With the price of bitcoin and other cryptocurrencies hitting all-time highs this year, it’s no surprise that more individuals are considering allocating a percentage of their wealth to cryptocurrency.
While education and due diligence should precede any responsible investment, in a sector as new as crypto, they’re especially key.
We spoke to three financial and wealth advisors about putting your best foot forward when it comes to investing in the future.
Kevin Gaines, AFMG Planning, on allocation percentage
“I’m finding an increasing number of client questions about the subject, just trying to understand what the excitement is all about. Since this can be a lot to digest, we may have a few conversations before a client is ready to invest.”
He advises investors to tread carefully when building an allocation:
“Given the sector’s volatility, I advise limiting the investment to a maximum of 5% of total overall portfolio, and that’s for my most aggressive clients.
Ryan Firth, Mercer Street, on security and taxes
“For those who manage the private keys to their crypto assets, this creates a need for planning around access and control of their keys, which is critically important.”
Firth points out that controlling private keys, or self-custody, might not be familiar territory for investors who have previously only used custodial financial solutions.
“New crypto investors’ questions are usually focused on how to get exposure to this asset class. They may or may not understand the tax implications of transacting in cryptocurrency, so I often educate them on tax planning strategies.”
Since tax policies vary widely by state, country, and region, advisors generally recommend finding an accountant who specializes in crypto taxes.
Luke Lloyd, Strategic Wealth Partners, on having a diversified portfolio
“With the current market cap of all cryptocurrency nearing $3 trillion and Bitcoin’s market cap alone valued at more than $1 trillion, crypto is impossible to ignore at this point.”
Lloyd does not just recommend Bitcoin:
“Institutional involvement has been increasing over the past year, which usually is a sign that they see a future within the new asset class. I think at this point, most people should have Bitcoin and Ethereum incorporated into their portfolio.”
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