Despite being a concept for several decades, most of us have only become familiar with the term ‘cryptocurrency’ in recent years. The notion of an online-only currency that is not physical tangible can be difficult to grasp, but for some, the profits of trading in cryptocurrency are very real, and have the potential to be lifechanging. A survey of 750 successful investors revealed that 47% of millennial millionaires have at least 25% of their wealth invested in Cryptocurrencies, and data suggests that there might be as many as 100,000 bitcoin millionaires at this moment in time. Bitcoin is by far the most popular and valuable cryptocurrency, with the value of one bitcoin surpassing the value of an ounce of gold for the first time on the 3 March 2017. Considering bitcoin was created only 8 years prior to that, the inflation in value of the cryptocurrency was unprecedented, making the lucky few who had seen the opportunity to invest very wealthy in the process. However, unlike the trading tycoons of previous generations, a lot of these individuals had never traded before, were not used to having to manage that amount of wealth and were unsure what to do next. We’ve put together some advice for those who might find themselves in a similar situation.
Don’t spend it all at once
With the astronomical appreciation in some cryptocurrencies, those who invested at the right time can find themselves in the possession of a lot of money, sometimes without experience in investment and wealth management. In this scenario, it can be tempting to buy a fancy car, book numerous all-inclusive luxury holidays and neglect imposing any kind of restrictions on spending. It goes without saying that this is not the way to benefit from a large lump sum in the long-term; in order to contribute to your future financial security, it is imperative to resist the temptation of purchasing luxury goods that often depreciate quickly in value, and instead pause, think and consider your options.
Pay off any existing debt
The first thing you should do when coming into any considerable amount of money is to pay off any outstanding debt; the interest rates on credit repayments (sometimes as much as 10 or 15%) will mean you will pay more the longer you leave it, costing you more money in the long run. Consolidate any loans or credit card debt and pay off the highest interest debt first, not only does this put you in a far better position financially, but it should also drastically reduce your stress levels.
Invest – and seek advice
Investing cannot only help grow your wealth, but it can also help to make it harder to spend; investing money often means is not immediately accessible, typically taking between 3-7 business days for withdrawals to process. This reduces the likelihood of impulse purchases but is also the reason why you should not invest all of your savings, leaving some in an easy to access emergency fund. The right investment strategy differs from person to person, depending on personal circumstance and lump sum amount. This can be an unsettling process as there is an abundance of investment options available, and investment, by its very nature, is not without risk. Seeking financial advice is the best way to ensure you are making the best decision with the options that are available to you – a financial adviser can also guide you with any tax payments or queries.
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This communication is based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity