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Trading Bitcoin Is a Bad Way to Invest

By U.S. News & World Report

The surge in bitcoin prices is causing a buzz that likely won’t end well for many. But what’s happening serves as a useful and cautionary lesson for long-term investors.

In short, fun and investing don’t mix well.

Rose Swanger, a certified financial planner at Advise Finance in Knoxville, Tennessee, says she was approached by an investor inquiring about cryptocurrency. “He called to say his friend had just made $2,000 in just one week by trading bitcoin,” she says. “He wanted to see if he should do the same.”

The problem is that the bitcoin craze, which has seen prices jump from less than $1,000 a year ago to more than $16,000 recently, is reminiscent of the dot-com fad that quickly morphed into a bubble — and then popped.

[See: Avoid These 8 Rookie Investing Mistakes.]

“I started invested in the late 1990s because at that time you could throw money in the market and just make money, but it ended when the tech bubble burst,” Swanger says. The Nasdaq 100 index, which was heavy on tech stocks, fell from more than 4,000 in March 2000 to less than 900 in September 2002, according to data from the St. Louis Federal Reserve.

Now Swanger advises her clients to be more cautious. She told the man who called her to “put just 1 percent” of his portfolio into bitcoin, reasoning that he was already determined to invest so she could persuade him to only take a small stake.

Whether he took Swanger’s advice is another matter because ads and news reports have investors dreaming of a big, quick payday. CBOE Global Markets’ bitcoin futures contracts also started trading recently, giving investors another avenue to bet on bitcoin.

Even pros get it wrong. It isn’t just neophytes who get caught up in frenzies. Rebecca Kennedy, founder and principal of Kennedy Financial Planning in Denver, remembers younger portfolio managers putting up to 60 percent of client money into tech stocks during the late 1990s tech stock craze, even though the valuations climbed each day.

“The more seasoned managers, however, were much more cautious about jumping on the tech stock bandwagon,” Kennedy says. Eventually, the “seasoned managers were finally vindicated for their more judicious approach and the young managers got fired.”

[Read: How to Invest in Bitcoin and Digital Currency.]

Unfortunately, there is little new under the sun when it comes to human emotions, and cryptocurrencies look to be replicating the dot-com surge.

Paul Donovan, global chief economist for UBS Wealth Management, calls bitcoin “the bubble to end all bubbles.” And Michael Novogratz, former Fortress Investment Group hedge fund manager, has called cryptocurrency “the biggest bubble of our lifetimes by a longshot.”

What’s wrong? It’s easy for investors to get carried away with dreaming of big bitcoin gains when they have 24/7 instant access to market prices and a constant feed of investment news and commentary.

“The technology has turned Wall street into a live casino where we were gambling,” says Lance Roberts, chief investment strategist at Clarity Financial in Houston. “We no longer analyze data.”

It used to be that the market was a way to invest savings so that the money could grow over long periods of time, withstanding the withering effect of inflation. It’s a tried-and-true formula for long-term wealth.

“I’ve been around markets since 1987, and there’s a huge difference [from before],” Roberts says. “People have been sucked into the market like it is a game at a casino.”

Patience is needed. Waiting long periods of time for your investment returns requires a lot of patience. It’s nearly every scenario, it’s not for getting rich quick.

Roberts says two quotes come to mind for investors who are tempted to make investments to any asset, whether it be bitcoin, stocks or bonds.

The first comes from a legendary economist, Paul Samuelson, the first American to win the Nobel prize for economics. “Investing should be more like watching paint dry or watching grass grow,” he says. “If you want excitement, take $800 and go to Las Vegas.”

[Read: How to Unlock Blockchain’s Investment Potential.]

The second from famed investor George Soros, who famously broke the Bank of England by selling short the British pound. “If investing is entertaining, if you’re having fun, you’re probably not making any money,” Sorors says. “Good investing is boring.”

So if you are having fun with bitcoin, just stop. Perhaps you should watch some grass grow instead.

More from U.S. News

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Trading Bitcoin Is a Bad Way to Invest originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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