It has been proven that investing in the S&P 500 is a surefire way to earn wealth. The caveat is that you need to stay invested in the stock market for a long-run time horizon — say, decades — in order to truly appreciate the magic of compound interest.

While stocks can help build durable wealth, some investors choose to allocate their capital toward alternative assets — real estate, rare artwork or collectibles, and even cryptocurrency.

In the crypto world, some have been lucky enough to turn modest sums into fortunes through the likes of Bitcoin and Ethereum. Over the last several years, both have experienced meaningful price appreciation.

Such dynamics have led others on a quest to identify the next crypto token to experience a generational run. One of the more popular altcoins in the crypto realm is Dogecoin (DOGE +0.93%), which trades for a pedestrian $0.12.

Let’s examine Dogecoin’s investment performance since its launch over a decade ago. From there, we’ll determine whether the fan favorite can generate durable wealth for your portfolio.

Dogecoin

Today’s Change

(0.93%) $0.00

Current Price

$0.13

If you invested in Dogecoin when it launched, here’s how much you’d have today

When Dogecoin launched in 2013, the token traded for just fractions of a penny — hovering around $0.0002. Given its current price of roughly $0.12, Dogecoin has appreciated by a jaw-dropping 60,000%. This means that even a modest investment of $1,000 at Dogecoin’s launch would be worth roughly $600,000 today.

Image source: Getty Images.

Is Dogecoin a smart investment?

It’s fair to say that money can be made investing in Dogecoin. But does that make it a good opportunity for smart investors?

When Dogecoin launched over a decade ago, its origins were founded on satire. The token’s creators, Billy Markus and Jackson Palmer, developed Dogecoin as a tongue-in-cheek response to the rise of digital assets — a then-new and unproven investment opportunity.

The reality is that people can make money investing in almost anything. What many overlook, however, is the significant role that timing and luck play in generating a profit. To me, investing in Dogecoin is virtually no different than buying a lottery ticket.

The verdict: Investing in Dogecoin could make you rich, but it probably won’t

If we focus on Dogecoin’s price action over the last five years, one theme becomes overwhelmingly clear: Volatility.

Dogecoin Price data by YCharts.

Although Dogecoin has appreciated significantly from its launch price, the token currently trades 81% below its all-time high. The reason is simple: Dogecoin is a meme coin whose price is largely dictated by online narratives and hype generated on social media.

As the peaks and valleys illustrated above make clear, if you had invested in Dogecoin at almost any point over the last five years, there’s a good chance you’d now be in the red. Given Dogecoin’s unpredictability, timing your buys is everything.

Smart investors understand that timing the market is generally a fool’s errand. If you want to become rich by investing in cryptocurrency, you have a much better chance of doing so through established opportunities, such as Bitcoin, Ethereum, or even adjacent businesses like Coinbase or Robinhood Markets.

In my eyes, riding Dogecoin’s momentum in hopes of becoming rich is extremely risky. I see the token as no more than a form of entertainment for speculative day traders.

Investing in Dogecoin now, near its lows, is not an opportunity to buy the dip. Falling for this idea is a value trap waiting to burn your portfolio. While Dogecoin has made some people money, it’s made a lot more people bag holders.

Against this backdrop, I do not view Dogecoin as a vehicle for generating durable wealth. Any profits you may gain from investing in Dogecoin will almost certainly be fleeting, which makes it incredibly difficult to become rich.

Since it has essentially no real-world utility, I do not consider Dogecoin a prudent option for investors seeking to build sustainable wealth over the long term.