. The reality for most people is job layoffs, taking a smaller salary at the next job, roof needs to be replaced, water heater and furnace goes out, and the car blows a head gasket. Holding my hand up here on being part of this group. Simply surviving while paying the rent or mortgage while trying to keep your head above water and oftentimes taking on a 2nd job are what seems to be the norm for most people.
Every now and then, luck might turn your way. You forgo the vacation, the car is behaving nicely, you might pick up some extra hours on the job or actually receive a bonus. It is 2017 and you find yourself with some money in the bank. Now if you keep that money where it is, Murphy might just come visit you. So what is a guy or gal to do?
Taking risks sometimes reaps rewards. There is a new kid on the blockchain and that kid is called cryptocurrency. Time to research. If you’ve never heard of Bitcoin, start there. Head on over to coinmarketcap.com. Take a look at this chart starting at the beginning of 2017 to date. About $1000 invested in a single Bitcoin at the beginning of the year would have you at approximately $11,000 right now. How can you get in on this action, well if you are in the U.S., simply by joining Coinbase will get you started.
Now before you get all dismayed and said I wish I would have done that, I’m never that lucky or I flat out don’t even have $1000 to invest, there are plenty of options. First of all, you can invest in a part of what is called a coin or token. There are approximately 1330 coins in the crypto marketplace today. Now remember your grand dads stock market with its 7% yearly returns? I could easily point to dozens of coins which had incredible multiple times returns from the start of 2017.
But now 2017 may have been an anomaly. Well that anomaly continues but truth be told, if you put money in nearly any coin (yes there are exceptions) at the beginning of the year, the sheer market cap change amongst all coins would have helped whatever crypto investment you may have been in. What I mean is that about $17 billion was in the crypto market at the beginning of the year. Today that number stands at $330 billion. Can you see the money coming in? How many of your friends know about Bitcoin or Litecoin, Ethereum, Electroneum, or NEO. But here’s the deal. Lest you think you’ve been left out, guess what? Institutional investors for the most part have not been entering the market. They have been non-existent. Once that money starts to roll in, this thing may go crazy.
There has to be a caveat, right? Yes. Crypto is so new that for the most part things like government regulations, taxes and ways where political systems or countries can put an absolute stop to this type of investing has not come into play. With a barrage of ICO’s (Initial Coin Offerings) and little regulation, that has caused issues with a couple of coins.
So are you thinking about becoming a cryptocurrency investor? Crypto goes beyond investing. How about learning to trade? In addition to Coinbase (previously mentioned), there are enough exchanges where if you’ve done your research, you should be able to find a reputable exchange such as Bittrex, Cryptopia, or Poloniex where you can trade the coin of your choice.
You will find basic tools on these sites for trading and if you want to go beyond that, check out sites such as Tradingview. Crypto is different than owning and trading stocks. You will have to learn the lingo. Blockchain, wallets (hardware and paper) mining, etc.. because security is of the utmost importance. In some respects, we are talking about the wild wild west. That brings about the good and bad. Investing in cryptocurrencies may not be for you. If it does excite you whatsoever, check out coinmarketcap, find out about ICO’s are showing up on the market through sites such as Coins Schedule or ICO-List, and then look up the leaders of the token, the developers, and see where they want to take the coin. ie I recently got into an ICO called Universa because I liked the speed, use cases, and even an advisor by the name of John McAfee. Yes, the name behind the anti-virus software which may be on your computer.
Risk does not always equal reward but without risk, you are the same old same old stagnant. Most important. Never invest money that you cannot afford to lose. If you started investing in crypto right now and come back to this article a year from now, you may find yourself up 200 or 300% or to the moon as some might say. You may lose absolutely every dollar you invest in crypto…. but you won’t be investing in grand dads stock market.