Welcome to The Money Coach, a Times of Malta column where readers can ask questions about life's money issues. Send your questions about personal finances, inheritance, gifting or other personal finance topics to moneycoach@timesofmalta.com

Dear Luca,

I have been investing consistently in the stock market for several years. My strategy is straightforward: I allocate a fixed amount of money each month to a couple of ETFs that track the American stock market. I also have some investments in Maltese stocks and bonds, as well as a few REITs.

I thought my portfolio was fairly diversified, with the ETFs being the most ‘aggressive’ element of my strategy. I’ve never really been drawn to the crypto world—mostly because I don’t fully understand it, and its volatility doesn’t align with my risk tolerance.

I’ve been making returns of around 30%, and I've been satisfied with that. But recently, when a friend shared the great returns he’s made in crypto, I couldn’t help but sit back and wonder: What if? To be clear, I’m not considering going all-in on crypto, but seeing those returns has left me questioning whether I might be missing out on something significant.

Looking forward to hearing your thoughts,

Ambitious Yet Cautious 

Luca Responds

It’s nice to hear that your investment strategy is working well for you so far. Let me first make something clear: this is not investment advice, and before making any investments I strongly encourage you to approach a licensed investment advisor.

Now let me start by saying that a 30% return is actually a great return… remember that on average, the S&P 500 - which tracks the performance of the 500 largest publicly traded companies in the U.S. - returns around 10% a year.

While annual returns can vary—sometimes exceeding 10% and other times dipping into negative territory—the long-term average over the past 90 years has been consistent at around 10%.

Now to tackle the subject of crypto.

Like every other thing, it is good to do your research. Given the election of Donald Trump a few weeks ago, it seems that the US government will be friendlier to crypto in general – that could mean that crypto has a brighter future.

Furthermore, there are big funds, such as Blackrock and Fidelity, which have this year introduced the option of an ETF tracking Bitcoin. And from research it seems that more ETFs tracking other crypto assets are in the pipeline.

Such developments mean that yes, there could be a good opportunity in the crypto world. Furthermore, big financial institutions like JP Morgan Chase and Fidelity Investments are constantly suggesting a 1-5% cryptocurrency allocation – this could highlight potential benefits in an optimistic scenario.

However, one must exercise caution. Big potential doesn’t mean putting all your investments there. You must consider loads of things, including your risk appetite, as crypto is a very volatile market. 

And one last thing: don’t fall into the trap of the herd mentality. Yes, your friend has good returns, but was it always this way? I have had loads of conversations with people who invested in crypto, and a good number lost lots of money there.

Remember when things are going well, everything looks so shiny and bright… leading many to fall into a trap and lose money. 

Luca is the founder of the Money Coaching Hub. Email him your financial questions or your response to today's question for a chance to be featured in a future column.

Disclaimer: This column is intended to provide general information on various topics related to personal finance. The information provided is for educational purposes only and should not be construed as personalised financial advice for your specific situation. Financial decisions are highly individual and can vary greatly based on your unique circumstances, goals, and risk tolerance. The author of this column is not authorised to provide financial advice. Before making any financial decisions, it is recommended to seek professional financial advice from an authorised financial advisor.