It’s a punt, not an investment

Wondering why you're slogging it out in your job when it seems everyone else is an overnight Bitcoin millionaire? Before you submit to the fear of missing out and dive into cryptocurrencies there are some important factors that you need to understand.

For most people dabbling in cryptocurrencies is not really an investment but actually a speculative punt. Almost all speculators lose money in the long run because they don't have the right process and let their emotions destroy any profits.

If you want to speculate with part of your portfolio, have the discipline to follow a smart process:

1. Consider your financial position and never borrow to speculate.

2. Limit any speculative bet to less than 2% of your portfolio.

3. Dollar cost average (buy small amounts over time) to reduce the chance you're investing at “peak FOMO” before a crash.

4. Lock in some profits along the way to avoid the potential for regret.

5. Ignore all spruikers. The same group of charlatans come and go with every market bubble and are only in it to make a quick buck from inexperienced investors.

6. Put it in a bottom drawer and don't check the price every day.

Bitcoin has fallen 80% twice before and it's likely to happen again at some point.

Could Bitcoin eventually be 10 times its current price? Sure. Could it be worth one tenth? Absolutely. The nature of any speculative bet is that it could pay off handsomely or be next to worthless. That's why you need to stick to a process that will set you up for success if you're right or wrong.

If you're not planning to jump on the virtual coin bandwagon, that's perfectly fine too. A lowcost diversified mix of exchange traded funds had been proven to be a smarter (and less emotionally exhausting) way to invest over the long term rather than constantly chasing what's “hot”.

Chris Brycki is the CEO and founder of StockSpot, a robo investing platform.

Almost all speculators lose money because they let their emotions destroy any profits