Nearly every investor has been adversely affected by the current market conditions. In fact, this is one of those rare times in history where stocks, bonds and cash have all been hurt by current market conditions. However, there is one group of investors that has been hurt more than any others and that is young investors.
A disproportionate number of young investors have jumped into the cryptocurrency craze and unfortunately, they have learned a tough lesson. As cryptocurrency markets have crashed over the last few months, many have found that their investments are now worthless. Some investors used debt to finance crypto purchases, which means that many are now finding themselves in a difficult financial situation.
Unfortunately, this experience has soured young investors from future investments. I would rather this experience serve as a lesson and teach people to be better investors in the future. In that regard, here are some of the mistakes I think the young investors made.
The first issue is portfolio diversification. Many inexperienced investors put the bulk of their money into cryptocurrency. I don’t care how good an investment may seem, you never want all your money in one area.
Diversification spreads risk over a wide variety of investments so that your exposure to any one investment or area of the economy is limited. By having a diversified portfolio, you reduce the overall portfolio volatility. Of course, it doesn’t mean that your portfolio won’t have losses, because even today, investors with diversified portfolios are hurting; however, it does provide protection over the long run.
More:Rick Bloom: With big market volitivity, do this to protect your financial investments
More:Rick Bloom: Retirement rollover mistakes can cost you big money
Second, be careful borrowing money to cover investments. It was not unusual for young investors to use their credit cards to finance cryptocurrency purchases. In the great majority of situations, I don’t think investors should be borrowing to invest,…
Read complete post here: