There is a lot of bad crypto advice out there.
For every balanced crypto investor, there are five meme accounts pleading with you to put all your money in Bitcoin, and others trying to convince their followers that some new altcoin is the crypto of the future.
The reality is a bit more nuanced, experts say. “Optimal investing is very simple and boring,” says Jeremy Schneider, the creator of Personal Finance Club on Instagram. “Today, this cryptocurrency and stock meme craze is making headlines, and for young investors, who [are new] to invest, they’re trying to figure out how to navigate that.”
Financial advisors and experts we have talked to about investing in crypto warn people not to allocate too much of their portfolio to crypto or not to understand the risks. Make sure investing in cryptocurrency doesn’t prevent you from saving and maintaining an emergency fund, paying off credit card and other high-interest debt, and saving for retirement with a more conventional investment strategy.
For a better perspective, here is what some of our favorite personal finance influencers are saying about crypto:
1. Jeremy Schneider, Personal Finance Club
Schneider has been familiar with Bitcoin since its inception.
“I remember the day in 2010 when I learned about Bitcoin. For about 30 minutes I thought about buying some Bitcoin and decided there was no way I could get to $1,” says Schneider. Bitcoin, of course, topped $1 on its way to a high of over $60,000 in April 2021; it currently sits below $40,000 after a tumultuous May.
Still, Schneider cautions against letting investing in FOMO pressure you into making your decisions. Instead, Schneider constantly reminds his followers of two simple rules for building wealth: live below your means and invest early and often (preferably in index funds).
Schneider says his net worth is about $4.1 million. Of that, he has around $2,000 worth of crypto, much less than 1%. For those interested in playing in space, Schneider recommends making a similarly small investment compared to your net worth.
“Essentially, I don’t see it as a productive asset. If you buy an index fund or real estate, you get dividends or rental income, whereas if you get cryptocurrency, you basically expect someone to pay you more money in the future,” says Schneider. “I can imagine a world 30 years from now where crypto could go to zero, or a different currency could emerge, whatever. But I can’t imagine a world 30 years from now where index funds and real estate don’t make you very rich.”
2. Jully-Alma Taveras, Latina investor
Jully-Alma Taveras, who calls herself “Investing Latina” online, believes there is a great opportunity to diversify her holdings with a cryptocurrency asset.
“It’s something people should start learning more about, at the very least,” says Taveras. “It’s not something anyone should invest all their money or fortune in, but I think it’s something we should include in a diversified portfolio.”
As a new and uncertain investment asset, Taveras recommends keeping your allocation at 1% of your total assets. She is also sticking to the two biggest cryptocurrencies for now.
“I have Bitcoin and Ethereum, and that’s as far as I’ve ever gone in my personal portfolio,” says Taveras.
Comparing cryptocurrencies to the conventional stock market misses the mark, says Taveras. “It’s not the stock market. It’s a completely different world,” says Taveras. And the new world definitely comes with uncertainties. “The stock market has been around for over 100 years, and blockchain technology has only been around for a little over a decade.”
3. Kiana Danial, investment diva
Kiana Danial started tracking the crypto markets in 2016, but didn’t actually start investing until late 2018. Danial, who has an account called @InvestDiva on Instagram, recommends thinking hard about your investment goals before buying crypto.
“Are you buying it because you want a lottery ticket to win a million dollars in a year?” Daniel asks. If that’s the case, “then you may want to reconsider your investment strategy because some people have gotten lucky, but most people have been burned out,” Danial told us recently.
But if you’ve done your research and are okay with the risk, Danial says it might make sense for investors who still have plenty of time before retirement to allocate up to 20% of their portfolio to crypto. But “please don’t invest in crypto based on trends on Twitter.”
4. Marc Russell, Betterwallet
As the creator of @BetterWallet on Instagram, Marc Russell’s investment philosophy is to “stick to the basics,” he says. “Boring long-term strategies that work every time is really where I focus my attention.”
However, Russell acknowledges that cryptocurrencies may have a place in his long-term strategy.
“I think a lot about asset allocation, and making sure I have the right mix of stocks, bonds, and alternatives, which is where crypto meets for the simple long-term investor,” says Russell. For educated investors, Russell recommends allocating around 5% to cryptocurrency, but warns against going beyond 10%.
Like others, Russell warns against getting carried away by the headlines and the emotional rush of getting into crypto without doing your due diligence. “People don’t understand the other side of the spectrum, where you can earn 50% of your investment, but you can also lose 50%. They think you’re getting 50% or 30%, and you’re not,” says Russell.
But for those who are educated in the market and know what is at risk, “it is an excellent diversifier because it is not correlated with the [stock] market for the most part. And when you’re looking for something to diversify you, that’s essentially what you’re looking for,” Russel says.
5. Humphrey Yang, Humphrey Speaks
Humphrey Yang’s personal finance advice has gone viral on TikTok and YouTube. He’s a strong believer in index funds, “but most people don’t want to do that because it’s too passive and it’s not fun, it’s kind of boring,” says Yang. “But honestly, that’s the best advice I can give to any average investor, just put your money in an index fund and check it out once a year.”
As an experienced investor, Yang considers cryptocurrencies to be a speculative investment. He likes to put between 5% and 15% of his total portfolio there, an amount he says limits his exposure on days when it’s falling.
It also keeps two of the most well-known cryptocurrencies in existence.
“I don’t really believe in too many altcoins,” says Yang. “I do Bitcoin and Ethereum because they are the two most stable and have the most history.”
What is Ethereum? Explained for beginners in 62 seconds. #ethereum #learntiktok #tiktokpartner
♬ original sound – Humphrey Yang
6. Tori Dunlap, her first 100K
Tori Dunlap has had her doubts about cryptocurrencies.
“It still feels very speculative,” says Dunlap, creator of Her First $100K, who saved her first $100,000 at age 25 and shares personal finance tips on TikTok and Instagram. But she also acknowledges the great interest in investing in cryptocurrencies, “even if it’s just a small amount of money.”
But when people ask him about it, he recommends following the 5% rule. “You don’t want to contribute more than 5% of your portfolio to these things that haven’t been tested over time,” says Dunlap. “If you’re investing a certain amount of money, maybe you should be fine if you lose that amount of money.”
@herfirst100k in #crypto #invest
♬ Buttercup – Jack Stauber
7. A’Shira Nelson, smart girl with money
A’Shira Nelson of Savvy Girl Money on Instagram is the ultimate retirement-minded investor.
“My strategy is to maximize my retirement accounts. For the most part, I only invest in low-cost index funds,” says Nelson. “I know I can see the history in that. I can read books about it.”
That is one of the biggest impediments for her to invest in cryptocurrencies: the lack of history and study in the space. But she is quick to remind her followers that there are many other types of investments she can make outside of the stock market and cryptocurrencies, if she wants to diversify.
“I make a lot of real estate investments,” says Nelson. “My husband helped me spice up my portfolio with real estate, and it’s also an easy way to have fun.”