Bitcoin in Your 401(k): A New Era of Retirement Investing
What the Inclusion of Bitcoin in 401(k) Plans Means for the Future of Retirement
In recent years, Bitcoin has evolved from a niche digital currency into a globally recognized asset class. Once viewed with skepticism by traditional finance, it's now being embraced by major institutions and investors alike. One of the most significant developments in this journey is the growing inclusion of Bitcoin in 401(k) retirement plans.
Yes, you read that right—Bitcoin is entering the retirement arena.
A Shift in Retirement Strategy
For decades, 401(k) plans have been synonymous with traditional assets: stocks, bonds, and mutual funds. The goal has always been to offer relatively stable, long-term growth for retirement. But as markets evolve and investor preferences change, so too must retirement plans.
Enter Bitcoin. In 2022, Fidelity Investments—one of the largest 401(k) plan providers in the U.S.—announced it would allow plan sponsors to offer Bitcoin as an option for retirement savers. This was a watershed moment for crypto in the retirement space and opened the door for other providers to consider similar offerings. Fidelity's Digital Assets Account (DAA) enables individuals to allocate up to 20% of their retirement savings to Bitcoin through their core 401(k) plan investment lineup .
Why Add Bitcoin to a 401(k)?
Diversification: Bitcoin offers a non-correlated asset compared to traditional equities and bonds, meaning it doesn't necessarily move with the broader markets. For some investors, this could provide a hedge against inflation or economic downturns.
High Growth Potential: Despite its volatility, Bitcoin has delivered exceptional returns over the past decade. Investors with long time horizons may be willing to accept short-term risk for the possibility of high long-term reward.
Appealing to Younger Investors: Millennials and Gen Z—many of whom are already investing in crypto outside of retirement accounts—are increasingly demanding access to digital assets in all aspects of their portfolios, including retirement.
A Regulatory Shift: DOL Reverses Course on Crypto in 401(k)s
In a significant regulatory development, the U.S. Department of Labor (DOL) recently rescinded its prior compliance release that discouraged fiduciaries from including cryptocurrencies in 401(k) plans. The original 2022 guidance raised concerns about the speculative and volatile nature of digital assets, suggesting that plan sponsors who included crypto could face heightened regulatory scrutiny.
The reversal marks a more neutral, and arguably more supportive, stance from the federal government. While the DOL isn't explicitly endorsing crypto in retirement accounts, rescinding the guidance removes a major deterrent that had been chilling interest among plan sponsors and fiduciaries.
This move gives fiduciaries more flexibility to consider digital assets like Bitcoin, provided they continue to act prudently and in the best interests of plan participants. In other words, fiduciaries must still meet their legal obligations under ERISA, but they are no longer under direct pressure from the DOL to avoid crypto altogether.
This shift could open the door to wider adoption, especially as demand continues to grow from both employers and employees seeking diversified, future-facing investment options.
Risks to Consider
Of course, adding Bitcoin to a 401(k) isn't without risk:
Volatility: Bitcoin is famously volatile. While it can deliver impressive gains, it can also experience sharp downturns.
Regulatory Uncertainty: Cryptocurrency is still a relatively new financial instrument in the eyes of regulators. Changes in policy could affect its value or availability in retirement plans.
Limited Allocation: Most 401(k) plans that allow Bitcoin cap the allocation—typically around 5% to 20% of the total portfolio—to help mitigate risk.
What Employers and Employees Should Know
Not all 401(k) plans automatically include Bitcoin. It's up to each plan sponsor (usually the employer) to decide whether to offer it as an option. If your employer doesn't offer it, you might not be able to access Bitcoin through your retirement account—at least not yet.
If they do, consider your risk tolerance, investment timeline, and retirement goals before diving in. Like any investment, Bitcoin should be part of a well-thought-out strategy—not a gamble.
Final Thoughts
The inclusion of Bitcoin in 401(k) plans marks a significant milestone in the maturation of digital assets. It reflects growing demand for alternative investments and a broader shift in how we think about financial planning and retirement. With the Department of Labor stepping back from its previous opposition, plan sponsors may feel more empowered to explore crypto options responsibly.
As with any financial decision, do your homework, talk to a financial advisor, and make sure your choices align with your long-term goals. Bitcoin in your 401(k) isn’t just a headline—it’s a glimpse into the future of retirement investing.
Disclaimer: This blog post is meant for purely for general educational purposes and does not represent investment advice made by Conviction Wealth Management LLC. Conviction Wealth Management LLC. is a Registered Investment Advisor in the State of New Jersey., Investments inherently have risk of loss and past performance does not guarantee future returns/performance. For an investment recommendation please consult an investment professional.
Understanding the Role of Individual Stocks in a Diversified Investment Strategy
While mutual funds and exchange-traded funds (ETFs) are commonly utilized for their diversification benefits, individual stocks can also play a significant role in an investor's portfolio. However, incorporating individual stocks requires careful consideration of one's financial goals, risk tolerance, investment knowledge, and time.
1. Customization and Control
Investing in individual stocks offers investors the ability to tailor their portfolios to specific sectors, industries, or companies that align with their investment objectives and values. This level of customization is not typically available through mutual funds or ETFs. For instance, investors can choose to invest in companies with strong environmental, social, and governance (ESG) practices or those that align with personal values.
2. Cost Efficiency
Owning individual stocks can be cost-effective, especially for long-term investors. Unlike mutual funds and ETFs, which often charge management fees, individual stocks may only incur transaction costs when bought or sold. This can result in lower overall investment expenses. However, it's important to note that trading costs and potential tax implications should be considered when evaluating the cost-effectiveness of individual stock investments.
3. Tax Planning Opportunities
Individual stock ownership provides investors with greater control over tax planning. Investors can decide when to sell positions, potentially allowing them to manage capital gains and losses more effectively. This flexibility can be advantageous in implementing tax-loss harvesting strategies or in managing the timing of taxable events.
4. Educational Value and Engagement
Investing in individual stocks can enhance an investor's understanding of the market and specific industries. By researching companies, analyzing financial statements, and staying informed about industry trends, investors can develop a deeper knowledge of the factors influencing stock performance. This engagement can lead to more informed decision-making and a greater sense of ownership in one's investment choices.
Important Considerations
While individual stocks offer certain advantages, they also come with risks, including company-specific risk, lack of diversification, and potential volatility. It's essential for investors to assess their ability to manage these risks and to ensure that individual stock investments align with their overall financial strategy.
Final Thoughts
Incorporating individual stocks into an investment portfolio can offer benefits such as customization, cost efficiency, tax planning opportunities, and educational engagement. However, these advantages should be weighed against the associated risks and the investor's capacity to manage them. It's advisable to consult with a qualified financial advisor to determine whether individual stocks are appropriate for your specific financial situation and goals.
Disclaimer: This blog post is meant for purely for general educational purposes and does not represent investment advice made by Conviction Wealth Management LLC. Conviction Wealth Management LLC. is a Registered Investment Advisor in the State of New Jersey, Investments inherently have risk of loss and past performance does not guarantee future returns/performance. For an investment recommendation please consult an investment professional.
Gold and It’s Place in Your Portfolio
A Brief Overview of Gold
Gold is one of the oldest known forms of currency with the first gold coin being struck around 550 BCE in what is today considered Asia Minor. Throughout history it has been used as a store of value, a medium of exchange, as well as a unit of account. It has economic and utilitarian value and during times of turmoil it has been seen as a safe haven by investors. Gold has been used on and off as a currency and display of power/store of value going back over multiple centuries to date. It was used as a currency or show of status by multiple early civilizations including but not limited to the Byzantines, Romans, Aztecs and Incas. This is because of the precious metal’s rarity, malleability, durability, beauty, and in the case of certain early American civilizations, it’s close semblance to the sun. Throughout more modern history different countries at different points have tied their currency to gold, meaning that one note of said currency can be exchanged for a certain amount of gold at any given time. The United States most recently adopted a gold standard post World War 2 as part of the Bretton Woods Agreement and stayed on said standard until 1971. The Swiss Franc was the latest and last major currency to be tied to gold ending its run in 1999. Gold historically has a low correlation to equities and bonds making it a great way to diversify your portfolio.
Different Ways To Own Gold
There are different investment vehicles allowing you to track the price of gold. ETF’s are one of the most simple and cost effective ways to track the price of gold with some physically taking possession the asset itself. You can also own gold the old fashioned way by owning the physical metal itself. Some different types of physical gold you may have heard of are bullion (gold bars), proofs(gold coins with prints on them), and of course jewelry. For this articles sake, when we refer to owning physical gold we will be thinking of bullion. Gold bars kept in their packaging can be bought and sold online at sites such as jmbullion.com or at physical gold exchanges which can be found locally to you with a quick google. Depending on the amount, physical gold can be cumbersome and lead to you paying relatively high commissions. In addition, you will also need a safe place in which to store it. Bullion does offer a degree of protection and diversification as it is something that you physically have in your possession, other than cash, that is typically thought of as an inflation hedge.
How Much Should I Own?
Is gold it right for your portfolio as a retail investor? If so, how much exposure should I have to the shiny metal asset? These two questions should be answered by asking yourself other questions. What is my risk tolerance? What is my investment time horizon? What are my investment goals? How would owning gold effect my current allocation? For more information on gold, it’s place in your portfolio and some of the best ways to get exposure to it, please schedule a meeting with an investment advisor representative using the contact page on our site or clicking here.
Gold Can Outperform During Times of Uncertainty
This Investopedia article offers a fair view of golds performance over more recent years as well as additional insight on the metal. Gold historically has a low correlation to equities and fixed income markets. Currently, as of writing this article Blackrock’s ETF, IAU, has a 5 year monthly beta of .32 (as shown on yahoofiance.com). A beta of 1 represents a perfect correlation to the S and P 500. A beta of .32 means the investment has been 32% as volatile as the S and P 500 index.
Disclaimer: This blog post is meant for purely for general educational purposes and does not represent investment advice made by Conviction Wealth Management LLC. Conviction Wealth Management LLC. is a Registered Investment Advisor in the State of New Jersey, Investments inherently have risk of loss and past performance does not guarantee future returns/performance. For an investment recommendation please consult an investment professional.
Picking Someone To Help Manage My Money
Picking someone to assist you with the investment management process can be a daunting task. The purpose of this blog post is to assist the retail investor in navigating this process. The following are some questions they should be asking themselves and their potential new advisor.
What Are Their Qualifications?
People who provide investment advice come in many shapes and forms with the industry having changed over the years. It is best practice to do your own due diligence and shop around when looking for someone to assist you with investment advice and financial planning. They should at the very least be a licensed professional and be registered on brokercheck.org or the Investment Advisor Disclosure page. These pages will offer work history information as well as any previous disclosures/complaints made against said licensed individual. Some other credentials to consider would be the Certified Financial Planner or CFP, Chartered Financial Analyst or CFA, as well as additional in industry experience.
How Do They Get Paid?
When you are working with someone who helps manage your money there are many ways in which they can be compensated and by many people, (not just you). Some advisors charge a commission on each trade while others charge an annual fee for investment advice. Whether you are more comfortable being billed one way or the other, each method of billing has it’s own pitfalls to look out for. If you are being charged a commission on each trade something to lookout for is what is known as churning. In short churning is excessive trading in an account in order to generate a commission. If you are paying someone an annual fee for investment advice or to manage an account it would be beneficial to be on the lookout for reverse churning. Reverse churning is essentially the failure to provide ongoing investment advice and/or work while collecting a fee for said advice. For more information on churning and reverse churning please see this Investopedia article.
What Services Do They Provide To You?
When meeting with a financial professional ask what value they actually provide. Will they help you develop a financial plan? What is their investment philosophy? Do they own individual stocks or strictly exchange traded funds and mutual funds in client portfolios? When you call them do they get back to you in a reasonable amount of time?
What Standard Are They Held To?
Fiduciary standard vs suitability standard. This is another consideration when picking a fiancial professional to help manage your money. Registered Representatives of Broker Dealers are held to a suitability standard meaning the investments that they sell you have to be suitable to your needs. When a financial professional is held to a fiduciary standard that means they have to act in what they feel is in your best interest when representing you, putting your own interests before their own legally. For further information on this topic please see this Investopedia article.
These are only a few of the considerations that should be considered when picking someone to help manage your own hard earned dollars. For more information please schedule a consultation with Conviction Wealth Management LLC. Our Registered Investment Advisor Representative would be happy to answer any questions you may have.
Disclaimer: This blog post is meant for purely for general educational purposes and does not represent investment advice made by Conviction Wealth Management LLC. Conviction Wealth Management LLC. is a Registered Investment Advisor in the State of New Jersey, Investments inherently have risk of loss and past performance does not guarantee future returns/performance. For an investment recommendation please consult an investment professional.