Cryptocurrencies: Buy or beware?

IN MAY 2012, I went to a property seminar in Melbourne when I was looking to buy my first property, so I was trying to gather as much information as possible.

Little did I know I was about to miss out on the biggest opportunity of my life, but it has taught me a lot.

The property seminar ran for most of the day and I was pretty tired by the end of it and I couldn’t stand to listen to another speaker.

I chose to stick around to hear a guy named Jamie McIntyre speak, who I’d followed for years and really loved how he explained property and business in general.

Unfortunately, Jamie is under investigation from ASIC after a few bad decisions but that’s another story.

After going into detail on various property investment strategies, he brought up a new topic, “Bitcoin”, and explained it was going to be a new form of currency that didn’t need a third party, like a bank, to facilitate the transaction, and that it had the ability to change the way we pay for goods and services.

I was there to listen about property, so I didn’t tune in like I usually would, and if I had invested $1,000 in Bitcoin at the time, it could now be potentially worth millions.

I still don’t own any form of cryptocurrency and I’m reluctant to buy anything I don’t understand entirely.

This mindset of “get rich quick” and the demand it creates is amazing but don’t underestimate the risk it can create for the particular market; on January 16 this year, the price of Bitcoin fell by over 20 per cent.

When someone senses financial fear, they sell all of their shares – this is a behaviour we have seen countless times (think the Great Depression and the GFC) especially with risky investments.

I prefer to purchase what I know and invest in something that has a regular cycle and has stood the test of time; like property and shares.

Twenty years ago, when property in Victoria was on average $88,000, we thought it was expensive, but now it is an average $450,000 and growing strongly – retrospect is an amazing thing.

The one thing I did learn from this seminar six years ago, is to make an educated decision and invest as soon as you’re financially able, and I am lucky I bought property at the time I did.

Isaac Baker is a wealth manager and mortgage broker for Yellow Brick Road Geelong and Torquay. Phone him for financial advice today on 0400 949 797.

Advice in this column should be taken as general in nature and might not apply to your personal circumstances.