Jack Bogle is the founder of Vanguard and the father of Index Investing, I consider him the “Dave Ramsey” of the investing world. He’s trustworthy, intelligent and could have made unbelievably amounts of money by charging high fees on his awesome product (Vanguard Index Funds). Instead he keeps fees low and is of the opinion that high fees to invest is an unnecessary drain on a working investor’s future. In other words… he is awesome! So when he stated that you should “avoid Bitcoin like the plague” I tend to listen. I had heard of Bitcoin just in passing while listening to a Dave Ramsey Show episode but didn’t think much of it. A few months later it was cryptocurrency mania and you couldn’t turn on the TV without hearing about it. So what is cryptocurrency?
Wikipedia explains cryptocurrency as “A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets.” Sounds like a fancy form of currency to me but I have chose to ignore the noise so I do not understand it completely. What I have paid attention to is the decentralized control of the asset by way of blockchain. Blockchain is a continuously moving transaction database or ledger. Blockchain has some serious implications to change the way we house data and transactions, all for the better. Much of this is way over my head but several large corporations have investigated blockchain. Vanguard has already started to implement using blockchain for their index data. So their are pros and cons to cryptocurrency, however for the normal investor I agree with Bogle. AVOID BITCOIN AND ESPECIALLY THE OTHERS!
Why? In my opinion there is no intrinsic value unlike stocks and bonds. Stocks have earnings and dividends and bonds have interest coupons. Buying Bitcoin or others is gambling! You are buying at face value in hopes that it will go up in value. Much like gold and the simple reason I stay away from gold as an investment. Highly speculative! Not convinced? Take Money Mustache’s word for it… he is smarter than all of us! He wrote an article recently “Why Bitcoin is Stupid.”
Still not convinced or think its okay to invest some blow money into Bitcoin or knock off cryptos? How about waiting until the bubble bursts, which I am willing to bet it will and then throw some money at whoever survived at discount prices! I on the other hand will stick to my three Index Funds and current asset allocation as you should… always!
Once again I can’t help but agree with and laugh at John Oliver. Whether you like John Oliver or disagree with his political views, at least listen to some of his ideas when it comes to investing. Much like his episode on paying attention to investment fees, I believe he hits the nail on the head with his latest episode on cryptocurrency! Click on the link below to watch, and as always pardon the language!
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