Cryptocurrency may be controversial, but it has also become one of the most popular investment types. Nearly one-quarter (24%) of investors own crypto, according to a recent investing study by The Motley Fool. That puts it ahead of bonds, index funds, and several other investment products.
Not every age range feels the same about crypto. Here's a look at which generation is most likely to invest in it and how to decide if you should do the same.
The generation most likely to invest in crypto
Millennials are the generation most likely to invest in crypto, and it's not a close race. Here's the percentage of each generation that said they own cryptocurrency:
- Gen Z: 22%
- Millennials: 43%
- Gen X: 23%
- Baby boomers: 8%
Cryptocurrency is a relatively recent investment option, so for the most part, these results are what you'd expect. Millennials are much more open to it than any other group, and baby boomers largely avoid it. The biggest surprise is Gen Z. As a whole, these young investors seem to be far more skeptical about crypto than millennials.
Is investing in crypto a good idea?
Cryptocurrency investing is a rollercoaster. These are extremely volatile assets, so large price swings are par for the course. Some large cryptocurrencies have failed entirely, with Terraform's Luna being one notable example. There have also been crypto exchanges, including FTX, that have gone under.
The bottom line is that crypto is a high-risk investment. It could be high-reward, too, but don't buy in expecting it to make you rich.
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Because of how unpredictable and unproven crypto is, it shouldn't be your only investment or make up a large part of your portfolio. But there's nothing wrong with investing in it if you believe it has potential or you want to dabble in something more exciting. If you decide to invest, here are a few smart rules to protect yourself:
- Don't put more than 5% of your portfolio in crypto. For example, if you have $20,000 in investments, stick to $1,000 or less in cryptocurrency. Any higher, and you're taking on too much risk with your investments.
- Keep most of your money in safer investments. Stocks are one of the best options. The stock market has historically averaged a return of about 10% per year over the last 50-plus years.
- Only invest money you can afford to lose. This way, you won't be in financial trouble if your investment drops in value, which happens often with crypto.
- Plan to buy and hold for at least five to 10 years. The cryptocurrency market has gone through several bull and bear cycles. You're more likely to be successful if you're willing to wait out down periods.
How to get started with cryptocurrency
Now that the SEC has approved Bitcoin (BTC) ETFs, it's easier than ever to invest in crypto. If you already have an account with a stock broker, check if it offers cryptocurrencies or Bitcoin ETFs. If so, the most convenient option would be to invest through your current brokerage account.
The other option is to open an account with a crypto trading platform. You can compare the top options on The Ascent's list of the best crypto exchanges and apps.
You'll also need to decide which cryptocurrencies you want to buy. Bitcoin was the first cryptocurrency and, while still risky, is lower risk than other cryptocurrencies. You may also want to check out altcoins (cryptocurrencies other than Bitcoin) to see if any others look like interesting investments to you.
Once you've found a place to buy cryptocurrency and you know which ones you want, you can add money to your investment. Whether you decide to make a one-time investment or to do it regularly, remember not to put too much of your money into crypto. It's fine to have a little money in longshot investments, but most of your portfolio is better off in safer assets.
