As we said previously cryptocurrencies are technology backed assets that need attention to finer details and even can expose you to certain scams, this said an individual going for these assets which are still at their nascent stage need to be skilled enough to understand both the methodology using which these digital tokens earn you money as well as should have a sufficient risk appetite to meet any loss, if the case be.
Now coming to our core topic that is should retirees or those nearing retirement invest or buy cryptocurrencies to add up to their retirement corpus or fortune.
Before we go further deep down into the topic whether or not those retiring or those who have already retired should park their surplus cash in bitcoin, there are some general aspects to it that can help you decide whether or not you should be investing in them:
Questions To Answer To Decide On Cryptocurrency/ Bitcoin Investment
1. Can you accept wide swings in the cryptocurrency that sometime occur by a minute?
2. Do you understand the technology running the cryptos or bitcoin and other altcoins?
3. Will you be willing to invest in an asset that operates on Decentralised finance with no central regulatory or authority overseeing it?
Positives of the cryptocurrency/bitcoin as pointed out by experts
Also one you discuss an asset you can also point to its positives as seen by experts:
As only recently the inclination for the asset category has spiked only to exponential gains in their prices, there have come up some views by experts that can also be highlighted here:
1. Cryptos have the potential to come out as primary currency form and thus could radically change the banking landscape.
2. Because of its limited supply it has also been accorded the tag similar to gold of being a ‘store of value' and even having the functionality to serve as a inflation hedge and some even call it as a digital gold.
Points to decide on your cryptocurrency or bitcoin purchase decision:
1. No one holistic view on cryptos in terms of their prospects:
Even as some experts see cryptos to be performing good over the long term, nobody can with certainty assert about their future prospects. Some of the leading names in India and across say for instance Kamath of Zerodha he said he doesn't invest in them because he does not understands them.
Likewise, Charlie Munger, VP-Berrkshire Hathaway called ‘bitcoin or crypto investment " disgusting and contrary to the interest of civilization.
And so for a retired or near retirement person considering that his other retirement savings are well in sync with the retirement needs one should be better off refraining from them as cryptos being a highly risky investment.
2. Higher volatility to which these instruments are exposed to shouldn't go well in the retirement age:
Say when you are depended on meeting your retirement age's various expenses such as fixed and other medical expenses through earnings from your deposits say you have made in MIS scheme or fixed deposits, how can you expose your investment to such a volatility, so better not get into them.
Say only on May 19, the crypto bitcoin crashed by a huge 30 percent in a day and recovered most of the losses to again hit levels of over $40000 per coin the next day.
So, if a suitable retirement savings plan is already in place for you, do not get yourself into a trouble by investing in these new cryptocurrenies.
But nonetheless, if your risk appetite and wealth allows to test such a novel investment too and have the capacity to absorb the huge risk, go the SIP-way and avoid lump sum investments in cryptocurrencies or bitcoin. As it is some of the cryptos are highly priced say for instance bitcoin which in rupee terms is priced at Rs. 30.51 lakhs.
Options Other Than Cryptocurrencies/ bitcoin for making good returns
Options which retirees can consider if they still have ample free cash or want to tap higher returns
1. Index funds:
Index funds in India which largely mimic the performance of a particular index are less risky and can even help you earn inflation beating high returns. Probably a SIP in index fund can be a best idea.
2. Dividend stocks:
These stocks which earn you dividend consistently help you supplement your passive income stream and thus can provide you a diversification from your regular conventional savings plan.