Money Matters viewer Khutang wanted to know whether it is safe to invest in Bitcoin and more generally, where a wannabe investor should be investing.
As Khutang is specifically talking about investing, this would not be your emergency funds or short-term savings for a goal, but rather longer-term investing for growth.
People want to know whether they should be investing in unit trusts, buying property, or starting their own share portfolio.
A good way to approach this is to break down the types of investments into green, orange and red flags.
A green flag would be investments that do not require much investment knowledge about the underlying assets. So, for example this would be your pension fund, a tax-free savings account into unit trusts or exchange-traded funds. Here you have handed over the decision making to someone else or are just tracking a market return. This would probably make up the majority of your investments.
An orange flag would be investments that require some market research and knowledge. So this would include having your own share portfolio with a stockbroker where you make the decision of what shares to buy. It would also include property investing as you need to do research into rental demand and property values. Investments into alternative assets such as cattle, art or investment cars would also fall into the orange category.
A red flag would be those investments that not only require additional knowledge, but which carry high risks of money loss or volatility. Bitcoin, or cryptocurrency, would fall into this category along with forex trading. This could also include investing in a fintech crowdfunding initiative or your friend’s latest business idea. This should be money you can afford to lose and should not make up a significant portion of your wealth.
There is nothing wrong with taking risk and a punt on a new trend, but make sure you have a stable investment base first.