With all the questions undermining stock and bond yields nowadays, it only makes sense for investors to take a serious look at bitcoin’s earnings potential. Look for the financial community to pay closer attention to bitcoin in the present investment environment.
Investors looking to diversify their portfolios should consider bitcoin and digital currency, according to this past weekend’s “Weekend Investor” report in The Wall Street Journal. The article, titled “In Search of Higher Returns” featured a shiny, logoed bitcoin rising as one hand gives a 100-dollar bill to another outstretched hand.
Stocks and bonds – traditional investment vehicles – aren’t promising great yields these days, the article notes. Hence, some financial advisors say taking additional risk in investments to diversify a portfolio makes sense, providing the investor understands the risk. Options in addition to bitcoin include peer-to-peer lending, emerging markets, farm land, timber land, rental property, arts and collectibles. Among all of these options, the article dedicated only one topic for a separate sidebar: bitcoin.
“A White-Knuckle Investment: The Case for Adding Bitcoin to a Portfolio,” offers a balanced analysis about bitcoin as an investment.
On the risk side, bitcoin’s price can fluctuate wildly, security remains an issue in light of Mt. Gox, and regulators are focusing more on bitcoin, the report notes.
On the positive side, digital currency has growth potential since it’s in its infancy. “Investment firms show growing interest in the currency and in the technology behind it, which could point to more widespread use,” the article states.
The article also puts bitcoin’s recent price decline in historical perspective. Bitcoin’s value has fallen 23 percent recently, a single bitcoin is worth $225.26 compared to $5 three years ago.
Dedicating a small part of one’s portfolio to bitcoin can make sense for younger, affluent investors who are less likely to be troubled by value fluctuations.
The article explains how investors can purchase bitcoin from exchanges and store it in wallets. One option investors should keep in mind is that Bitcoin Investment Trust will begin trading in the coming weeks, according to Michael Sonnenshein, a spokesman for Grayscale Investments, which is part of New York-based Digital Currency Group.
The article notes that higher risk investments should represent 1 percent or less of an investor’s portfolio. Some investors can accept a higher amount, providing losses won’t undermine their savings, standard of living or other financial goals.