Fisher Investments examines what long-term investors should consider about gold and cryptocurrencies | Knowledge

Fisher Investments examines what long-term investors should consider about gold and cryptocurrencies |  Knowledge

Fisher Investments Founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher explains what long-term investors should keep in mind before investing in Bitcoin and gold.

For example, he discusses their risk/reward profiles, how they behave compared to traditional asset classes, like stocks, and much more. While Ken acknowledges the appeal of investing in cryptocurrencies, especially in times like today, he details the potential risks for long-term investors and why timing is everything for success.


Ken Fisher:

So with crypto and Bitcoin and all reaching new all-time highs, it makes sense that there would be a lot more interest in this. And again, people want to ask, “Is this the thing in the future that I should be in now, is this crypto, is Bitcoin the new gold?” And so, first of all, I just want to go on a tangent trying to answer that.

Forget about crypto for a while. Gold was never gold. Gold has never been what people think it is.

Let me put this into perspective for you. You have stocks, bonds, cash, other things. That pretty much covers it.

Gold is one of those other things, and there’s nothing terrible about that. But the thing is, when you think about how you construct portfolios and investment opportunities, you ask yourself what kind of returns are you getting versus what kind of volatility are you experiencing to get those returns. ?

And what the goldbugs will never accept, but is 100% true, is that gold gets lower long term returns than stocks, bonds or cash, with significantly higher volatility than stocks.

If you don’t like the volatility of stocks, the volatility of gold will hit you and cryptocurrencies fall into the same category.

I’ll come back to it. But before I do, let me stick with gold for a second. Gold earns its entire net return from approximately 15% of its calendar life. The other 85% of the time, it’s a useless asset.

The Goldbugs never believe it because they never think about it. Gold has had very, very long periods, years and years – a period of 28 years – where the price of gold has generally fallen.

If you have something that’s going to go down in price for 28 years, or go down for five years, or go down for ten years, it’s going to drive you crazy before you even get to that 15% where you get big, sudden surges. Now, what I mean about gold and crypto is that if you can time things that are exceptionally volatile – much more volatile than stocks – you don’t need any advice from my part in anything.

The fact is that stocks go up 75% of the time in history. Some periods they don’t increase as much. But overall, about 75%, 73% in total since 1925.

In a context that surges so often, chances are it won’t make you as crazy – even if the stocks make people crazy – as something much more volatile that makes people even crazier.

If you’re such a good speculator and you know when to get in and out and move this and move that. If you are such a good trader, you don’t need my advice. But most people aren’t; most people buy these things at a high price, sell them at a low price later and are disappointed. People say, oh, I buy it and put it away. Most people can’t do that. Most people can’t do that with stocks.

The average passive fund is actually only held for a little less than two years because they can’t keep it because some scary news knocked them out of it; a certain price variation takes them out.

In reality, time in the market is as important as market timing, and most people can’t time the market from beans or bananas.

Now let me return to another point regarding Bitcoin. And this is not always true for gold, although it has been true for gold recently.

Bitcoin and gold have a positive correlation with stocks; they went up, essentially, when stocks went up and they went down, essentially, when stocks went down. In 2022 they both decrease, in 2023, in 24 they both increase.

They act like very volatile stocks – not only that, that’s an exaggeration – they act the same way as very volatile stocks because when the market goes down or the stock market goes up, not all stocks do it perfectly . Some people act a little differently.

Both Bitcoin and gold act a bit like highly volatile stocks. Is there anything wrong with that in itself? No. But the point is to overemphasize what they are, which is something that doesn’t do anything, that is highly speculative, very volatile and that can skyrocket – or skyrocket – that doesn’t is not a way to invest a lot of money in a portfolio that you actually want to take care of you in the long-term future that you probably have ahead of you.

Once again, I repeat: if you think you are such a good speculator, I take my hat off to you. You are probably wrong. You’re probably not a very good speculator.

Most people aren’t. Most people get timing wrong more often than they get it right. And you have to be pretty good at timing and most of them aren’t. Most ride during a hot spell until they clean their clocks. So with that, my point would be to be careful when thinking about it.

Now let me come back to another point. Since we are working on Bitcoin, let me give you two more facts about Bitcoin. The thing is, when you think about the so-called coin, when you think about cryptocurrency, let’s be real for a moment. Money and crypto are not the same thing.

Money is supposed to have a relatively stable value. Money is something we use to lubricate a transaction, the buyer and the seller, so that both know what they are getting so they can accept the outcome: I get the things, you get the money, you get the things, I get the money. …and then to know within a reasonable time what I can do with the money I received by selling these products to you.

That I can turn around and use it in a semi-predictable way. Yes, inflation eats it away, but inflation eats it away pretty slowly, most of the time.

It expands the measure of what money is. But with anything that is volatile, like gold, or Bitcoin, or any part of crypto, or any other highly volatile commodity. It’s not money because we don’t know what it will be worth three weeks later.

You can’t rely on it for your next transaction at a known value; it’s not money. So those who think it’s money are making a mistake. It is a very volatile raw material and should be treated as such.

It’s closer to gold, but it’s not the new gold because gold was never the new gold anyway because of the volatility I mentioned earlier, I’m sorry to sound like a grumpy, sallow old man, even though I am an old man, but I thank you for listening to me.

I hope you found this helpful, and I suggest that if you’re thinking about Bitcoin or crypto, be sure you really know what you’re doing. Be sure to know its volatility. Be sure to know the risk of it blowing up in your face. And be careful. Thank you very much for listening to me. I hope you found this useful.

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