Bitcoin is not a stock, a bond or even a legal entity. Created and held exclusively in cyberspace, the currency isn’t tied to, managed or regulated by any bank or government agency.
The digital currency may wind up as brilliant an innovation as the personal computer and Internet. But Bitcoin’s role as an investment has yet to be defined, leaving many investors intrigued – but wondering whether it has a place in their portfolio.
To invest or not to invest? It’s a billion-dollar debate. Advocates think the digital currency—unhinged to the dollar—can act as a hedge against economic collapse and provide growth, much like gold. Skeptics sees it as a volatile, speculative, tulip-like bubble waiting to burst.
Is Bitcoin right for your portfolio?
Bitcoin, only four years old, has crowned a new class of millionaires who bought the digital coins for pennies early on, then watched their value rise 9,000% in 2013.
So far in 2014, Bitcoin has suffered a steady stream of negative headlines and a 50% selloff.
- Cyberattacks Force Bitcoin Exchanges to Halt Withdrawals
- Bitcoin Millionaire Arrested for Alleged Money Laundering
- China Forbids Companies from Accepting Bitcoin
As some bitcoin holders cash in, others wonder whether the dramatic drop creates stellar buying opportunity.
If you’re wondering the same thing, take to heart this advice from Gary Gordon, president of Pacific Park Financial and CFP, with $120 million under management:
“At the present, it is more appropriate for active traders than it is for mom-and-pop investors. If mom-and-pop feel the need to participate, they should probably keep it to 1% or 2% of a total portfolio, whereby ‘virtually’ nothing that happens to bitcoin could permanently harm their portfolio,” suggests the financial advisor and avid proponent of ETFs.
Your mantra, should you choose to invest, is this: If you can’t afford to lose it, don’t bet it.
Proceed with caution. Here are four ways to gain a stake, both for those thinking about getting in, and for those of us who are just curious about how it works: