How high is the risk of investing in digital assets?

How high is the risk of investing in digital assets?

To answer this question it's necessary to understand what INVESTING means.

Investing means expending money in a company or business with the expectation of achieving a profit or material result, hoping it's better than having it in the bank. The word has its origins in the Latin invertere, formed by the prefix in, and the verb vertere (return).

“Every human action poses a risk” and “When making a decision, we always set aside something with the intention to gain a bigger benefit”. That’s in our nature and the reason of every economy; two basic principles we must understand and assume to move forward toward our financial goals and, of course, at the moment of making decisions.

“The biggest risk of investing is not doing it out of fear, baseless most of the time,” said Carlos Ponce, Analysis and Strategy Director at BX+ Group. “Let’s not get carried away for what happened to our grandparents or a misinformed neighbor”.

The financial world evolves constantly, so being informed of the breakthroughs can help us to better understand the risks while making money-related decisions, especially if that money is allotted to other purposes that can affect us if we don't get a positive result, like our children education, the mortgage, etc.

Misinformation is one of the biggest DANGERS while investing. For example, many people that haven’t set the goal to gain a bigger financial culture (and today’s new trend of digital or cryptographic economy), mistake volatility with losing money. Volatility is when the price of an asset goes up or down, but the asset’s owner neither wins nor losses, until he or she buys or sells that asset.

Lately, we read and hear in the media about extraordinary and safe investment opportunities, with minimum to no risk. And there is when the problem presents itself: creating false expectations.

Traditional investing accounts from banks offer a return of about 4% to 6%, and in the best scenario, if investing a large amount, it goes up to 8% or 9% a year “GUARANTEED”. But the funds must remain untouched during that period to achieve those benefits. If you are a conservative person, always playing save, this might be the right fit for you. 

That said, there are lots of ways to invest to get bigger profits, but ALL OF THEM come with a certain amount of risk, depending of the possible return. They range from those that offer a 1% monthly to those that offer to double your investment within a year; there are even those that offer to triple or quadruplicate your funds. But every one of those poses a risk in proportion to the potential profits.

Having said all this, is investing a good idea?

It depends if you are willing to risk the money invested, but with the chance that, instead of losing it, you receive large profits in return. How much risk you can take in your finances without affecting your lifestyle?

THERE IS NO MAGIC TRICK, AND RISK-FREE BUSINESS DOESN’T EXIST!

Even big companies like Apple or Microsoft suffer steep losses or their stock plunges occasionally, sometimes causing the bankruptcy of investors that weren’t prepared to face those losses.

Let’s picture an investor in a NEW field, with big growth predictions, but that is just beginning to position itself in the market, like crypto-assets. What makes him think that investing in any cryptocurrency is risk-free? NOTHING! Is nonsense! The crypto-asset market may have huge swings for an undetermined period. Even the so called “experts” conduct studies that take them to huge levels of speculation and risk. Can you imagine an expert committing so many hours of his time to an analysis that will result in only having a 50% of success rate? IT'S JUST LIKE A COIN FLIP.

So, you invested and lost money? Well, welcome to the business and investment world! All those who take risks, eventually take losses, and some time they aren’t small ones.

However, if you are patient enough, invest wisely without putting your estate or your family wellbeing at risk, gather the necessary information, keep up with the crypto-economy market, get advice from those who have been analyzing the market for so much longer and, especially, are aware of the risk, the reality is that the crypto-asset market, even if it is and will continue to be targeted by the big financial institutions and most countries, offers big profit opportunities in the short, medium and, especially, long term.

If you should invest or not, that’s you call. Many of us bet on the future of the cryptoeconomy and the technologic development, because they seem to be unstoppable trends, although, on top of investing in crypto-assets I still keep my traditional business, bet on education, human development and the power of the people through the development of their talent, because there is a common thread throughout the history of mankind.

There have been different moments in the technologic development, industrial and intellectual breakthroughs, and all of them have disappeared, been overtaken or modified. Different currencies have come and go. But the HUMAN BEING remains as the only constant.

"If you want to be rich, don't learn only how you earn, but also how you invest..."
Benjamin Franklin.

 

By Javier Espinosa

  • Ing. Javier Espinosa

    Ing. Javier Espinosa

    Ing. en Sistemas Computacionales con especialidades en Tecnologías de la Información y Desarrollo Humano. Socio fundador de ITDA Corp.

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