Cryptocurrency: Stay in? Get out? How to decide?

Warren Buffett is famous for saying “Only when the tide goes out do you discover who’s been swimming naked.” If you invested in cybercoins, the news has not been good lately. Are you wearing your bathing suit? What to do? Is time to take your profits … or cut your losses?

Make sure you have your financial basics covered

Before you consider investing in cryptocurrency, ask yourself some questions about your finances: Would you pass Finances 101? Meaning, are you maxing out your contribution to a retirement plan? Are you paying off consumer debt? Do you have an emergency fund? In other words, have you done all the boring conventional things you know you should have done since Andrew Tobias wrote “The Only Investment Guide You’ll Ever Need” in 1978? Do you have an FDIC insured bank account and a SIPC protected investment account with a securities broker for your principal financial assets and relationships?

Next, set reasonable limits

If you absolutely want to invest in the cryptocurrency world, here is a possibility: Keep a separate account at a separate entity and put no more than 5% of your liquid assets in speculative investments. Don’t be seduced into trading cyberassets on margin. This must be money you would otherwise spend on hockey tickets, red-soled Christian Louboutin shoes, Lotto, or a bet against the Yankees, and can afford to lose.

Finally, don’t take it too seriously

If you make a profit in your speculation account,

perhaps you could slip this into a conversation as a “modest success.” This will make you sound like a careful student of the markets. If you lose some money in this account, you could tell a self-deprecating story with a smile, noting that

the investment provided you an opportunity to learn and follow the developments in a new and exciting investment realm. If you are already invested in the cryptocurrency markets, you could evaluate your positions in a similar way.