Some people see the words ‘cryptocurrency IRA’ and steer clear because they think it’s only about investing in digital currencies. You can certainly go that route, but not even the biggest crypto investors would really recommend doing so. The point of a digital IRA is to allocate a certain percentage of your portfolio to crypto-currencies. Let’s say that you look at it like you would precious metals, with about 5 to 10 percent of your capital going to digital currencies.
That’s one way to look at it, but the point is you get to determine the parameters in terms of how much money you want to put into crypto-currencies. After people watched Bitcoin gain over 1000 percent in 2017, they want to get their hands on that fast money. Before diving further into cryptocurrency IRAs, however, there are two important things to mention.
Understanding the Risk
First, you do see what happened to Bitcoin afterward, right? After hitting such a record high, people took notice, yet the digital currency dropped significantly after that. Its value was chopped right in half in the coming months. The second thing you should realize is that you don’t want to take so much stock in risky, rapidly growing investments in terms of an IRA. This is your retirement you’re talking about.
That being said, it is important to mention again that a cryptocurrency or digital IRA isn’t just about those types of investments. It does mean, however, that you should take into account the volatility of digital currencies so that you invest in them at a pace you consider appropriate. How much risk are you willing to take? Be sure that a 5 to 10 percent stake dropping significantly could still have a major impact on your portfolio.
Yet it could also bring big gains. You have the same types of choices to make when you invest in individual stocks vs mutual funds or bonds. That’s just one other example, but you get the picture. Risk assessment is key, and in terms of digital currencies, it’s a little difficult to do a risk assessment. They are so new. So perhaps the best thing to do is to take a smaller stake in them.
Learn more about Crypto IRA now and make a better-informed decision about your investment.
Consider Your Other Investments
What other types of investments do you have? Perhaps you have been a little conservative with your portfolio. That is one way you could look at it for sure. Let’s say that perhaps you have all of your IRA money in bonds and mutual funds. You know your retirement is secure, but you want to see if you can take things to the next level in 5 years by hitting a big run with the crypto-currencies.
You decide to put 5 percent of your money into the digital currencies so that you can see if you hit the jackpot. Does that sound like a plan to you? You could even put the 5 percent in a basket of crypto-currencies to diversify. Or you could put it into Bitcoin on the dip. It’s totally up to you how you want to get the job done.