Bitcoin A Better Investment Than Real Estate Now?

Q: Is Bitcoin A Better Investment Than Real Estate Now? Kevin, Nyack, NY

A: Interesting question, Kevin.  Before I answer your question, I want to draw a distinction between investing and speculating.  Bitcoin investors, despite all the money that SOME of them have been making lately are speculators.  Speculation is different than investing.  I don’t speculate, I invest.  That doesn’t mean that you can’t make money speculating–you certainly can, just like you can make money at the casino or the race track.  However, the likelihood of losing money is much higher when you speculate unless you are very lucky and very disciplined.

Warren Buffett’s mentor, Benjamin Graham defines an investment in his 1934 classic, “Security Analysis” as “one which, upon thorough analysis, promises safety of principal and a satisfactory return.”  As an investor not a speculator, I like to buy with a profit cushion baked in from the beginning.  Speculation is ok as long as you know what it is and don’t mind losing your investment money.  People speculate in real estate, for example, when they buy property and hope that it appreciates rather than buying at a discount from the beginning with a profit and ‘margin of safety’ – to use another Ben Graham phrase – built in from the beginning.  Speculation usually ends in disaster because speculators, like most gamblers, rarely have the discipline to take their chips off the table before they lose it all.

Thanks for your question, Kevin.  For more real estate information and tips visit my blog at geraldlucas.com.

—