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Volatility, Crypto and Your IRA

Market volatility is unsettling, but historically not unusual. If you’ve built an appropriately diversified portfolio that matches your time horizon and risk tolerance, it’s likely the recent market drop will be a mere blip in your long-term investing plan. Call Prosperity Financial Group at (925) 314-8500 for your free portfolio review today.

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There is no doubt about the fact that we have entered a new period of volatility. 

That means larger swings in the equity (stock) markets both up and down. More agita, more acid reflux, and more need for anti-anxiety medicine. 

In late September into early November, the Nasdaq, home of many of the high-tech companies, experienced a negative swing of close to 10%, the definition of a “correction.” We think that this will be the norm for many months to come. However, volatility can be your friend too.

And all of this talk about Crypto. Most of us have no idea, other than Bitcoin, what Crypto is. 

What is Blockchain and how is this associated with Crypto? 

What is Ethereum? 

What is Coinbase?

There is so much confusion and misunderstanding about digital currency that I recommend that clients run away. 

The Problem

We are actually in the “wild west” of Crypto investing. When the price of Bitcoin goes from $38,000 to $55,000 in a short period, that could spell a quick gain or forebear massive swings to come. And just like the Gold Rush, millionaires will be made, the remaining 97% will lose.

We are slowly putting our toes in the water here for our clients, but “caution” is the word of the day. 

What You Need to Know

You don’t have to own Bitcoin to play in this space. As the old phrase use to be, “there are many ways to skin a bear,” so are there many indirect ways to play in this space. Digital Banks and Digital Payment Companies may be a much smarter play here if volatility keeps you up at night, as it does to me.

Ask your Financial Advisor for ideas.

Remember that as we adjust portfolios to capitalize on this volatility — and we are — taxes become an issue. Gains only become taxable when sales are made. So, this is a great time to discuss taking some gains off of the table and paying some capital gains taxes. 

However, in your IRA, there are no capital gains taxes to be paid. So, owning greatly appreciating assets in an IRA is a terrific way to do business. 

On the other hand, real estate does not offer depreciation, capital gains, or 1035 exchanges in IRAs. We usually try to avoid real estate in IRAs for these reasons. 

And remember, contributions to your IRA can be tax-deductible and gains in your Roth IRA are tax-free, and in most cases, your Advisor and you can direct these investments to meet your needs and values. 

For more information, reach out to me anytime. I’m here to help. 

Call or email me anytime.

All my best,

Elliot Kallen


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