Here’s why Bitcoin isn’t right for me

When we think about the hottest investments of 2021, it’s easy to land on Bitcoin (CRYPTO: BTC), whose value has notably soared in recent months. But while a lot of people I know are anxious to jump on the Bitcoin wagon, I stay away. Here’s why.

1. I don’t fully understand it

Let’s be clear, I know what Bitcoin is. It is a digital currency that is increasingly accepted as an alternative to real money. But I don’t quite understand how it’s mined and why it’s so limited in quantity, despite my very tech-savvy husband explaining it a few times.

A rule I like to follow with my money is never to invest in something that I don’t understand. There was a time, for example, when I didn’t really understand how REITs (real estate investment trusts) worked, so I read until I had more clarity. I tried to learn more about Bitcoin, but there are still some aspects that confuse me, so I don’t think this is the right place for my money.

Image source: Getty Images.

Additionally, I frequently hear Bitcoin enthusiasts comparing it to gold. But I just don’t understand this comparison. Gold is a physical commodity. Bitcoin is not. Gold has been around forever. Bitcoin doesn’t. I understand gold and can decide whether or not to invest in it. I just don’t fully understand bitcoin, and that alone makes it a bad choice for me.

2. It does not match my investment strategy

My investment strategy largely involves buy stocks that offer exceptional value or growth potential. I also own bonds and REITs as they are various sources of income. Bitcoin, frankly, just doesn’t suit me in this mix. And while it’s easy to argue that Bitcoin might, over time, gain in value (as it has already been proven to be able to), I’m just not confident.

Whenever I decide if a company’s stocks should have a place in my portfolio, I look at its assets, cash flow, and other financial data to determine where it is going. But Bitcoin isn’t a business – it’s a type of currency, so I can’t do the same analysis as I normally would.

3. I’m worried about the risk

The extent to which Bitcoin grows in value will depend heavily on its adoption and regulation. These two things are up in the air. While some would say stocks are a risky investment in and of themselves, for me Bitcoin is more volatile.

One of the most important things to do as an investor is to build a portfolio that you are comfortable with and confident in. If I had to buy Bitcoin, I wouldn’t be able to meet either of the criteria. For me, it’s important to have investments that don’t keep me awake at night, and I can’t say Bitcoin fits that bill. And while I know there are a lot of opportunities out there, at the moment I am choosing to stay away from Bitcoin and put my money to work elsewhere.

To be clear, Bitcoin can be a great choice for someone who has an investment strategy that is different from mine or understands it better. And I might change my mind about it. But for now, I’m not there yet.

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Maurie backman has no position in any of the stocks mentioned. The Motley Fool owns shares and recommends Bitcoin. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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