Crypto currency and day trading have caught the fancy of several mutual fund investors, especially youngsters, say financial planners and mutual fund advisors. According to these advisors and planners, many investors are likely to lose their hard-earned money if they bet heavily on these ‘so-called’ investment options that they believe can make people rich overnight.
“It is a scary scenario. Many investors, both youngsters and seasoned investors, are betting heavily on crypto currencies,” says Suresh Sadagopan, chief planner at Ladder7 Financial Advisors. “Unlike other investment options like mutual funds, there are no underlying assets in crypto currency. If things go wrong, your money is gone,” he says.
Advisors say most of them do not encourage investing in crypto currencies since there is no clarity on its regulations. “Most investors are investing on their own because they think they can earn high returns. It is a dangerous investment. Many investors would realise that in time,” says an advisor who doesn’t want to be quoted.
Most advisors ETMutualFunds.com spoke to said they were apprehensive about these investments as there is no clarity on who will help investors if there are any issues. “It is not clear who is in charge in case an investor has any issue,” says Sadagopan. He says he doesn’t have any problems with crypto currencies per se. “It is a great concept. But a currency can’t be only for speculation.”
Advisors also say many investors believe that they can make a lot of money easily by trading. “There are several investors who want very high returns in a day. They believe day trading can do that for them,” says the mutual fund advisor. He says once they see high returns in one or two trades, many investors go overboard, and it can be very risky, “if you earmark a percentage for such speculative activity, it is still fine. Otherwise, investors will lose all their money,” says Sadagopan.
Mutual fund advisors and planners say investors, especially those who have been investing with a plan, should not indulge in such speculation to create wealth.
They reason that new investors will not listen till they lose their shirt, but seasoned investors should not fall for these tall claims of super returns in a day. “You might have come across such instances in your mutual funds investment journey also. Stick to your financial plan,” says the mutual fund investor. “Investing regularly over a long period of time is the only proven way to create wealth.”