Former President Donald Trump has launched a new cryptocurrency exchange, World Liberty Financial, where users can trade various digital currencies, including Bitcoin. As part of this initiative, the exchange has introduced its own cryptocurrency: WLFI. Given Trump’s association with this new digital coin, it has garnered considerable attention. But is it wise to invest your money in it? We consulted two experts to get their insights.
Avoid Investments Without a Proven Track Record
Financial advisors typically recommend investing in assets with a history of stability and growth. Since Trump’s cryptocurrency is brand new, it lacks any historical performance data. Just because it has a recognizable name attached does not guarantee positive results.
Joe Schmitz, Jr., founder and CEO of Peak Retirement Planning, advises caution: “Invest in assets that you understand and that have a proven track record of success. Speculating on potential gains is not a sound investment strategy.” While some investors have seen significant returns in cryptocurrency, others have experienced substantial losses. What works for one individual is not a surefire bet for another. Keep in mind that the future performance of any new cryptocurrency is unpredictable.
Cryptocurrency Timing Is Challenging
World Liberty Financial has announced that WLFI will operate as a stablecoin, theoretically pegged one-to-one with the U.S. dollar. This design aims to mitigate the drastic price fluctuations common to other cryptocurrencies. However, there are still considerable risks involved. The value of a stablecoin relies on World Liberty Financial’s ability to maintain sufficient cash reserves to back every issued coin.
“I do not recommend investing in Trump’s crypto or any cryptocurrency,” says Thomas J. Brock from RetireGuide.com. “Cryptocurrency is a speculative asset that yields no income and has no inherent economic value. Profit can only be made by selling at a higher price than the purchase price, which is difficult due to the volatility of the market.” It’s important to remember that limitless growth is unrealistic, and you could end up with worthless assets. Traditional investments, like bonds or index funds, tend to yield slower but more reliable returns.
Investing Requires a Long-Term Perspective
The allure of quick profits can lead some to view cryptocurrency as an easy path to wealth. However, the volatile nature of crypto markets often resembles gambling more than investing.
“Investing should always be approached with a long-term perspective,” advises Schmitz. “Cryptocurrency lacks a proven long-term success record. For those who are serious about saving for retirement, crypto is likely not the best option.” A safer investment strategy involves assets like index funds, which offer consistent growth over time by tracking a basket of companies on the stock market. This approach spreads risk across multiple assets, allowing for steady returns aligned with overall market performance.
Only Invest What You Can Afford to Lose
When it comes to cryptocurrency, especially a new offering like Trump’s, the golden rule is to invest only what you can afford to lose. Unlike shares in a diversified index fund, investing in cryptocurrency carries a higher level of risk.
Brock adds, “Cryptocurrency can provide some diversification for a portfolio composed of stocks, bonds, and cash. However, only invest what you are willing to lose entirely.” If you decide to invest in WLFI, be prepared for the possibility that its value could drop to zero. With any digital asset, especially new ones, you are taking a gamble. If you choose to proceed, only use money you can afford to lose.
