Should you invest in crypto?

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Social media and crypto chats go hand in hand for millennials. If you are like me and spend a lot of time online, you will find that investing in bitcoin, dogecoin, and other coins is all the rage. According to a survey by NORC, a research arm of the University of Chicago, more than one in 10 Americans invests in cryptocurrencies. Crypto investors tend to be younger (38 on average) and more diverse than traditional equity investors, and 61% started their crypto journey in the past 12 months. Among those who are still hesitant to get started, 31% say they do not know where to start. I am in this camp. I still don’t fully understand crypto, but reading tweets about people getting rich in bitcoin, I start to wonder if my hesitation is costing me.

Anyone who thinks they’ve missed the boat needs to make one thing clear: You absolutely didn’t, says Isaiah Douglass, a millennial and certified financial planner at Vincere Wealth in Indianapolis, which invests in bitcoin. Bitcoin is a small slice of the global investment pie in terms of market value compared to the big hitters in the S&P 500 Index. Currently, bitcoin is collectively worth around $ 800 billion; Apple, the biggest title in the S&P 500, is worth $ 2.4 trillion. Bitcoin still has room to grow (price as of August 6).

Bitcoin is not a fad, says Douglass. He notes that there are supporters of bitcoin in the US Congress and that El Salvador recently adopted bitcoin as a form of legal tender. But the price hasn’t kept up with the positive momentum, he says. Young people who invest some of their savings in bitcoin over time will be ahead of the big investors who Douglass says will follow in the decade.

Douglass says his clients who invest in bitcoin believe that blockchain technology that tracks crypto transactions over a network of computers is revolutionary. But they don’t invest money they can’t afford to lose, and their holdings are small, accounting for 1-5% of their overall portfolio. Investors who are successful in bitcoin and other coins also use an average dollar cost strategy, which means that you invest your money in regular and even portions over time.

How to invest. Before putting money into cryptocurrencies, establish a core portfolio that aligns with your investment goals. If you are a young professional, that core will likely be funds in your employer sponsored 401 (k), or a traditional or Roth IRA. Then choose how to invest. Most major brokerage firms do not allow account holders to trade cryptocurrencies directly. But you can invest in Grayscale Bitcoin Trust (symbol GBTC, $ 36), an investment fund that holds bitcoin tokens. Note the expensive expense ratio of 2%, compared to fractions of a percent for, say, an S&P 500 exchange-traded fund. And remember that shares in the trust can trade at a premium or at a discount to it. to its underlying assets.

Another option is to take the fintech route. Financial firm SoFi and broker Robinhood allow account holders to buy and sell various cryptocurrencies through their smartphone apps. The risk: Your crypto funds are not FDIC or SIPC insured, which means that if the institution goes bankrupt, your funds are permanently lost.

Or open an account on one of the cryptocurrency exchanges. Coinbase is the bigger one, but Swan Bitcoin, recommended by Douglass, has lower fees. The digital assets of the two companies are not covered by any type of insurance, but the US dollars in the accounts are insured by the FDIC, up to $ 250,000.

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