We’ve talked about this topic before, but it keeps rearing its head. It’s Bitcoin and it’s back in the news. The SEC has now decided that Bitcoin and similar cryptocurrencies are going to be saved. There are a handful of them that took them up on that offer.
Watch on YouTube HERE.
Previously, to buy Bitcoin, you had to go to an exchange and open an account that handled cryptocurrencies. Now, what’s changed in January is any investment account where you can hold stocks. bonds, mutual funds, and exchange-traded funds, you can now buy an exchange-traded fund that will track the price of Bitcoin. As of this recording, you can buy 11 different exchange-traded funds.
We don’t even like to call them currencies, which we get into in this episode.
Allowing investors to bypass the electronic wallets does provide more access. But remember, just because the SEC approved this, does not necessarily make it a wise thing to invest in.
Do cryptocurrencies and Bitcoin belong in your retirement portfolio?
Morningstar’s article, Is Even a Little Bitcoin Too Much for Your Portfolio? looked into this with a lot of research and modeling for us.
There are a lot of different ways to think about it. Some of the proponents of Bitcoin and cryptocurrency tout the potential diversifying factors. This article looked at whether or not they do help you with diversity. Is it reducing your risk or are they not doing anything for you, or making it worse?
Historically, Bitcoin ran up like climbing a mountain in terms of its price and then it dropped and showed huge volatility in either direction.
Anytime we’re adding something to a retirement portfolio, we’re doing it to diversify the portfolio.
Listen to the full episode to hear Dave and Nick’s take on this.
So here’s a hypothetical. Let’s say one of our clients calls us on Friday and says, “Hey, I know how you feel about this. I know it doesn’t fit with your investment philosophy, but I really want to own some Bitcoin. I want to be part of this.”
We’ve got clients who buy lottery tickets, a client who loves collectible cars, some who like to go to the casino, and others who spend money on things that have some value, but they’re probably not going to change their retirement. It comes down to more of a budgeting question than an investment question. Can you afford to go to the casino once a quarter and spend $1,000 hoping you make a half million?
If that doesn’t hurt you and it’s valuable to you, go do it. If buying Bitcoin in your retirement account isn’t going to change the trajectory of your retirement, it is super meaningful to you to participate in that for whatever reason. To me, then at that point, it’s no different than somebody who says, “Hey, my cousin’s involved with this company, and it sounds great. And I’d like 100 shares of that company just so I can say I’m part of what he’s working on.” There’s nothing wrong with that.
Hopefully, we’ve answered some questions about Bitcoin and how it relates to your retirement portfolio. If you have questions, please shoot us an email at firstname.lastname@example.org.
About Shotwell Rutter Baer
Shotwell Rutter Baer is proud to be an independent, fee-only registered investment advisory firm. This means that we are only compensated by our clients for our knowledge and guidance — not from commissions by selling financial products. Our only motivation is to help you achieve financial freedom and peace of mind. By structuring our business this way we believe that many of the conflicts of interest that plague the financial services industry are eliminated. We work for our clients, period.
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