Is Bitcoin Right for You? What to Know Before You Invest

Bitcoin has been one of the best-performing assets of the past decade, beating even the stock market. That kind of return can spark serious FOMO (fear of missing out), leading some investors to jump in without fully understanding what they’re buying.

At Advance Capital Management, our goal is to help you build a portfolio that matches your goals, risk tolerance and time horizon. That means making informed decisions even when an investment seems to be making headlines everywhere.

So… is Bitcoin worth considering? And if so, how does it fit into your plan?

Let’s break it down with a brief overview.

What is Bitcoin, exactly?

Bitcoin is a type of digital currency, also known as a cryptocurrency. It allows people to send and receive payments without using a bank or other middleman. Every transaction is recorded on something called the blockchain, which acts like a public ledger.

Key Features of Bitcoin

• Decentralized: No single government or bank controls it. Transactions are verified by a global network of computers.
• Limited Supply: There will only ever be 21 million bitcoins, which gives it scarcity value. Some compare it to “digital gold.”
• Secure (If Handled Properly): Bitcoin relies on cryptography for security, but owners must store it carefully using private keys and secure digital wallets.

What is Bitcoin used for?

Bitcoin isn’t just a buzzword or a speculative asset. It was originally created as a way to exchange value directly between people. Over time, its uses have evolved.

Today, Bitcoin serves a few key functions that may appeal to both tech-savvy users and long-term investors:

1. Peer-to-Peer Payments: You can send money to someone directly, without needing a bank.
2. Investment: Many people buy Bitcoin hoping its value will rise over time.
3. Global Transfers: Bitcoin can be used to send money internationally, often with lower fees than traditional wire transfers.

What are the risks?

Like any investment, Bitcoin comes with risks… but it also comes with unique risks not common to traditional investments:

• Volatility: Bitcoin’s price can swing wildly.
• No Government Backing: It’s not supported by a central bank or government, and it doesn’t have legal tender status.
• Regulatory Uncertainty: Laws vary by country and can change quickly.
• Security Concerns: Digital wallets can be hacked or compromised. Lose your private key, and you may lose access permanently.
• Unregulated Market: Unlike stocks or bonds, cryptocurrencies are not subject to the same protections and oversight.

How to buy Bitcoin

If you’re interested, here are two common ways to invest:

1. Direct Purchase Through an Exchange
   Open an individual account with a platform like Coinbase or Kraken. After purchasing, you’ll store your Bitcoin in a digital wallet or keep it on the exchange (though this comes with added risk).
2. Bitcoin ETFs (Exchange-Traded Funds)
   For those who want exposure without the hassle of wallets or private keys, a Bitcoin ETF may be an option. It lets you invest in Bitcoin through a traditional brokerage account. Just know: you don’t own actual Bitcoin, only shares in a fund that does.

So, is Bitcoin right for you?

Bitcoin represents a new frontier in finance, and like any frontier, it offers both opportunity and uncertainty.

Here are some things to ask yourself:

• Am I comfortable with high price swings and potential losses?
• Do I understand the technology, or am I just following the hype?
• Would Bitcoin help diversify my portfolio, or just add more risk?

The bottom line

Bitcoin is a fast-evolving, high-risk asset class. It may have a place in a well-diversified portfolio. But only if it fits your goals, time horizon and risk appetite.

If you’re considering adding alternatives, like Bitcoin or other cryptocurrencies, to your portfolio, we’re here to help you assess whether this type of investment would be in your best interest.

 

The information presented is for informational purposes only and is not a recommendation. Investing in digital currency comes with significant risk of loss.