By Jay Sanford, Director, Investment Strategy
We at WFG are not in the business of buying and selling (trading) highly volatile “currencies.” Yet, we come across it almost every day. It is the investment du jour at the moment. That isn’t to say it isn’t legitimate, but we see this type of investment come and go in terms of the wave of hysteria. Dot.coms, house flipping, the Iraqi Dinar, the Vietnamese Dong, just to name a few, all have a few things in common. One, they offer the chance or hope of creating a great deal of wealth in either a relatively short period of time and/or with little effort or output by the investor. Secondly, they are excellent conversation pieces at cocktail parties and water coolers. Both of these points can have profound affects on your thought process when determining if it is a good idea for you to invest in them.
At some point we believe you should take a step back and look at the sources of your information for these types of investments (friends, colleagues, the internet, a stranger) and ask if they know your situation: what your risk tolerance is; what your time horizon is; what risk do you need to take in order to achieve your goals. Chances are YOU don’t NEED to take on the risk and roller coaster of the ‘investment du jour’ to achieve your goals.
We realize behavioral finance partially dictates the desire to invest in something like this (herd mentality, narrative vs. analysis, etc.). So, a few words of wisdom if you choose that path:
- Prepare to lose it all. Start with and stick to an amount you can afford to lose completely.
- Have an investment discipline. If your goal is 50% return and you achieve that, stay disciplined and get out. Don’t get greedy.
- Research. Know what you are investing in. If you can’t understand why prices are going up and down, then maybe you shouldn’t be investing in it. Fundamentally, there should be some reasoning behind price fluctuation beyond just supply and demand. (A side note: When you have esoteric investments or non-regulated investments, supply and demand price fluctuation can be manipulated much easier. Be cautious!)
In the end, we want what is best for you. We want you to achieve your goals, understand your risks and sleep well at night. Roller coaster rides rarely make for ideal sleeping conditions.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Global Retirement Partners, LLC (GRP) a registered investment advisor. GRP, LPL Financial, and Washington Financial Group are separate non-affiliated entities. 1-718448