Let’s skip the suspense: In nice, round numbers – the roundest number, in fact – 0% of your financial plan should be in Bitcoin.
I received an email this afternoon from a representative of something called Osprey Funds. He invited me to an “interactive event” that would explain how Bitcoin compares to other asset classes. I could also learn about “accessing” Bitcoin for our clients.
There’s so much wrong with this, but I’ll be brief.
Start with the name of the group putting on this educational event – Osprey Funds. A quick Google search describes the osprey as a “fish-eating bird of prey.” Hmm. If the one doing the selling is the osprey, doesn’t that make their customers the fish?
But let’s say I can get past the image of being attacked from the air and devoured. Shouldn’t I be interested in adding a new “asset class” to our clients’ portfolios? Diversification is a worthwhile thing in financial planning, isn’t it?
What is an Asset in Financial Planning?
The problem is this, Osprey: Bitcoin is not an asset class. And diversification into worthless assets strikes me as dumb. Really, really dumb.
In financial planning, an asset is one that can be expected, rationally, to provide some combination of growth, income and capital preservation. Stocks, bonds, and money market investments are typical examples.
With Bitcoin, do we have any rational basis for expecting growth, income or capital preservation? No. Speculators simply hope that they can sell to someone else at a higher price.
Fun, for Now
A writer for The Wall Street Journal recently suggested that even though Bitcoin may not be a financial asset, it still has value. The people who speculate on it feel a sense of community and are having fun. To them, it’s like playing a video game, and what’s wrong with that?
I don’t doubt that they are having fun, for now. But it’s not a game. Videogame players don’t expect to retire before they are 35. A lot of Bitcoin gamblers do, judging by the ads I see online. They will be disappointed.
Barry Dunaway, CFA®
America First Investment Advisors, LLC
This post expresses the views of the author as of the date of publication. America First Investment Advisors has no obligation to update the information in it. Be aware that past performance is no indication of future performance, and that wherever there is the potential for profit there is also the possibility of loss.