Fear of missing out is a powerful force in investing. And it’s difficult to ignore an asset that has gained more than 500,000% in just a few years, eliciting headline-grabbing commentary from Elon Musk and Warren Buffett, among others.
Bitcoin and other cryptocurrencies have captured the imagination of investors, putting financial professionals at the centre of an increasingly frenetic discussion about whether to jump into the fray or steer clear.
Sure, it may be tempting to dismiss Bitcoin as a passing fad and tell clients it’s inappropriate for their portfolios. But simply discounting it won’t be an adequate answer for some. Moreover, the question itself presents an important opportunity for you to better understand your clients’ risk tolerance.
“If you have a client who really wants to buy Bitcoin, just saying ‘don’t do it’ is a disservice,” says Barbara Burtin, an equity investment analyst at Capital Group who covers the banking industry. “In fact, owning a small amount can be a learning experience.”