The recent cryptocurrency bear market has yielded today, with a nice upturn for top cryptos. Bitcoin (BTC) has posted a nearly 10% gain in the last 24 hours, with Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH) following at approximately 11%, 14%, and 12%, respectively. All this while the traditional markets continue to flounder in correction territory, further complicating the playing field for the modern, diversified investor.
To further compound the issue, the housing market is seeing signs of trouble, and global instability looms, threatening to further derail global markets. Where do we go from here? Precious metals? Art? Savings accounts that can’t beat inflation? Hide cash in a mattress? Gamble?
In a sense, we’re all gambling not only when we invest, but when we are static and hold large amounts of any currency or asset class. And so, in this time of uncertainly, the following 3 principles apply now more than ever.
- Diversify – As always, make sure your eggs are in multiple baskets and that these baskets are allocated by investment objectives and investment horizons. And, the critical issue of investment horizons brings us to our second point.
- Consider Your Personal Timeline – What are your cash flow requirements? Do you have a steady steam of income and the ability to “ride out” the stock market downturn or potentially lose it all on cryptos?
- Risk/Reward Analysis – The general rule is that riskier investments tend to have a higher potential upside but always keep in mind that you may incur substantial losses. You must evaluate your own personal risk tolerance profile considering both the effects of the first point mentioned above on your own holdings and the impact of the second point on your current investment approach.