Experts: Smart Retirement Investors Use Cryptocurrency to Season, Not Stuff, Their Portfolios

Big bets on bitcoin and other cryptocurrencies are too risky for retirement investors, but a little digital money can hedge against declines in the values of other nest-egg assets.

Bitcoin is the most widely held cryptocurrency, but its volatile value makes bitcoin unsuitable as a long-term investment, according to David Twibell, president of Custom Portfolio Group in Englewood, Colo.

Twibell told TheStreet.com that holding Bitcoin in a retirement portfolio as a long-term investment is a risky strategy comparable to currency trading.

The value of bitcoin has dropped well below $10,000 since peaking at $20,089 on Dec. 17.

Loading a retirement portfolio with Bitcoin and allocating too little to the stock market is “sheer lunacy,” said Greg McBride, chief financial analysts at New York-based Bankrate, a financial data and content provider.

Bitcoin defies valuation because it is a purely speculative investment with no intrinsic value, said Bill DeShurko, president of registered investment advisory firm 401 Advisor in Centerville, Ohio.

DeShurko suggests instead investing in such companies as American Express and Western Union that use the blockchain technology behind Bitcoin to cut their costs and operate with greater efficiency.

Miami-based investor Jason Spatafora, a co-founder of Marijuanastocks.com, said cryptocurrencies comprise less than 2 percent of his personal investment portfolio because their value is too volatile to warrant a larger allocation.

He told TheStreet.com that he has invested in cryptocurrencies “for personal education with zero expectation of return.”

Bitcoin in your IRA

The Internal Revenue Service allows cryptocurrency in Individual Retirement Arrangements (IRAs), but many IRA custodians do not, according to Don Shelly, a finance professor at Southern Methodist University in Dallas.

In contrast to a custodial IRA, a self-directed IRA allows the account’s owner to invest in cryptocurrencies and other alternatives to stocks, bonds and certificates of deposit, Shelly said.

The only types of investments in a self-directed IRA that the IRS specifically prohibits are collectibles and life insurance, he said.

Average investors might consider a small portfolio allocation to cryptocurrency not only for its potential appreciation but also for its value as a hedge.

Cryptocurrency values aren’t correlated with the value of the U.S. dollar and other reserve currencies.

A basket of cryptocurrencies could serve as a financial hedge against a long-term depreciation of the U.S. dollar and other government-issued currencies.

Retirement investment vehicles range from IRAs and 401(k)s to securities and savings accounts to cryptocurrency wallets. The absence of a consolidated retirement account can complicate strategies based on preset asset allocations.

Technology may fix that.

A new retirement investment platform called Auctus allows users to aggregate their retirement assets and to contribute Bitcoin, Ethereum and any other blockchain-based coins to their nest eggs.

Auctus also can automatically rebalance portfolio allocations in accordance with preset rules.

Recommended Articles

7 Warnings Signs of a Recession

The 2018 has not been a banner year for the stock market. Warning signs of a recession are becoming more obvious, according to some economists and market pundits. The Dow

Keeping More: How Does a Student Loan Affect Taxes?

Filling out your taxes correctly can be a challenging process, especially for those with student loans. But how does a student loan affect taxes? Many ways, starting with deductions. It

Migraine Pain? Here Are the Best and Worst Foods

Food can be your friend or your foe. Particularly for migraineurs, food can be a serious trigger for a headache, or it can bring a blessed relief from pain. Here

5 Major Money Decisions Before You Retire

It is said that retirement is a lifelong journey and not a destination. For many aspiring retirees, it may be a road to nowhere. Over 22% of Americans have less

Buying a Home? Avoid These 8 Killer Mistakes

Buying is home is not easy. You need to line up credit, decide how much house to buy, find the house, deal with realtors and the sellers. It can be

Body Odor: The Real Reasons Why You Stink

Body odor can be a really embarrassing condition. Unfortunately too many people deal with this common problem by washing more often with antibacterial soaps and body washes, and applying products

4 Powerful Passive Income Ideas That Can Boost Income

Do you enjoy exchanging hours for pay? This form of compensation is common, but most people dread it. What if you could instead get paid whether you work or not?

8 Tips for Efficiently Managing Your Small Business Finances

Managing your small business finances is crucial. Small to medium-sized businesses need financing but they lack enough of it — to the tune of $5 trillion, according to the SME Finance

The One Chart That Could Be a Game Changer for Investors

Allow me to present one chart to you that could indeed prove to be a game changer for investors and financial markets going forward. See below. What are we looking

6 Cultures That Promote Longer Lives and What We Can Learn From Them

Okinawa is renowned for its ability to produce long-living citizens and centenarians, or individuals who live past 100 years of age. What’s their secret? Their bodies age more slowly than

Seniors Finding Jobs in the Gig Economy Created by Millennials

A growing number of seniors finding jobs are doing so by joining the gig economy. According to a 2017 Prudential Financial survey, around 31 percent of gig economy workers are

Viagra for Women — Is a Pill Really the Best Answer for Igniting a Woman’s Sex Drive?

There is a new drug going up for FDA approval called Flibanserin. This medicine is being called “Viagra for women.” The FDA has already denied approval of this medication twice