New School, Old School

Early in May 2022, when the price of Bitcoin was down over 40 per cent from its October high of nearly $65,000, investment guru Warren Buffett said he wouldn’t buy the cryptocurrency even if it was available at $25. “If you told me you owned all the Bitcoin in the world and you offered it to me for $25, I wouldn’t take it,” Buffett was quoted as saying by Business Insider. In the same report, billionaire investor Charlie Munger said holding Bitcoin is “stupid”, because it would be worth zero dollars eventually.

Well, Bitcoin, the biggest and oldest digital asset on blockchain, is not down to $25, but it is well below $25,000 and hovering around $20,000, as on June 24. No one knows how long the downward spiral will continue, but the falling markets have chipped away at investors’ confidence and made them cautious. I would say that’s better late than never. Some say that cryptos were not the only assets to be dented, and global inflation and rising interest rates have hit the stock market equally hard. But look at the difference in the proportion of the fall, and that may not seem convincing. For instance, as on June 21, Bitcoin lost about 55 per cent, year-to-date. That’s more than five times the loss recorded by the BSE Sensex, which fell 10 per cent in the same period, and more than double the number S&P 500 lost, which was about 22 per cent.

They say numbers don’t lie, but if that sounds like a cliché to you, the absence of historical data or information, owing to the short lives of digital assets, and lack of regulation should make you wary. In any case, at present, the web of lies—of quick and super returns—weaved around by fraudsters can catch you off guard.

Investing in time-tested instruments would do well for middle India—ever-ready to try out new things to feed its growing aspirations—because they are the ones who are doing the tightrope walk. One wrong step, and years of savings and efforts can come to nought. If you are vying for thrill, observe those who can experiment and take the risks and, perhaps, only have a negligible fraction to lose. As for action on your own individual portfolio, boring is better—and more practical—at least for now.

Then, there are other pressing matters to attend to. First, the income tax return (ITR) filing season is upon us. Covid caused pain but it also created longer windows for some financial tasks, including filing your ITR. The same luxury may not be available this year. So, get your financial documents together. How about DIYing it this time? We have a guide to help you with that. Second, the financial window to restructure your home loans is long gone, and with interest rates rising, you may want to restructure your equated monthly instalments (EMIs) to get rid of that debt faster and pay less over the long term. It’s time to realign not just your investments—debt and equity—but also your cash flows.

If you are looking to buy a house now, consider your cash flows and take a responsible call in choosing the right project, given that the real estate regulatory authority (Rera) may not always come to your rescue later.

Think ahead and don’t miss the long-term picture by letting nervous markets mess with your emotions and investments.

nidhi@outlookindia.com