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I have no problem with anyone investing money they can afford to lose in any get-rich-scheme.

Article by Akwasi Duodu

There are a lot of reasons to be discouraged right now. We have a national lockdown, we know of people losing their livelihoods, there are promises of a deep recession and the news is gloomy. Worst of all, people are dying. There’s no doubt about it; we are living through an exceptional period and many people are looking for good news.

As the economy flounders in the turbulence of uncertainty, get rich schemes rise to the surface. It’s hard not to notice. Go on Facebook, Twitter or Instagram and it won’t be long before you find a so-called financial expert promising the latest investment opportunity with big returns; Bitcoin, perhaps being the most popular right now. I had one individual not just ask me whether they should invest in Bitcoin, but whether they could afford not to!

Danger ahead?

Beware, is what I say. There is no doubt that Bitcoin has seen an extraordinary run. After a boom in 2017, the price of bitcoin fell by about 65% during the month from 6 January to 6 February 2018. Wikipedia tells us that “By September 2018, cryptocurrencies collapsed 80% from their peak in January 2018, making the 2018 cryptocurrency crash worse than the Dot-com bubble’s 78% collapse. By 26 November, bitcoin fell by over 80% from its peak, having lost almost one-third of its value in the previous week.”

How much can you afford to lose?
There is however no doubt that those few who got in at the right time would have made extraordinary returns. Anyone who invested in March 2020, just after Covid hit and Bitcoin was at its most lacklustre, would be sitting pretty today. It’s all very well in hindsight looking at a past-performance chart, but the million-dollar question that comes with any volatile investment such as this is when to get in and when to get out. And with the FCA’s latest warning, “Be prepared to lose all your money” investing in Bitcoin certainly isn’t for the faint-hearted. With that in mind, I have no problem with anyone investing money they can afford to lose in any get-rich-scheme.

Is boring best?
Whilst a long-term investment strategy is nowhere near as exciting as a shorter-term one, it certainly tends to be more profitable, especially if you stick at it. The long game is simple and boring but has proven to be effective. There is no magic formula, but simple common sense. Spread your assets across a reliable investment portfolio with a track record, leave it be and patiently watch your portfolio grow, not looking at it too often.

Let someone else deal with the anxiety. Better still, engage with a financial planner and let them do all the work for you. They will assess your appetite for investment risk and create a suitable investment strategy to suit your time horizon without wild promises or unrealistic expectations. That’s it. Play the long game and be patient, focused and consistent. Warren Buffet, one of the most successful investors ever, is an advocate of this approach saying, “If you aren’t thinking about holding your portfolio or stock for 10 years, don’t even think about holding it for 10 minutes! Enough said?

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