If You Speculate, Set Rules First
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By Ben Dolan
One of my favorite weekend activities, as a Dad with a large family, is to take my kids to their friends’ birthday parties. There’s usually an abundance of pizza and cake, and sometimes a family will have a legacy Nintendo (Tetris and Duck Hunt anyone?!), which is always great fun and brings back lots of memories.
But the best part about these parties, without a doubt, is the Grandparents. They are always so happy to be attending such a joyous occasion, and I love talking to them. Often, they ask what I do for a living. A couple of years ago I noticed a trend with this grey-haired cohort. After telling them that I own a wealth management firm, they immediately tell me about their crypto portfolio, and ask for my thoughts.
What alarmed me was not how many of these older investors were in crypto, but the large amounts they were investing in crypto. Also, many of them, it seemed, had not considered the cons associated with crypto, which are many. In short, I was worried that they might not know they are buying a speculative asset.
Speculation usually involves a high-risk high-reward situation. In my opinion, it is closer to gambling than investing. While we don’t advise on speculative assets, we know investing in them can be fun and it’s part of overall market activity.
Still, if you’re going to speculate, here are some guidelines that might be helpful:
- Set a limit on how much money you’ll speculate with and stick to it regardless of how the asset performs.
- Keep your speculative bets to a very, very small portion of your overall portfolio.
- Stick with investments in an area of the economy that you are familiar with.
- Expect huge price swings in the underlying asset.
- Know, and be ok with, the chance that your investment could go to zero.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The market and economic data are historical and are no guarantee of future results. All indices are unmanaged and may not be invested into directly. The information in this report has been prepared from data believed to be reliable, but no representation is being made as to its accuracy and completeness.
Nothing in this material should be construed as investment advice offered by Dolan Capital Advisors, Inc. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction, or investment strategy. No chart, graph, or other figure provided should be used to determine which securities to buy, sell or hold. No representation is made concerning the appropriateness of any particular investment, security, portfolio of securities, transaction, or investment strategy. You should speak with your own financial professional before making any investment decisions.
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Certain statements contained herein are statements of future expectations and other forward-looking statements that are based on opinions and assumptions that involve known and unknown risks and uncertainties that would cause actual results, performance, or events to differ materially from those expressed or implied in such statements.
Ben Dolan and Michael Foster are investment advisor representatives of Dolan Capital Advisors, Inc., a SEC-registered investment adviser. Investment advice offered through Dolan Capital Advisors, Inc.