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Should You Add at Least a Little Bitcoin to Your Portfolio?
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Should You Add at Least a Little Bitcoin to Your Portfolio?

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Should You Add at Least a Little Bitcoin to Your Portfolio?

Bitcoin (CRYPTO: BTC) is the hottest investment on the planet right now, and it's making a lot of noise in the markets. This digital currency has been around since 2009 but has experienced recent all-time highs that have helped many investors double their returns in only a few months.

As the world's first decentralized currency to hit the market, many believe that Bitcoin and its blockchain technology can revolutionize financial services. If you're wondering if you should get in on the Bitcoin action, here are a few items to consider to help make your decision a bit easier.

IMAGE SOURCE: GETTY IMAGES.

Earn while you learn

If Bitcoin sounds like jibberish to you, this is a perfect time to learn more about this digital currency. Don't automatically write it off as a scam because you don't understand it. Seek to learn as much as you can and then draw your own conclusions.

Often, the motivation to learn something completely new is put on the backburner unless you have skin in the game. So, put your money where your curiosity is and get ready to enter the Bitcoin learning laboratory. There are no limitations on when you can learn because the cryptocurrency market operates in real-time 24 hours a day, unlike the stock market.

All it takes is a small investment to get you started. Anyone can invest in Bitcoin because many of the historical barriers to entry have been removed. Just don't be tempted to put your entire life savings into Bitcoin because it's very volatile. The rewards can be great but the risk can be more than some people can bear. You can always grab a small position in Bitcoin to incentivize you to track it, read about it, and understand the technology behind it. By starting with an amount that allows you to "test the waters," you're not introducing yourself to a high level of risk as you learn more about it.

Start with fractional shares

If you do a quick search on the price of Bitcoin, it's easy to become intimidated and automatically assume that you don't stand a chance of becoming an investor. This month, the price of Bitcoin surpassed $50,000 for the first time. It's the largest cryptocurrency by market value, and it's receiving a lot of support from major companies like Tesla, PayPal, and Mastercard.

But that doesn't mean that you don't have an opportunity to still get in. The good news is that you are not required to pay the full price tag to become a Bitcoin investor. Let's say the price of Bitcoin is $50,000 and you only want to allocate $1,000 to invest. That's possible. You can tap into the power of fractional shares and use your $1,000 to grab 0.02 Bitcoin. As the price of Bitcoin increases, the value of your proportional share increases too. The mechanics of investing in bitcoin are similar to investing in the stock market, but there are some nuances (e.g., crypto conversions) that can make it a bit tricky.

When you're ready to get started, you can purchase fractional shares through major cryptocurrency exchanges or brokerage firms. You can check out a popular exchange like Coinbase or go straight to Robinhood to manage your cryptocurrency investments. There are also other exchanges you can use to buy and sell cryptocurrency, so do your due diligence and determine what works best for you.

Create a winning opportunity

Here's a simple rule of thumb when it comes to investing: Don't invest what you can't afford to lose. But on the other hand, don't be so afraid of losing that you miss out on an incredible learning opportunity.

Adding a little bit of bitcoin to your portfolio allows you to diversify your assets. You never want to be in a position where you have to rely on only one asset class for your survival. That's one of the greatest risks you can take on. By diversifying your asset classes and diving in to learn more, you give yourself a winning chance no matter what the outcome turns out to be five years from now.

Let's face it: Bitcoin could crash next month. But there's also an opportunity for Bitcoin to double in value. Although there is much uncertainty about the direction of Bitcoin over the next year, Bitcoin has changed the way many people think about fiat currency. There's nothing wrong with allocating some of your extra cash to invest in Bitcoin if it motivates you to learn more, grow, and see what's coming down the pipeline.

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Charlene Rhinehart, CPA owns shares of Bitcoin. The Motley Fool recommends Bitcoin. The Motley Fool has a disclosure policy.

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