What about investing in cryptocurrencies?

An investment asset garnering lots of headlines is cryptocurrency. You may have heard of Bitcoin, the most famous digital currency, and thousands have invested. Generated by computers, cryptocurrencies can be traded between investors and used to buy some items. The value of some has soared, with stories of people making fortunes from investing then selling at the right time.

The problem is that cryptocurrencies have no intrinsic value, and they cannot generate an income like a company or bond. As a result, their value is volatile. In the space of a few days in January 2021, the value of one Bitcoin fluctuated by thousands of dollars. On 4 January it fell by $5,000 to $29,000, then by 11 January it had risen to $41,000 only to drop by $9,000 in one day.

‘The noise around Bitcoin is too loud to ignore,’ says Myron Jobson, personal finance campaigner at Interactive Investor. ‘The worry is that at a time where the investment industry has seen an influx of people investing for the first time, novice investors will get swept up in “Bitcoin mania” and invest without appreciating the risks. Bitcoin remains high-risk and the price swings have historically been too wild for many investors to stomach.’

Andrew Bailey, the head of the Financial Conduct Authority, has warned that investing in Bitcoin is the same as gambling. He said earlier this year that he expects all existing digital currencies to become extinct as the technology evolves and they are replaced by more stable cryptocurrencies. If you do want to invest in cryptocurrency, make sure you do so through a legitimate trader such as blockchain.com and make sure you set up two-factor authentication to protect your investment.