Here’s what you need to know before investing in Bitcoin ETFs
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It’s been a great year for the spot Bitcoin ETFswith some of the largest asset managers offering value-bearing ETFs The leading digital currency. But there are things to consider before adding these ETFs to your portfolio, experts say.
The US Securities and Exchange Commission approved the first Bitcoin spot ETFs in January. Earlier this month, Bitcoin ETFs collectively surpassed 12 $100 billion in assets under managementrepresenting one of the most successful ETF launches in history.
Bitcoin ETFs give investors “a traditional way to buy non-traditional assets,” said Douglas Boneparth, a certified financial planner, president of Bone Fide Wealth in New York.
Although Recent fluctuationsprice Bitcoin It was still up nearly 120% year to date, as of December 20, driven in part by the pro-crypto policy proposed by the president-elect. Donald Trump.
There’s a lot of upside potential, said Boneparth, who is also a CNBC panelist Financial Advisory Board. But there is usually a “huge amount of volatility” compared to traditional asset classes.
If you’re still ready to buy Bitcoin ETFs, here’s what to consider.
Advisors remain ‘cautious’ about bitcoin ETFs
“Most advisors are Still relatively cautious About using this [bitcoin ETFs] “With their clients,” said Amy Arnott, a strategist at Morningstar Research Services.
To this point, about 59% of financial advisors do not currently use or discuss cryptocurrencies with their clients, according to a June survey from Cerulli Associates. The survey included 271 advisors during the first quarter of 2024, when the price of Bitcoin was lower.
Follow a “rebalancing policy”
If you’re keen on adding Bitcoin ETFs to your portfolio, Arnott suggests keeping your allocation small — around 2% to 3% max — and rebalancing regularly.
Your allocation should be based on your goals, risk tolerance, and timeline. Without rebalancing, an exchange-traded Bitcoin position could have a “drastic impact on the overall risk profile of the portfolio,” she said.
It’s a good idea to rebalance on a regular schedule, quarterly at a minimum, or even monthly…
Amy Arnott
Portfolio Strategist at Morningstar Research Services
You can follow a “rebalancing policy” by trimming profits when your Bitcoin ETF allocation exceeds a predetermined percentage of your portfolio, Arnott said. This requires regular monitoring.
“It’s a good idea to rebalance on a regular schedule, at least quarterly, or even monthly” for volatile assets like bitcoin, she said.
Consider your schedule
Like other investments, it’s important to consider your goals and timeline before adding bitcoin ETFs to your portfolio, Arnott said.
Similar to stocks, Morningstar Wallet frame It recommends holding Bitcoin and other cryptocurrencies for at least 10 years due to volatility, periodic withdrawals and crypto winters.
“This is not a good place to be if you’re saving for a down payment on a house in a few years,” Arnott said.
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2024-12-23 12:55:00
