Tue Jul 02 2024, by Tyler Gardner

Essential Tips for Investing in Bitcoin Through Exchange-Traded Funds (ETFs)

If you are thinking about investing in Bitcoin through an exchange-traded fund, here are four things you should probably know.

I'm Tyler, a former financial advisor and portfolio manager, and now I create financial content for free so that you don't have to pay for it.

1. Look for the ETF with the Cheapest Expense Ratio

Why? Because American parts, Russian parts, all made in Taiwan. Regardless of which company is packaging these, in the case of Bitcoin spot ETFs, eight out of the 11 currently listed spot Bitcoin ETFs are custodied by Coinbase. So if it's the same management team, look for the cheapest option.

2. Be Skeptical of 0% Expense Ratios

Even though some of the companies currently have 0% fees, always read the fine print because many of these fee waivers are set to expire after a certain amount of time or after the company reaches a certain amount of assets. I don't want you to be blindsided by a sudden hike in the fees.

3. Consider Allocating a Portion of Your Assets to Alternative Investments

Even though traditional portfolio theory suggests that people would be okay allocating 60% of their assets to stocks and 40% to bonds, several historical market studies have shown that by allocating up to 20% of your assets in alternative investments—real estate, commodities, collectibles, cryptocurrencies—your overall returns would have been stronger, especially in times of market stress. But remember, past performance is never indicative of future results.

4. Invest in Bitcoin Within Your Roth IRA

Why? It's unique as an asset class and unlike stocks, bonds, and mutual funds, is not backed by a physical asset nor is it backed by a profit-generating company. I'm not here to debate the crypto diehards, but I am here to suggest that it is still a speculative asset. But if Bitcoin turns out to be the way of the future, wouldn't you rather have invested in an account where 100% of your capital gains over the next 30 to 40 years are also 100% tax-free?

If any of this is helpful, like and follow and I'll keep trying to get you one step closer to where you need to be.