Cryptoassets are quickly reaching a mainstream tipping point.  Every day it seems more and more people are talking about and possibly even investing in cryptocurrency.  Though some insist crypto is a passing trend, plenty of the world’s top financial institutions such as J.P. Morgan are moving money into crypto.  

However, the average person may not understand the merits or value of cryptoassets as such digital currency may be inherently complex.  Making crypto even more complex and slightly intimidating is the fact that it is not a tangible asset, meaning it cannot be physically touched as it exists on a screen.

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There is no shame in reaching out to a Greeneville, TN fee-only CERTIFIED FINANCIAL PLANNER™ Professional to make the complex simple.  Truly comprehensive financial planning provided by a CFP® includes an explanation of cryptoassets as well as other complex and/or speculative investment vehicles.  

Choose the right fee-only financial advisor and you will be provided with a clear and cogent explanation of cryptoassets provided in plain English you can understand without a MBA.  Without further ado, let’s delve into the basics every investor should understand when considering cryptoasset investments. 

1. Cryptoassets Have an Element of Risk

If you have been hesitant to invest your hard-earned money in cryptoassets due to the comparably high level of risk, you are not alone.  However, there is an element of risk when investing in any equity.  There is certainly the potential for cryptoassets to suffer significant setbacks as the market takes shape yet there may also be considerable upside to these breakthrough digital value stores.  

Recognize the fact that there is risk in every investment and pose any questions and concerns to your fee-only CERTIFIED FINANCIAL PLANNER™ Professional at Sapiat Asset Management.  At Sapiat Asset Management we can help you understand the basics of cryptoassets and why we consider them ‘speculative investments’ and select those that are ideal for your risk tolerance, portfolio, and overarching investing goals. 

If you are still questioning whether it is prudent to invest a portion of your savings in cryptoassets, you may want to abide by the 5% rule.  Invest 5% or less of your aggregate savings into cryptocurrency and you may feel more comfortable knowing only a small percentage of your money is invested in an asset with elevated risk.

Continue to consult with your fee-only financial advisor while learning about cryptoassets and you will be provided with a fully customized plan.  A CERTIFIED FINANCIAL PLANNER™ Professional should take the time necessary to tailor cryptoasset investments as well as other investments to each investor’s idiosyncratic goals, risk preferences, and other nuanced requirements.  This is the comprehensive financial planning necessary to diversify your portfolio and take full advantage of the crypto boom. 

2. Maintain an Open Mind When Investing in Cryptoassets 

Those who skim the surface of cryptoassets without performing a deep dive tend to believe the only way to invest in these digital value stores is to directly buy them.   Meet with a fee-only CERTIFIED FINANCIAL PLANNER™ Professional and you will be provided with helpful guidance that steers you toward the best possible crypto investment for your risk tolerance and portfolio dynamics.  

It is now possible to invest in cryptoassets through several investment vehicles ranging from Bitcoin futures to cryptocurrency hedge funds and publicly traded businesses that have exposure to the blockchain. 

As an example, crypto enthusiasts have recently scooped up shares of the publicly traded stock Coinbase (COIN).  Some crypto investors directly own cryptocurrencies and also own alternative/indirect crypto investments such as those described above.

3. Be Highly Selective

The specific cryptocurrencies you select for your portfolio should not be randomly selected.  There are plenty of cryptoassets available for investment yet some are clearly superior to the rest.  Keep in mind, hundreds of cryptocurrencies have popped up only to drop to zero.   

At Sapiat Asset Management we have undertaken due diligence on several crypto exchanges & crypto custodians to determine which organizations with which to work. We believe we have contracted with the current market leaders to provide our customers with access to international cryptomarkets.

4. Sweat the Small Stuff of Cryptoasset Storage and Security

There is no sense investing your hard-earned money in cryptoassets if you cannot store those assets in a safe, organized, and easily accessible manner.  However, many retail investors are unfamiliar with the nuances of cryptoassets.  Cryptocurrency is stored within a digital wallet that is categorized as either hot or cold.  Digital crypto wallets are nothing more than software programs that store keys that connect you, the cryptoasset investor, to the blockchain where the cryptocurrency is.  

Digital wallets do not store the cryptocurrency yet empower investors to access it through the blockchain accessed with a public key.  The public key is best described as the cryptocurrency address viewed by the other party involved with the transaction.  The word “key” is used as it unlocks the cryptocurrency you invest in on the blockchain.  

Aside from providing investors with access to cryptoassets along with the ability to transmit/receive crypto, digital wallets are also helpful in that they record transactions stored on the blockchain.  Securing digital currency is just as important as choosing the right cryptoasset in the first place.  Aside from monitoring your cryptoassets, you may also use this digital currency to buy products and services with a hot wallet.  

Pay attention to the subtleties of crypto security and you will rest easy knowing your hard-earned money is secure.  Opt for a virtual private network (VPN) to ensure your digital transactions are fully secure and encrypted.  VPNs secure an online network, preventing unauthorized parties from viewing or accessing your cryptoassets.   

At Sapiat Asset Management, we use a personalized process to identify the financial and retirement planning strategies that meet the needs of our clients. Our knowledge of your financial situation is a big part of the foundation that drives our relationship with you. Contact us today for a complimentary consultation.

Sapiat Asset Management is a Fee-Only, Independent, Registered Investment Advisor (RIA), specializing in goal-oriented financial planning and investment management for Gen X Individuals & Families, their Businesses, & the Trusts that benefit them and their heirs.