If you’re considering alternative investments this year, you should thoroughly think through the consequences of investing in some of the most popular ones in the media. Although Bitcoin and the Cannabis business may be on Wall Street’s radar, it’s not necessarily for good reasons. Both are still considered speculative and are not investable asset classes; they are not categorized as alternative investments in the stock market, and may not ever be. However, Blockchain technology is something that many financial institutions are investing in due to the security benefits it provides. Bitcoin doesn’t pay dividends, the tokens have no cash flows, and there is no way to determine demand growth or provide valuation measures. And then there is cannabis, which still has its hands full with the federal government regardless of states deciding to go rogue on allowing sales to the public.
Cryptocurrency exchanges (such as Bitcoin) have come through technology development, and are virtual, digital (website) exchange that can reside in any country, or countries, and managed by multiple individuals. Traders have to be ‘verified’ but are not limited to number of times they trade, etc.; as traders in the US market are. There is no regulation, and no knowledge of who the ‘currency trader’ is. For this reason, cryptocurrency investing may result in a significant loss of capital, and just like other markets has no guarantee of profit. Time and technology development will weed out fraudulent cryptocurrency exchanges, but we advise waiting to see how the US financial sector will view cryptocurrency in the coming year.
Last month the State of California legalized the sale of Cannabistwhich has increased Interest in this alternative investment. The resulting media commentary regarding other states following California may be speculation, but California is being viewed by many Americans as being leader in opening up of cannabis business nationwide. Regardless if a state allows medical or recreational cannabis sales, one thing is clear; investing in this type of business may just go up in smoke! Because Cannabis and drug sales are on the ‘naughty list’ for traditional lenders, many dispensaries look to private investors. There is no regulation or legal process if your lenders default; this business is viewed as illegal at the federal level which is why we caution you on this alternative investment.
Alternative investments may have a place in your portfolio with other types of investments that are meeting a specific need you have. If you are curious about alternative investments, you are invited to make an appointment to discuss them. Together we can determine which ones may be a legitimate alternative that meets an investment objective you have.