By Jen Glantz
April 27, 2021
A true sign that my friends and I are maturing is that our conversations during Saturday morning brunches and late-night group chat text messages are not just about what TV shows we're watching or which vitamin C serum we're using. These days, we spend a lot of time talking about our financial plans and investment strategies.
- All my friends are buying NFTs in hopes of selling them for a profit, but I'm not convinced.
- They're too risky for me right now — they're only worth what people will pay for them.
- After years of making mistakes with my money, NFTs just don't fit into my careful financial plan.
For the most part, I enjoy this. I learn good tips from them, mostly around how to save more every month, and occasionally hear about an investment move they made that tempts me to learn more (it's how I got so into researching cryptocurrency). But lately, all my friends are talking about how they're investing in something that's recently gained a lot of attention and traction: NFTs.
If you've never heard the term NFT before, it stands for "non-fungible token" and is simply defined as a verifiable piece of digital data that can take any form (image, GIF, video, online character, song, etc.).
NFTs have received a lot of attention, and celebrities like Lindsay Lohan, Grimes, and Shawn Mendes, as well as artists, have really leaned in on the trend.
Investing in an NFT is essentially investing in a piece of digital art. You don't get anything physical to have or to hold. A friend recently bought an NFT that was a GIF of a cat. She's hoping to sell it in the future for at least three times the price she paid.
As more and more of my friends are putting money into buying NFTs as part of their investment strategy, I'm running further away from the idea.
Here are the four main reasons I'm not investing in NFTs even though all my friends are.
1. NFTs are only worth what people are willing to pay for them
One main issue I have with NFTs is that the value of what is being sold is so unpredictable and at times random. Essentially, just like other collectible items, NFTs are worth whatever someone is willing to pay for them.
You could buy an NFT for a low price and hope in the future it gets more desirable, but there's never a guarantee that anyone will want it or will want to pay big money for it.
Sure, an NFT created by Paris Hilton sold for 40 Ethereum (currently worth around $68,000), but who knows how much the value will rise over time or how many people will want to buy it in the future?
2. They're too risky for me
There is risk associated with any investment. But the kind of investment where you can't predict the price or the potential future value based on trends, data, or even earnings reports is just too risky for me to want to spend my money.
Because there is a major risk associated with NFTs and the uncertainty around what the actual value of them is or will be in the future, it makes it feel like you're putting money down on a roulette table in Vegas and hoping for the best outcome.
Unless you have a lot of money to put behind an NFT from a famous artist or celebrity, you're just going off luck, and that is way too risky for my portfolio.
3. NFTs don't fit into my current financial portfolio
I've worked really hard to get my finances to a decent place after so many years of being reckless and making mistakes. I stick to a tight budget and my financial planning allows me to work on several goals at once, from increasing my retirement fund to putting savings in my emergency fund.
I have allocated only a certain amount of my money every month to be added to my investment accounts and am comfortable with that number and my current plan of investing in only stocks, EFTs, and a cryptocurrency. I am not looking to add anything new to my portfolio right now because that comes not only with added risk and time to monitor and check in on that investment, but it also would make me adjust my current financial plans, and they are working just fine as they are.
4. I'm not prepared to invest in something I don't know much about
NFTs are not a new thing; they have been around for many years. However, since February, due to news of celebrities and artists making piles of money off NFTs, more people have shown an interest in them.
But I just don't know enough about them to take on that kind of financial risk. There's no guarantee they'll be profitable, and I can't gamble with my savings.
Unless I promise myself that I'll devote a tremendous amount of time to studying NFT trends, digital art, and learning how to forecast what kind of NFTs could make me a sizable amount of money on my investment, it's just not something I will get into fast.
I'm not rushing to buy an NFT just because everyone around me is. As I spend time learning more about them and seeing how they could fit into my overall financial portfolio, my temper toward them may change, but for now, I'm OK with missing out on whatever fate or fortune NFTs bring for my friends.
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