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Magnus Zhong: Hello, I’m Magnus Zhong, and this is Ian Tam. Over the past couple of years, we have heard of many cryptocurrencies like Bitcoin, Ethereum, or Dogecoin. Should you buy some? Today, we are talking about cryptocurrencies.
Ian, is it easy to invest in Bitcoin?
Ian Tam: Hey, Magnus. Yeah. So, it is actually pretty easy to invest in Bitcoin. What you need to do is open an account on a Bitcoin exchange, which will allow you to buy, sell and hold Bitcoin. So, in terms of doing it, it’s quite easy mechanically. But in terms of succeeding, it’s actually quite difficult. Bitcoin is a very volatile investment. So, it will require some pretty detailed skill and expertise to be able to invest successfully.
Zhong: How risky is it? Can I become a Bitcoin billionaire?
Tam: It’s a great question. And you know what? We hear a lot of stories about people becoming billionaires through Bitcoin. But I understand you’re into football or soccer, so you know, like, Ronaldo and David Beckham. These are soccer superstars. But for every David Beckham, there’s thousands and thousands of soccer players that don’t quite make it to the big leagues, right? So, you think about Bitcoin in the same way. There are very few investors that can do very well with Bitcoin. Everyone else tends to actually lose money with Bitcoin. So, it’s quite a challenging investment.
Zhong: How should investors consider things like cryptocurrencies?
Tam: Yeah. It’s a great question. At Morningstar, we think about Bitcoin as a type of thematic investment. So, another example would be like investing in Big Data or investing in a specific kind of technology. These are all kind of thematic investments. And what my colleague Ben Johnson says about thematic investments is that you’re really making three bets when you’re investing. The first is that you pick the right theme. So, maybe Bitcoin will be the next big thing and make everyone rich. Maybe. We’re not sure.
The second is that, that theme is not already over value, not overpaying for investing in that theme. And the third is that you pick the right person to help you manage your investment within that theme. So, those are three very specific bets. So, the probability of being successful at all three is actually very small. But if you do win out on all three, it ends up being quite lucrative for you. But again, the probability is quite small.
Zhong: Okay. Thank you, Ian. For Morningstar, Magnus Zhong.