Bitcoin, Cryptocurrency

My father has $1 million – Should he buy Bitcoins?

Q. My dad is now 78 years old and has approximately a million US dollars in his retirement accounts. He’s now expressing his thoughts on buying cryptocurrency, Bitcoin in particular. As well as investing in stocks, he learns on social media. How can I get him to stick with mutual funds?

— Concerned son

A. Cryptocurrency has been lately a talk of the town and stocks pumped up by interest on social media boards.

Yet before diving into these or any investment, there are a couple of essentials to consider.

First, stated Jeanne Kane, a certified financial planner with JFL Total Wealth Management in Boonton, every investor needs to understand where an investment gets its value.

Apple, for example, is a technology company that sells computers, mobile phones, and watches.

my father has $1 million

Next, have a better grasp of how the investment may increase or decrease value, she said. Apple, as an example, had revenue of $89.6 billion in the second quarter of 2021, up 54% year over year with earnings per share of $1.40

For stocks, bonds, and mutual funds, you can do your homework and get answers to these inquiries.

“Investments like Bitcoin should be held to the same standard,” Kane stated. 

“Where does Bitcoin get its value and why does it increase? If your dad can’t answer those questions for Bitcoin or any other investment, he shouldn’t be investing in it.”

In speaking to your dad, Kane advises that you don’t try to steer him in another direction. She stated that usually, that does not work, mainly when it sounds like he’s getting emotionally hooked in the excitement built around specific investments.

“Maybe suggest that he set up a separate account and put in $100,000 or less and ‘play’ with that. Limit the exposure,” she said. “It is his money, and he will do what he wants — which is his right. To tell him he can’t will only make him want to do it more.”

That’s why it’s your most suitable choice to enable him to do what he desires while limiting the downside.

Emotion runs high with investing, especially in an up market, really since 2008, with only one negative year — 2018,” she stated.

“Logic generally does not work well with emotional responses so the best you can do is really to limit the downside.”

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