Is your portfolio exposed to cryptocurrency?

Thursday 6 May, 2021

As most of you are probably aware by now, I specialise in offering investment and pension advice and one question I am asked frequently asked is ‘do we have exposure to cryptocurrency?’

Tracy Dove, Financial Adviser in Basildon, Essex and Cheshunt, Hertfordshire said:

‘If you are referring to direct exposure to cryptocurrency, then the answer is no. However, a lot of you will be aware that several companies have recently decided to hold their cash in cryptocurrency. For example, electric car maker, Tesla. As some of the funds we invest in have a weighting in Tesla shares then you could argue we have an indirect exposure to cryptocurrency. Obviously one key thing to note is the funds we invest in don’t hold a stock because they hold their cash reserves in cryptocurrency. The fund managers purchase stocks for these funds because they believe they offer a good investment based on their core services.’ 

Do you plan to have cryptocurrency in your portfolios in the future?

Now the next question I usually get asked is do you plan to hold cryptocurrency in your portfolios in the near future. Again, if you are talking about Bitcoin for example, then I believe it is very unlikely our funds would ever invest in it. However, the reason for our reluctance in investing in Bitcoin is because of the lack of legislation, the volatility and the illegal black-market nature of these coins and what they are actually used for. As a result, there is a severe ethical dilemma in a climate where we are encouraging more ethical investments and greener technology. Some of you reading this will trade in cryptocurrency and may have made profits from trading them, but I think you will all agree coins like this are volatile and go up quickly up as well as down quickly. Remember we are not traders, and we aim to invest clients’ money for the long-term, normally for a five-year period, and we try and reduce volatility and aim for steady growth. 

Tracy Dove, Financial Adviser in Cheshunt, Hertfordshire continued:

‘The above explanation should answer any questions you have about individual coins, but what we are reviewing is the block chain technology that sits behind the coins. We do believe this could have a big part to play in the future. We know we have to consider incorporating this technology into our model portfolios, because this form of technology could develop, especially as we move into a new digital age. The key to any investment is the ability to adapt and embrace new concepts, reaping the reward but taking minimal risks.’

In Summary

Overall cryptocurrency is an interesting concept, but it is viewed as trading rather than investing. I can’t see crypto coins being part of our portfolios in the near future, but I can definitely see the block chain technology being incorporated into our investments. The key question is how this can be done in an ethical and risk-free manner. 

If you want to find out more about cryptocurrency from our Thomas Oliver investment team, please click the following link and scroll down to Episode 7 to listen to our podcast or call our qualified financial advisers on 01707 872000.

Investment Club – Episode 7 – Do Cryptocurrencies belong in diversified portfolios?

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