Beyond Bitcoin: Blockchain’s Role in Investing

Many people associate blockchain with the volatile cryptocurrency Bitcoin, but they’re not one and the same. And blockchain has implications for investors beyond what you might imagine.

Blockchain is a method of distributing encrypted information among members of a network, who themselves authenticate the information.

There are two types of blockchain: public and private. In a public blockchain, like Bitcoin, every member of the network houses data, makes decisions about its accuracy, and reconciles transactions. In a private blockchain, every member has access to data, but only certain members have permission to verify and reconcile it.

Many public companies (companies in which you can invest) are using blockchain to more efficiently exchange information among various points of a network, like a supply chain.

Walmart, for example, is using blockchain to monitor its food-delivery supply chain. Blockchain tells Walmart from which supplier a product came and on what date. This can help prevent food recalls and is so significant the vice president of food and safety at Walmart has said that “blockchain will do for food traceability what the internet did for communication.”

The trucking industry is also using blockchain to help transport goods from one point to another. This is a complex process that often involves a large number of transactions via email and phone calls, which can take days. Now, a trucking consortium hopes to make that process more efficient by using blockchain.

The U.S. Food and Drug Administration is even testing blockchain to exchange medical records, data from clinical trials, and health data gathered from wearable devices.

What does that mean for investors? Companies that use blockchain could become more efficient, and that could affect their profitability. While there are many factors involved in analyzing a company’s suitability for a portfolio, this is one to consider.

How to Prep Your Portfolio for a Market Downturn

Because we’re in the midst of a historically significant bull market, many investor portfolios have performed well for several years. That means it may be time to re-examine your portfolio.

The last bear market ended almost a decade ago. Since then, the rise we have seen in stocks is almost unprecedented. It is the second oldest without at least a 20% drop in the S&P 500 Index.

That may sound great. Who doesn’t like strong performance? Why make a change, when things are going so well?

But we will undoubtedly experience a market correction at some point, and you may want to start thinking about how you will position your portfolio then.

As hockey great Wayne Gretzky once said, you want to skate to where the puck is going, not to where it has been.

This doesn’t mean you should try to time the market; you may simply want to have a conversation with your financial advisor about how to best position your portfolio for now and the future.

Perhaps you focus more on capital preservation, for example. Or perhaps you consider how you might re-allocate among asset classes. That way, when there is an event such as a market downturn or a geopolitical shock, you are already ahead of it and can continue making changes.

The end of the year is a good time to have this conversation, because it is likely that you are already thinking about the changes you might make to your portfolio to keep it in tip-top shape over the coming year.