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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
If you are interested in investing in cryptocurrencies then doing so through digital IRAs is the safest choice. Buying shares through that creates a tax shield for profits earned on an investment as well. What are Digital IRAs and Should You Use One? By Britt Erica Tunick With all the attention being given to bitcoin these days, not to mention predictions that many analysts are predicting that the price of a single bitcoin is likely to reach $10,000 before the end of 2017, it is no surprise that many people have been wondering if they should invest in digital currencies. Understandably, however, few people have the means, or the risk tolerance, to invest so much money in something that is so speculative. That’s where digital IRAs come in. What, you may wonder, are digital IRAs? Much like their name suggests, digital IRAs are a fairly new type of individual retirement account that allows their owners to invest in cryptocurrencies such as bitcoin and Ethereum. But digital IRAs are not solely invested in cryptocurrencies and, instead, only a small percentage of their investment portfolio is typically invested in cryptocurrencies, with the remainder comprised of typical IRA investments such as stocks and bonds. One reason for investing in cryptocurrencies through a digital IRA is the fact that doing so allows you to allocate a smaller portion of money to such currencies than you would otherwise have to if you were to buy it through a bitcoin exchange. Purchasing cryptocurrencies such as bitcoin through a digital IRA can also be beneficial because it provides you the ability to immediately invest as much of the money within your portfolio as you would like into bitcoin, whereas bitcoin exchanges have hard limits on how much money an individual can invest in bitcoin or other cryptocurrencies on any one day. Additionally, buying shares of bitcoin or other cryptocurrencies through a digital IRA creates a tax shield for any profits you earn on such an investment as long as your investment remains within that IRA portfolio unless you choose a Roth digital IRA which, just like traditional Roth IRAs, would mean that you would pay taxes on your investment upfront in order to have a tax-free distribution at the time of your retirement. While there is no guarantee that the value of cryptocurrencies such as bitcoin will continue to rise, if investing in them is something you are truly interested in doing so through a digital IRA is probably the safest way, especially if you are only allocating a portion of your portfolio to them. At the end of the day, it is just one more form of diversification. |
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