Should I withdraw a billion dong in savings to invest in Bitcoin?

According to experts, Bitcoin has potential but is risky because it is not recognized by law, its market price fluctuates strongly, and it requires a lot of investment knowledge.

I have one billion dong in a bank for a one-year term. But I see that the interest rate is low, not enough to compensate for inflation and consumer prices. I want to withdraw it all to invest. But real estate is frozen, some places show signs of price reduction. Stocks are constantly fluctuating, not seeing a strong recovery.

I have an acquaintance who advised me to buy Bitcoin and leave it there for 4-5 years, it will definitely be profitable. But I personally feel insecure, so I still want to invest in other channels, instead of putting all my money into cryptocurrencies.

Please give me some advice, thank you!

Pham Van San

Bitcoin is the most popular and largest cryptocurrency in the market today. Photo: Tat Dat

Consultant:

Bitcoin's growth potential comes from its application in non-cash payments, limited supply and benefits from unstable political and economic situations. Bitcoin is increasingly used due to its convenience in payments without foreign currency conversion with low transaction costs and management costs. In addition, the increasing political instability in the world and recent instability in the banking sector in the US and Europe have further made investors lose confidence in paper money and stock investment channels, shifting their attention to investment channels that are less affected by these factors such as cryptocurrencies.

In addition, the supply of Bitcoin is limited, only about 21 million units and by 2140, no more will be created. Although more and more alternative cryptocurrencies are being created, Bitcoin is still the most popular currency in this market and is used to buy and sell other currencies. Therefore, the growth potential of Bitcoin is promising. However, you should also consider the risk of this asset.

Each investment channel has two main risk groups: operational risk and market risk. Operational risk is the risk that is not related to the supply and demand of buying and selling, usually issues related to the trading activities of investors such as capital injection, capital withdrawal, and specific operating methods of the investment channel that can cause loss of assets. This type of risk is controlled with the supervision of government agencies and legal regulations.

Market risks are risks that are mainly related to changes in supply and demand of participants. Supply and demand fluctuate depending on the characteristics of the investment channel and the impact of macroeconomic factors. This type of risk is difficult to control and is characteristic of each investment channel.

For example, in the real estate investment channel, operational risks will arise during the transfer of ownership, risks in transaction contracts, and legal issues. Market risks of the real estate channel are changes in demand for real estate trading, leading to loss of liquidity, risk of capital loss, and "buried" capital for a long time.

Back to your question, in Vietnam, with investment channels that are not recognized by the state and protected by law such as Bitcoin, the operational risk is very high because there is no specialized management agency as well as legal regulations to protect the rights of investors. Therefore, when there is a risk of fraud and property appropriation, investors can easily lose both principal and interest.

Bitcoin's market risk is also high due to continuous trading. Cryptocurrencies are not yet widely recognized in the world compared to traditional assets and the price fluctuations are unlimited, so the value of the asset can increase or decrease sharply in a short period of time, making it difficult to realize profits as planned.

Currently, each country has a different view of Bitcoin. However, there are still many countries with a moderate view on management and use, mainly countries that are leading in information technology. This group does not encourage digital currency transactions but does not prohibit them negatively. Regulatory agencies only introduce policies to collect taxes and measures to monitor smuggling and money laundering using digital currencies. Typical countries in this group are Japan, Australia, the US, South Korea, Singapore, the Philippines, and New Zealand.

In short, Bitcoin is a high-risk, high-return investment channel, suitable for investors with high risk tolerance and full knowledge of the cryptocurrency market.

Regarding investment allocation, this depends largely on your financial situation and goals, your investment risk tolerance and your backup plans. Generally, assets with high returns will have high risks and vice versa. Therefore, diversifying your investment portfolio will help you achieve good returns, along with reasonable risks over a long period of time.

I cannot give a specific asset allocation ratio due to lack of information about age, job, income, expenses, financial goals, financial dependents, backup plans... My advice is that your investment portfolio should maintain a full range of channels such as real estate, stocks, deposits and other financial products in any economic situation. In the long term, these channels will still grow with Vietnam's economic development.

The investment proportion of each channel needs to change according to the economic situation, financial situation and risk appetite at each time. Concentrating all assets in any one channel will significantly increase the risk of "losing everything", potentially reducing long-term profitability.

Currently, the world economy in general and Vietnam in particular are in the final stages of tightening monetary policy to combat inflation. This action is predicted by many world experts to cause an economic crisis in the next 6-12 months. In such an economic context, preserving assets to seize opportunities when the new economic growth cycle returns will help increase the total value of assets significantly.

Assets with high liquidity, safety and sustainable growth such as savings deposits need to increase their proportion to about 40-70%. 2024 will be an opportunity to start reducing the proportion of savings deposits to hold asset classes with higher returns and higher risks. It should be noted that no matter which channel is chosen, investment needs to have a strategy and research to achieve the desired results.

Phan Hoang Quan

Personal Financial Planning Expert at FIDT

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