Should You Invest in Bitcoin?

Welcome back to Short Takes by OmniStar Financial Group. Today we're going to be talking about a very hot topic: cryptocurrencies. Phil, we've been hearing multiple clients for years now ask about, hey, what about crypto, what about crypto, what about crypto? And well, today we're going to talk a little bit about that.

This whole thing, Dustin, it cranked up back in what, 2009, when Bitcoin came on the scene. It really hasn't looked back. It's been volatile, but it hasn't looked back. It's become more and more popular. Let's use Bitcoin as an example. Bitcoins, Bitcoin, Bitcoin, Bitcoin, Bitcoins. We don't all need Bitcoin. Does it make sense? Should you buy it, and is now the right time?

Now, this thing is on sale right now, maybe 50 off just a few weeks ago. It's climbed back a little bit, trading at around 41 000 today. We were at 70 000 in November, and then all of a sudden we were at 36 a week ago. That can rattle anybody's nerves, I would think.

And if you look online or you talk to any of your buddies, I have, even being from Iowa, small town, I have three or four buddies who invested in Bitcoin back in 2009, 2010, and they sold it after they made a small profit, and now they're kicking themselves. And so now you hear those stories and it just makes you want to purchase it even more.

One thing with Bitcoin is, if you're going to invest in it, be ready for the roller coaster, because it is all over the place. It's not like a normal stock where it stops at four o'clock Eastern time. It's trading after hours, during the weekend, during holidays, never taking a break.

So it's not a true currency. It's more of a store of value, if you will. People say, well, you have to mine it, much like the yellow metal. So in a sense it's thought about today like gold, a store of value. It could become a currency. But here's the thing: if you're considering crypto, just keep in mind the volatility. Huge.

As Dustin was just talking about, it can be a great time to buy it, because from the perspective of stock, as you said, it seems cheap right now relative to where it was in November at 70 000. But it's not cheap relative to what it was when it fell 80 percent during a period just a few years ago. Is crypto a good investment right now? Dustin, what do you think?

It's hard to say if it's good right now. If you were just talking about the stock market and the stock market dropped almost 50 percent, yeah, it'd be a great time to buy, 100. But we just don't know with crypto. It can be a great investment. It can be a great add-on to the overall investment portfolio. But when you look at fundamental investing, don't take all of your money out of the stock market and put it all into crypto.

Why? It may be attractive to do that, but trading stocks has been around for hundreds of years. We know the fundamentals. We have a track record of that. But what I would say is you do want some exposure in that market. Our portfolios, for example, we've been adding somewhere about two and a half percent max into those portfolios. So not a huge amount, but we're at least trying to get a little bit of exposure into that area.

But the what-ifs here are huge. To your point, stocks have been trading for hundreds of years. We can look historically speaking, and we know that stocks ebb and flow and they're likely going to come back. And you can talk about the kind of company, you can talk about market share. You can gauge pretty well how a stock is going to behave.

Crypto, on the other hand, it's anything but a well-behaved stock. It's all over the place. It's sort of like the incorrigible kid [Music]. No matter what you say to them, you can't really get them to do what you want them to do. This thing is probably here to stay, but the question is, is it right for you?

So we define crypto as just an investment. Not good, not bad. It's risky. It comes with significant risk, and don't get in crypto if you're fearful of risk. But if you can tolerate risk, if you consider what your total investment strategy looks like, what you're trying to accomplish with Bitcoin, perfectly fine to look at crypto at this point, because relatively speaking it could be a pretty good price.

What we're talking about is viewing crypto in the context of a financial plan. Have your fundamental wealth building strategies, doing the things that you know long term will make you successful. I've been in investment management for 30 years. I own crypto, and I think that long term I feel perfectly safe having a portion of my portfolio focused on Bitcoin. Would I put everything there? No, of course not. I still believe that diversification really trumps everything when it comes to prudent investing and really driving long-term wealth.

And though people have been extremely successful with Bitcoin, we've seen a lot of people who are now crying the blues, because when it fell, particularly here a few years ago when it fell 80 percent, people were jumping out fast. The emotions kick in and they say, my goodness, I've got to keep what little bit's left. And so as many millionaires as it's made, probably taken just as much.

It just means to be careful. It means to make sure that when you're buying crypto, you understand the risk and you understand how it fits in the context of your total plan. Don't do it on a whim, and don't expect to become a millionaire overnight. Just know what you're doing before you dive into crypto.

All right, that's all we've got for crypto today. If you have questions, want to learn more about crypto, reach out to us at OmniStar, our entire team. We'll talk to you anytime you'd like. Keep us in touch with what you're doing. Let us know how we can help. Take care. We'll see you next time on We're Talking Money Short Takes.

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