Should you invest in cryptocurrencies?

David Watson

David Watson

Chartered Financial Planner

Bitcoin and cryptocurrencies are taking up significant column inches just now, with Scottish entrepreneur, Baroness Michelle Mone, and her business partner being the latest to offer a new cryptocurrency to the market. A look at Wikipedia shows that there are more than 30 different cryptocurrencies.

Whilst not a cryptocurrency expert for anyone considering “investing” in bitcoin or other cryptocurrencies, I thought that it would be worth highlighting the investment fundamentals.

Those of you who know me will know that I am a keen golfer and for me golf and investing have some similarities.

Over the years have been various golfing fads and the golfers amongst you will remember ‘stack and tilt’ as a classic example adopted by some coaches. Others like to stick to the fundamentals that have been shown to work since the game was invented, for example,  ‘grip, aim, stance, posture’. Investing has also had its fair share of ‘fads’ but through them all, for me, the fundamentals of investing have remained the same and these using the 4 main asset classes to build an investment portfolio: cash, gilts/bonds, property and equities (shares in companies).

One thing each of these asset classes has in common is that they have the potential to pay an income i.e. cash – interest (albeit low in the UK just now), gilts/bonds – coupon, property – rental income, equities/shares – dividends. The compounding effects of this income on an investment portfolio should not be underestimated. Property and equities also have the potential for capital uplift, as do gilts/bond if sold mid duration. 

Bitcoin on the other hand does not generate any income. Similar to investing in any other currency it is simply a bet against how that currency moves in value. This type of investment is high risk and while it may be suitable for some types of investors, it is always better to seek independent advice before considering investing.

At Johnston Carmichael Wealth we believe that investment decisions should be disciplined and backed by a robust process. If you are looking to invest, I would encourage you to steer clear of cryptocurrencies and to meet with a suitably qualified and regulated independent financial adviser, who can work with you to create and build a financial plan, and sensible investment strategy.

You can find out more about our dedicated Investment Committee and the work that they do by visiting this link here.

Disclaimer: While all possible care is taken in the completion of this blog, no responsibility for loss occasioned by any person acting or refraining from action as a result of the information contained in this blog.

This blog represents our interpretation of current and proposed legislation and HMRC practice as at the date of publication. These may change in future.

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