Crypto investment can be lucrative, or strike panic in all but the most risk-tolerant investors. One of the questions everyone who is planning for retirement has on their mind is what investments to include in their retirement portfolio. If you are on either side of the crypto investment split, you are not alone as to whether crypto should be an option to consider in your retirement portfolio.
Weighing the Pros and Cons of Crypto Investment
When deciding which investments to put in your retirement portfolio, almost everyone has explored crypto investment as an option recently. Crypto is an investment tool that can seem like the road to wealth as the growth of Bitcoin that began in early 2017 indicates. In late 2020, Bitcoin topped the $55,000 per coin mark, but then, in April of 2021, it dropped like a rock on news that came out.
Whether this is good news or bad news depends on when you got into the market and when you sold. If you are holding Bitcoin or any other cryptocurrency in hopes of retiring comfortably, your guess is as good as anybody’s as to what the market is likely to do in the distant future. One thing that everyone can agree on when it comes to holding crypto in your retirement portfolio is that you should diversify and have the weight of your investments in something that is less volatile and shows better promise of steady growth.
Generational Differences in Attitude
Earlier this year, Morningstar surveyed what people liked and did not like in their retirement investments. It was found that a majority of participants ranked crypto as a very low priority in their investment portfolio. This echoes the good advice that having a small portion of risky investment with excellent potential is good, but the balance should be in something with a proven track record.
It should not be surprising that younger investors were more likely to see crypto as an important instrument for their retirement savings. Generation Z has time on their side if something should go wrong. The results of the survey found that Generation Z had the most interest. Interest among Millennials was slightly below Generation Z. With Generation X, interest in crypto dropped by more than half. Baby boomers were the most skeptical about even having crypto in their portfolio at all.
Time Matters for Baby Boomers
The results of the Morningstar survey are what one would expect when you consider the factor of time and cultural differences between the generations. Generation Z and the Millennials are more tech-savvy, and they have many years to wait and see what happens with crypto in the future. For the Baby Boomers, retirement is upon them if it has not already arrived. A volatile investment instrument, such as crypto, is just too risky. If a mistake occurs, there is no time to recover for Boomers.
Right now, the crypto market is volatile. The world of cryptocurrency can be considered in its infancy as far as investment instruments are concerned. The software and infrastructure continue to be developed at a dizzying pace. More places are deciding to accept crypto as payment, and as we saw with Tesla, some are reconsidering their initial decisions to accept it. Governments around the globe continue to develop new laws and have varying degrees of acceptance for cryptocurrency.
Many of the issues surrounding crypto that would eventually lead to its long-term stability and viability as an investment instrument will take years or decades to work out. For now, it is still a risky investment, and most advise that it can be a small portion of your portfolio, but only in small portions. Generation Z will probably experience a different world when it comes to crypto investing. Only time will tell what that world will look like and whether it will be friendly to crypto.