It’s hard to ignore all the recent commentary on bitcoins, block chains and cryptocurrency. But why all the buzz about these relatively new buzzwords? Should you buy some bitcoin to have and hold? Should you invest in it? What is “it” to begin with?
Fortunately, my colleagues at Dimensional Fund Advisors have published a handy, three-page piece on this very subject: “To Bit or Not to Bit: What Should Investors Make of Bitcoin Mania?”
Having done my own due diligence and reached essentially the same conclusions they did, I’m going to share their article here, with permission. It’s an approachable piece, worth your time to read, but if you’d rather jump straight to the conclusion, here it is:
Because bitcoin is being sold in some quarters as a paradigm shift in financial markets, this does not mean investors should rush to include it in their portfolios. When digesting the latest article on bitcoin, keep in mind that a goals-based approach based on stocks, bonds, and traditional currencies, as well as sensible and robust dimensions of expected returns, has been helping investors effectively pursue their goals for decades.
For additional insights on how cryptocurrency fits into evidence-based portfolio planning (which is, to say, how it mostly doesn’t seem to fit in at this time), read the rest of Dimensional’s article here.