Allworth Advice | Are Bitcoin ETFs safe?
Every week, Allworth Financial’s Amy Wagner and Steve Hruby, CFP®, answer your questions. If you, a friend, or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.
Gary in Independence: Now that there are Bitcoin ETFs, does that make it a safe investment?
Answer: We’ve been anticipating a question like this ever sincethe Securities and Exchange Commission (SEC) officially voted earlier this year to allow everyday investors to buy and sell Bitcoin just like they would buy and sell stocks, paving the way for brand-new Bitcoin exchange-traded funds (ETFs).
According to The New York Times, the ETFs directly track Bitcoin’s price, minus the fees and cost of trading. However, in our opinion, this new option doesn’t change a thing about Bitcoin, the world’s largest cryptocurrency. It’s still very much a speculative asset, quite akin to gambling. Just because you might now see a Bitcoin ETF available through your brokerage firm doesn’t magically remove the risk. Yes, an ETF makes the buying, selling, and holding of Bitcoin much easier (no need to worry about things like ‘wallets’), but the underlying risks still remain. (We should also note that the SEC Chair explicitly stated that this ETF approval does not mean the SEC endorses or approves Bitcoin and that investors should “remain cautious.”)
Here’s the Allworth Advice: It’s important to remember that there really is no such thing as a ‘safe’ investment. Every single investment comes with risk, even something like a Certificate of Deposit (depending on the rate of inflation versus the rate on the CD, you could lose purchasing power). Bitcoin (or any cryptocurrency) is no exception – it’s still quite volatile. And wrapping it up inside a ‘traditional’ investment vehicle like an ETF does not change that.
Julie in Colerain Township: Just got my tax refund! What’s the best way to use it: paying off credit card debt or starting an emergency fund?
Answer: You can go ahead and take that sigh of relief now – we’ve made it through tax season!And as of March 8th, the IRS says that the average refund is around $3,145. But no matter how much your refund is, our answer is pretty cut and dry: Start your emergency fund.
At first glance, using this money for an emergency fund probably sounds pretty boring. But that’s the point. An emergency fund is supposed to be boring. It’s supposed to be there, whenever you need it, to get you out of a jam. Because let’s face it, life happens. The furnace goes out. Your car needs brakes. You make a surprise trip to the emergency room.
Yet, a recent study from the Federal Reserve Board shows that 40 percent of Americans can’t cover a $400 emergency expense. And you know what usually happens when someone doesn’t have cash to pay for an unexpected expense? It goes on the credit card.
Stop the cycle. Build up your emergency fund. We recommend having enough money in the account to cover at least three months’ worth of your most vital living expenses (six months’ worth of expenses is even better).
Don’t get us wrong, paying off your credit card debt should still be a priority. But the Allworth Advice is that, right now, you should set that refund money aside so it can serve as a cushion in case of emergency. Online banks are still currently offering interest rates around four percent or higher; just make sure the institution you choose is FDIC-insured.
Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Retirement planning services offered through Allworth Financial a SEC Registered Investment Advisor. Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Visit allworthfinancial.com or call (513) 469-7500.
This article originally appeared on Cincinnati Enquirer: Allworth Advice | Are Bitcoin ETFs safe?
