Even if you don't directly work with a financial advisor, it could be worth paying attention to what they're saying about markets and investing.
Take the recent announcement regarding cryptocurrency from the CFP Board, the professional organization for certified financial planners. Planners providing advice on crypto-related investments, the board ruled, are neither required to or barred from providing advice related to crypto, but "should do so with caution."
It's advice all retail investors would be wise to follow. That's because CFPs operate by a strict code of standards, which include a fiduciary duty and a duty of competence. Basically, if you're a client, a CFP has to know their stuff in order to advise you how to invest and has to act in your best financial interest.
If a group of financial professionals are treading carefully around crypto, it may make sense for you to follow suit. Here are the crypto risks that financial pros are most worried about, and how they're approaching crypto on behalf of their clients.
The unique risks associated with cryptoIn some ways, the CFP Board clarified that its advisors should handle crypto investments just like any other. A good advisor, and by extension a good investor, assesses factors such as risk, return potential, cost and track record before purchasing any investment.
But the notice points out that cryptocurrencies and related assets come with unique risks. Here are six to consider:
The CFP Board doesn't want their planners advising clients on crypto unless they have specialized knowledge of the crypto market. It may be worth taking that outlook for yourself too: Do you think you have a better grip on market forces in crypto than your average financial planner?
Before investing in crypto, ask yourself how well you understand the market, as well as if you know the ins and outs of the coin you're interested in buying.
It's likely smart to also take a planner's view when it comes to assessing how a crypto investment would fit into your overall financial picture.
Think about your unique financial situation, including your investing goals, tolerance for risk and tax status. Your reason for buying crypto will ideally go beyond "because it's going to go up."
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