Money Rehab with Nicole Lapin - Can You Handle Crypto’s Volatility?

Episode Date: January 11, 2022

To help you decide whether you can handle cryptocurrency’s volatility, Nicole put together a fun quiz on today’s episode. Let’s play! Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. Hey guys, are you ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. And should I have a 401k? You don't do it? No, I never will. You think the whole world revolves around you and your money.

Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. In yesterday's episode, I walked you through how to buy cryptocurrency.

But before you do that, there is an even bigger question. Should you buy cryptocurrency? As I've said before on this show, cryptocurrency is a volatile and risky investment. That is quite a one-two punch. If you're investing in crypto, there will be periods where you lose money. Sugarcoating that fact would just be lying to you. But whether that fact sits well with you, or whether your stomach just did backflips at the mere thought of losing a bunch of money, that's what investors call your risk tolerance. And knowing that about yourself will put you on track to the investment strategy that

works best for you. To help you decide whether you can handle cryptocurrency's risk, I put together a little two-part quiz for you. This is a multiple choice quiz, but it's not one of those tests where only one of the three possible answers is correct. In fact, none of these answers are wrong or right. This merely is a teaching tool to help you decide if cryptocurrency is a good fit for your investing sensibilities. Okay, here's part one of the quiz. Number one. Here's part one of the quiz. Number one. Choose one of the following words to describe yourself.

A, fun. B, unflappable. C, reliable. Number two. Your friends are going through a haunted house. You are A, the leader of the pack. B, comfortable in the middle, holding hands with a pal next to you. Or C, at home. Number three. Do you invest in the middle holding hands with a pal next to you. Or C, at home. Number three,

do you invest in the stock market? A, hell yeah, I eat stonks for breakfast. B, yes, but not directly. I have a retirement account through work that is invested in the market. Or C, hell to the no, do you want me to go broke lapping? Just thinking about the stock market makes me nauseated. Number four. You get a bonus you weren't expecting. Awesome. You just moved, so you use your money to A, buy the couch you've been drooling over, B, snag some cleaning supplies and other immediate purchases on your to-do list. Or C. Put a down payment for a new roof. The last owner said things were looking a little saggy.

Number five. Thoughts on lottery tickets? A. Love them. B. Like them. C. Leave them. Number six. You find and pocket $100 in a parking lot. When you get into your car, you realize that you no longer have the bill on you. You A, keep moving, easy come, easy go. B, get out of your car,

retrace your steps. If you can't find it within the next 10 minutes, you'll move on. Or C, will not leave the parking structure until that $100 is backed safely and securely in your pocket. Number seven, your boss asks you to give a presentation on a topic you know nothing about. You say, A, hell yes, this sounds like an awesome opportunity to prove myself. B, would it be possible to work with a team to give the presentation? prove myself? B, would it be possible to work with a team to give the presentation? Or C, I don't feel comfortable that I could knock this out of the park without knowing the subject matter. Is there another opportunity to give a presentation on something more in my wheelhouse? If you answered all or mostly C's, you don't like to risk it for the biscuit. You'd rather take zero risks and let

the biscuits fall where they may. In other words, you're a conservative investor, which means that you will prioritize minimizing your chances of losing money, even if it means missing out on some gains. Because of that, a volatile option like cryptocurrency probably isn't the best fit for you. If you answered all or mostly Bs, you're an even-keeled dude or dudette with a healthy attitude to assess risk and reward objectively. You're a good candidate for a modest crypto investment. If you answered all or mostly As, you're the life of the party whose carpe diem attitude may translate into aggressive investing behaviors, seeking the highest possible reward without flinching at the possibility of losing money. You're a good fit for crypto.

Hell, you may already be in crypto, but you're also at risk of being too at risk. Remember that any dollar you put in crypto, you could lose. Now, you may consider yourself a thrillist, but should you actually act that way with your bank account? Maybe, but maybe not. That depends mostly on your age, but also when you need your money and how much money you can afford to lose and what you want to get with the money you invest. For some basic guidelines for the level of risk you should take on, here's part two of the quiz. Number one, how old are you? A, 18 to 34, B, 35 to 44, or C, 45 plus. Number two, what's the next big purchase you're focused on? A, what's the next big purchase you're focused on? A, nothing on my horizon, but a second house or car would be nice. B, my kid's college education or C, living a sweet retirement. Number three,

when is your next big purchase? A, 15 plus years. B, 10 to 15 years or C. 5 or so years Number four. I expect my income to A. Increase. I'm getting a raise or jumping to another job with a higher salary. B. Stay the same. I'm tenured and have no worries that my salary will change significantly in the next few years. Or C. Decline in the next few years. Unfortunately, my job is on shaky ground. If you answered all or mostly C's in part two, you should be more conservative with crypto

investing because you're older, have more of an urgent need for the money, or have uncertainties with your future income. If you answered all or mostly B's, you should be a more moderate investor because you might not necessarily need the money too soon or you have a steady income stream. If you answered all or mostly As, you're in good shape to dive into crypto because you have a long time horizon for your investments or are just flush with cash to play with. So once and for all, let's determine what your risk tolerance is and what it should be. If you found you answered mostly C's on both quizzes or strongly on the second one, you'll be most successful by making conservative moves with crypto.

If you answered mostly A's on both, then you're a good candidate to take a bigger crypto position. If you answered mostly B's on both or Cs on the first and As on the second, then you, my friend, are a moderate investor and should consider sprinkling some crypto into your portfolio. Ta-da! Now you know. For today's tip, you can take straight to the bank. If your quiz results placed you as a conservative investor, you'll likely be most comfortable if you put less than 1% of your net worth in crypto and stick to the big coins like Bitcoin or Ethereum. If you found that you're a moderate investor, you're probably looking at putting something like 3% of your net worth in crypto. If you're an aggressive investor, then you'll likely put in somewhere between 5% to 8% of your net worth in crypto. Just be warned. Most experts say do not put more than 10% of your net worth into any one investment, including crypto.

Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and Mimsy. Huge thanks to OG Money Rehab team Michelle Lanz for her development work, Catherine Law for her production and writing of Magic, and Brandon Dickert for his editing, engineering, and sound design. And as always, thanks to you for finally investing in yourself

so that you can get it together and get it all.