If you read my blog post from last week, then you know I discussed why getting retirement investing advice from social media is a bad idea. Most of the people who offer such information have good intentions; it’s just that they are usually in a different place in their financial planning lives than you and me.

So, this week, I offer part two of last week’s post. I recently read a post from another retirement Facebook group that I follow. The person posting the question asked if she should consider looking at a more “aggressive” type of investing strategy since her 401k was not doing the job for her, whatever that means. She is in her 20’s and ready to give up. Ah, youth.

As you can imagine, several responding posts were offering a variety of suggestions. One that caught my eye was from another 20-something. He said he planned to retire in his 30’s because his strategy is to put all of his savings into Bitcoin, and he advised the young lady with the question to do the same. This week, we explore Bitcoin and things to consider if you are thinking of high-risk investing as part of your retirement savings plan.

Bitcoin is a cryptocurrency created in 2009. It trades in marketplaces called “bitcoin exchanges” where people can buy and sell bitcoins using different currencies. The attraction of Bitcoin and other cryptocurrencies is rooted in the fact that there are no middlemen, like banks. More merchants are accepting Bitcoin to pay for goods and services.

For example, you can book a hotel through Expedia using it and Overstock also accepts Bitcoin for purchases. There is a fixed number of Bitcoin, 21 million. Currently, there are 17 million in the market. The rest will be “mined,” which is a process of creating new bitcoin. For a deeper dive into the specifics of Bitcoin, you can read more here.

What I want to discuss is the risk of investing in bitcoin, which is a high-risk investment. Warren Buffet, the famous investor, stated that he would never own Bitcoin due to the extreme volatility that characterizes its trading. Cryptocurrency is not as liquid as stocks, so it is more difficult to get out if you see the value heading south.

Another reason Bitcoin is not for the faint of heart is that it trades 24 hours a day. Bitcoin fanatics are typically glued to their cell phones throughout the day, watching the value go up and down. Some investment pros say that it is a buy and hold investment and that one should approach it that way due to the large swings and the inability to time the market in any way.

The lesson with Bitcoin and any high-risk investment is to ask yourself how you would feel if you invested the amount you are thinking of investing and saw your value go to zero? Then, what if it swings back up in value in a couple of days only to go back to near zero in the next few days, and so on? It’s a classic risk tolerance test.

How much can you afford to lose within your retirement investing time frame, and will you be able to sleep at night knowing the volatility? When one is in their 20’s and 30’s, they have time on their side to make up for a high-risk loss. Not so much when you are in your 50’s and 60’s.

Instead of chasing risk to make up for years of not investing in your retirement plan, start where you are, work with a professional, and develop a plan that will allow you to retire on your terms.

For information on my financial coaching, go here.