Have you been contemplating the idea of joining the Bitcoin movement? There’s a lot of investment advice circulating about it, but the biggest thought going around is that people have got to get involved in Bitcoin.

It’s true many people have made good money investing in Bitcoin.  In fact, I know of some friends who have done it; I’ve not ventured that direction just yet.

Have you heard of Bitcoin but don’t know what it is? You’ve come to the right place.

Bitcoin: What Is It , Who Created It and How Does It Differ From Other Currencies

Bitcoin, which was created by Satoshi Nakamoto, is digital currency that’s created electronically and held there. His idea of this electronic payment system was to create a currency not tied to a particular authority, which could be electronically transferred and for a low transaction fee.

Thus, nobody and no entity has control over it. Bitcoins do not ever get printed unlike dollars, Yen, Wan, etc. People make it through computers all around the world, using some type of software that addresses mathematical problems.

It’s the first known cryptocurrency.

With Bitcoin, you can electronically make a purchase, making them similar to traditional currency, which can be traded digitally as well.  The key aspect of Bitcoin is the decentralized nature of it. Not one institution has control over the network, which makes people feel a little easier about their money.

Again, bitcoins are not printed – they stay in a digital format, which are created by anybody. They are mined via a computer power of a distributed network. The network will process transactions that use the currency. Thus, bitcoin is a network payment all its own.

Consider this: if you had started investing in bitcoin when it first came about in 2010, you would have made more than a billion dollars.

That’s just how popular it is today. And, it’s hard not to feel jealous of people who noticed the trend early on. And, it’s tempting to get involved in the field. But, is it something you could even consider – is it an investment or speculative?

Should You Invest In Bitcoins Or Not?

I’ve been an investor and entrepreneur for decades now. And, during this time I’ve learned there is a difference between investing and speculating. My idea of the discussion is this:

• Investing – It’s what you do after you’ve done some research and are sure the principal will stay safe – that you can make some kind of profit from it.
• Speculating – This is investing in an asset with no protection to the principal, but there’s a chance for profit.

According to Graham and Dodd, investments are one where, upon careful consideration, there is some safety to the principal and a decent return. Anything that doesn’t meet that are deemed hypothetical.

American Nobel Prize Paul Samuelson once said investing is like watching paint dry or watching a pot boil.  Bear in mind that you can speculate all you want, but it’s best to know what you’re doing to ensure you don’t lose your shirt in the process. There are many successful investors, and many avoid speculation as much as they can. It’s the one thing they abide by.

Are You Investing or Speculating?

So, how do you know if you’re investing or speculating? Well, it boils down to looking at the risk and seeing what the returns are. Thankfully, William F. Sharpe, a Nobel Prize winner, came up with this for us. The Sharpe Ratio, as it was dubbed, is the average return per volatility unit. It’s a numeric representation of a return divided by risk.

Someone who can predict the future doesn’t have to abide by this ratio. This person could pick the next big investment, work a couple of years in the American business world and call it quits.

You may not fall in this line of prophetic investors, but you may be well aware of the investment risk and return. What is it that the Sharpe Ratio tell you about the different big asset classes?

Here’s a look at the multifamily real estate market against other asset classes:

• It does nine times better than the NASDAQ
• It does four times better than the private equity sector
• It does three times better than the S&P 500
• It does three times better than the industrial real estate market
• It’s only slightly better than the Dow Jones (one percent better)
• It’s about the same as the office real estate industry

If you want your risk to remain low but provide you with a high return, the idea is to be as high as you can and to the left when possible.

If you’re interested in investing in metals such as silver and gold, then back to what money guru Dave Ramsey once said, “metals are not an investment; they’re insurance.” At the time, the advice didn’t seem good, and I opted to ignore it – later regretting that decision.

So, if you’re thinking about investing in Bitcoin and decide to ignore my advice, it’s all good. I’ve been there.

Where do bitcoin and other similar cryptocurrencies rank? The return and risk don’t even make the chart.

Should You Invest In Bitcoin?

If you want, then this is what you should do. Just think if you had done that back in 2010; you’d be very wealthy right now.

I don’t like to speculate in this manner, as I’ve already been there and done that. In November 2017, there was a more than 20 percent drop in the bitcoin price. Why? Apparently, the change to the underlying technology had been thrown out; it was all it took to cause the decline.

But, the next week, the price increase by 40 percent.

Bitcoin is a rather volatile investment, and if that’s something you’re interested in, by all means, go for it!

Known as the Wolf of Wall Street, Jordan Belfort had some powerful words about cryptocurrency. He calls it the largest scam ever that will blow up in people’s faces.

According to Jaimie Dimon, chief executive at JP Morgan, said any trader caught trading bitcoin would be fired right away. He called it stupid and against the rules.  Within 48 hours after his comments, the price of bitcoin dropped 23 percent.

Again, volatile!

Should You Invest In Real Estate?

It must be stated that the real estate market is also volatile – just not to the extreme. Still, it boils down to risk versus return. Real estate numbers can’t be made up.

If there’s an important distinction to be made between commoditized investment such as bitcoin, metals, stocks, bonds and more and real estate, it’s this: You have the power to control various factors that will lead to a successful real estate portfolio.

How?

It’s known as forced appreciation.

With forced appreciation, you carry out calculated changes to the commercial real estate to boost the value and income. When it comes to my multifamily investing strategy, it’s something I employ regularly.

This cannot be done with other types of investments such as bitcoin.

In 2008, when the real estate market bubble burst, I was in $2.5 million in debt. However, 13 months later, I was able to become debt free.  This would not have been possible if I hadn’t invested in as many asset classes as possible. Since the debt was associated with real estate, I could sell off these assets to ensure financial survival for my family.

For you, you have to determine what kind of investment strategy you want.

• Do you want to take chances and hope you make it big?
• Do you want to slowly build your wealth by making sound decisions and investments?

The real estate market offers a plethora of activities to achieve your goals, as it has and will for so many real estate investors.