Have you heard of Tulipmania? It was a period of time in 17th century Holland when tulip bulbs (a luxury back then) exploded in value when a single bulb could sell for as much as a nice house. A few months later, prices came crashing down making them near worthless. This may be a very extreme example, but in recent years, we have seen a push of a new hype.
This all started with the Cannabis push and companies formed rather quickly with very high valuations. It didn’t take long for these companies to come back to reality. Most Cannabis plays now trade with way less volatility when they first came on the scene.
Next came Crypto, a world very few understand, but a place where many people have both gained and lost large sums of money. Since the early days of Bitcoin, we have seen prices go from single digits to north of 18,000, back down to 3,000, and now at over 58,000. Along with the emergence of Bitcoin came hundreds of other cryptos some skyrocketing in value in mere hours then crashing days or weeks later. Coins are being formed and inflated to insanely high market caps, only to collapse weeks later. This isn’t an article predicting if crypto will inflate or crash, but to help unpack this trend and to answer the commonly asked question: What’s next?
Soon after Crypto came NFTs, or non-fungible tokens, which are now utilizing the technology and craze of crypto to digitalize art and create a whole new group of multi-millionaires. Now, there are NFTs being created and bought for as low as $1 selling for millions of dollars.
So as the craze continues, the question is do you or should you invest? We don’t recommend or put a price target on Crypto, and how can you really? Due to its volatility, these coins could be 50% higher or lower tomorrow, or totally worthless overnight. When it comes to long-term investing, a diversified portfolio and slow compounding growth over time is the way to go. Now, that doesn’t mean taking a small portion of that diversified portfolio and adding some of these plays into it hoping for a grand slam. It’s very easy to get caught up in the media, making it look like everyone is getting rich quickly with Crypto or NFTs. The media doesn’t show you the strikeouts – the extreme financial risk that is involved in these plays.
So, what’s next? No one knows for certain, but I am confident another huge opportunity will come along, taking over headlines like Crypto has today. People will say “I wish I invested”, “if I bought it 5 years ago it would be worth millions”, or “why didn’t you tell me about this when it first came out?”. There will always be that next thing, we just don’t know when or exactly what it will be.
Although it’s easy to get caught up in the noise and stories of people getting rich overnight, heed this advice: continuously investing in the market and managing your risk appropriately will allow you to see a huge amount of growth on your portfolio over the next 30 years. Stay the course and don’t let the craze make you think you aren’t making enough money on a stock market averaging 10% a year over the last 30+ years. If you want to get into these spaces, go for it, just know the risk versus the reward and the proper allocation to your overall investments. It is critical to know the core of your portfolio is diversified and growing and compounding for you over time.