The cryptocurrency IRA is one of the newest forms of individual retirement account.At present, the IRS sees cryptocurrencies as personal property, which means they can be held in an IRA since only life insurance and collectables are excluded. However, if you wish to open such an IRA, you must understand that it has to be a self directed one. This means you will be responsible for deciding what to invest in, when, and to which amounts. So what should you put in your cryptocurrency IRA portfolio?
Building a Cryptocurrency IRA Portfolio
Naturally, the main focus of a cryptocurrency IRA is going to be cryptocurrency. However, do not make this 100% of your investment. A strong portfolio is a diverse portfolio so if you are going to have a self directed account, you should make sure that you also look at other things such as stocks, bonds, real estate, options, precious metals, and so on. Not just that, do remember that bitcoin is not the only cryptocurrency, so you also shouldn’t purchase bitcoin only.
So-called altcoins were once comparable to penny stocks. They were worthless and were unlikely to ever become worth something. However, this is no longer true. Indeed, bitcoin is still the most expensive and best known cryptocurrency. However, where it used to hold 90% of the crypto market, it is now down to just 40%. Clever investors knew this was coming. They saw that more and more people were looking at ethereum because they were concerned about the block size problems that the Bitcoin community kept on arguing about. This is a clue: you need to also look at joining the Bitcoin community and listening to what is being said there.
Today, most cryptocurrency investment focus on Bitcoin. However, you need to also consider other options to have a diverse portfolio. Consider Ethereum, but also Monero, Dash, Litecoin, and Ripple. Furthermore, you should have a look at the market cap for each of these cryptocurrencies, so that you have somewhat of a metric, albeit an imperfect one, to tell you how much something is worth.
One of the key things of important is that you take some time to get to know what you are actually investing in. As previously mentioned, joining the Bitcoin and other cryptocurrencies communities is a good step towards that. It will ensure that you are made aware of any changes in value and perception, enabling you to adjust your investment portfolio accordingly. Clearly, you also have to educate yourself on how a self directed IRA works.
Overall, investing in cryptocurrencies is an exciting thing to do and one that is recommended by the financial community. However, you must be realistic about the fact that all Investments are risky and that there are never any guarantees. Hence, while it might not be a good idea to not invest at all, you should never invest what you cannot afford to lose. With that in mind, you should be able to build a good portfolio.