Former President Donald Trump announced the launch of a new cryptocurrency exchange World Liberty Financial where people can buy, sell and trade digital currencies like Bitcoin. Now the exchange has also taken the next big step of issuing its very own cryptocurrency: WLFI.
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Because Trump’s name is attached, this new digital coin is drawing a lot of attention. But should you put your own money in? We spoke to two experts who gave us their take.
Don’t Invest in Anything Without a Proven Track Record
Any financial advisor will tell you to put your money in an asset that has a proven record of stability and growth. Trump’s cryptocurrency is brand new and doesn’t have any history to back it up. Just because it has a familiar name attached to it, that doesn’t mean it will perform well.
“The best things that you can invest in are things that you understand, and that have a proven track record of success,” said Joe Schmitz, Jr., founder and CEO of Peak Retirement Planning. “You should not invest in things because people are speculating that it could make it big.”
Crypto has made huge gains for some, but it’s also caused huge losses, too. Some people do make a lot of money in crypto. But what worked for one person doesn’t guarantee that the same thing will work for you. If you’re considering putting money into Trump’s crypto, remember that there’s no way to know whether any new cryptocurrency will perform well.
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Crypto Is Too Hard to Time
World Liberty Financial announced that their currency, WLFI, will become a stablecoin. That means that, theoretically at least, its value will be locked one-to-one with the U.S. dollar. This is supposed to keep the extreme price swings of regular cryptocurrencies from happening. But there are still big risks. A stablecoin relies on World Liberty Financial to keep its value. You have to trust that World Liberty Financial has enough cash reserves to back up every coin they issue.
“I do not advise putting money into Trump’s crypto or any other cryptocurrency,” said Thomas J. Brock, of RetireGuide.com. “Cryptocurrency is a highly speculative asset; it is not a prudent investment. Cryptocurrency does not yield any income, and it has no intrinsic economic value. The only way you can make money with cryptocurrency is if you can sell it to someone at a higher price than what you paid. Unfortunately, given cryptocurrency’s incredibly volatile nature, properly timing a purchase and sale is hard to do.”
Keep in mind that unlimited growth isn’t possible. There is a high potential you could be left holding worthless assets. Traditional investments like bonds or index funds are slower to earn returns, but they’re far more predictable.
Investing Is a Long-Term Endeavor
It’s easy to think that crypto is an easy way to get rich fast. The huge price spikes can make it look like a way to double or triple your money overnight. But that’s more gambling than investment. Real investing doesn’t work that way.
“Investing is a long-term play,” said Schmitz. “Investing should be done with a long-term outlook in mind, always. Cryptocurrency has no long-term record of being successful. Maybe one day it will, but for those who are diligent savers and forecasting for their retirement, crypto is likely not the best investment for you.”
The best and safest way to invest is in assets like index funds, where you’ll see steady, reliable growth over time. These funds track the performance of groups of companies on the stock market. Instead of betting everything on a single asset, your risk is spread out. Index funds generally grow steadily, and you benefit when the market as a whole does. They’re a safer and simpler way to invest.
Only Buy Crypto If You Can Afford to Lose Your Money
The most important rule with crypto — and especially any new currency like Trump’s — is only to put in what you’re comfortable losing. This isn’t like buying shares in a well-diversified index fund with a long track record.
“Cryptocurrency can provide some diversification benefit to a portfolio comprised of stocks, bonds and cash,” said Brock. “However, if you buy a cryptocurrency, make sure you can afford to lose most, if not all, your money.”
If you’re thinking about investing in WLFI, just know that it could go to zero. That’s the reality with any digital asset, especially one that’s new. You’re essentially gambling. But if you’re determined to buy into Trump’s crypto, only use money that you won’t miss if it disappears overnight.
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This article originally appeared on GOBankingRates.com: Is Trump’s Crypto Worth the Investment? Experts Weigh In
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
