Bitcoin Offers Diversification For Retirement Portfolios

Bitcoin is becoming a recognized asset class with a low correlation to other asset classes. This makes it a good option for diversifying investment portfolios with retirement accounts, and some options do exist for investing in bitcoin for retirement.

Also read: Former US Mint Director Brings Bitcoin to Retirement Investing

Diversifying Portfolios

Most investment advisors recommend having diversified retirement portfolios to limit exposure to any one type of asset which will subsequently reduce the volatility of a portfolio over time.

According to research by Ark Invest and Coinbase, “Bitcoin is the only asset that maintains consistently low correlations with every other asset.” This makes bitcoin a great investment for diversifying portfolios.

In addition, the joint report states that while its volatility is still high, it has dropped significantly and could reduce further in the future.

Investing in Bitcoin Funds

An easy way for the mainstream investing public to invest in bitcoin is by investing in bitcoin funds which provide investors with exposure to the price performance of bitcoin without actually owning any bitcoins. These funds can usually be traded in traditional brokerage accounts such as at Fidelity Investments. Below are some options.

Bitcoin Investment Trust

One such fund is Barry Silbert’s Bitcoin Investment Trust (GBTC) whose shares are quoted on the QTCQX marketplace under the Alternative Reporting Standards. With Xapo Inc as the Custodian, the fund had $164.21 million under management at the end of 2016 and charges 2 percent annual fee.

Within 12 months period, GBTC has returned 151.61 percent. GBTC can be purchased in traditional brokerage accounts. It is available for trade in Fidelity’s self-directed IRA, a Fidelity representative confirmed to Bitcoin.com.

Bitcoin Exchange-Traded Notes

Outside of the U.S, the Stockholm-based XBT Provider offers bitcoin exchange-traded notes (ETNs) called Bitcoin Tracker One and Bitcoin Tracker Euro. Unlike GBTC which invest in bitcoins, these ETNs are merely “non-equity linked certificates” which track bitcoin’s price, its prospectus describes. The certificates are not principal-protected but the company holds bitcoin equivalent to the value of ETNs issued and has a guarantor, Global Advisors (Jersey) Limited.

These certificates charge an annual fee of 2.5 percent. In a 12 month period, Bitcoin Tracker One returned 124 percent while Bitcoin Tracker Euro returned 118 percent. While listed on Nasdaq Nordic in Stockholm, they are available in 179 countries including the U.S. for investors with accounts at Interactive Brokers.

Global Advisors Bitcoin Investment Fund

Another bitcoin fund called Gabi is offered by Global Advisors itself, which claims to be

the “first institutional-grade program for managing exposure to bitcoin,” according to its website. In December, the fund was listed on Channel Islands Securities Exchange (CISE).

Gabi recently became a partner of Wealthics Global Partners, an independent provider of asset management solutions. Its management fee is 1%. In 2015, the fund returned 37.42 percent and 71.25 percent in 2016.

Investing in Bitcoin Directly

For those wanting to invest in actual bitcoin, Fidelity Investments and most self-directed IRAs do not offer this option. However, a startup based in Sherman Oaks, California, called Bitcoin IRA, has been providing U.S. investors with the ability to hold actual bitcoin in an IRA since last June. The company’s chief strategist is Edmund C Moy, Director of the U.S. Mint from 2006 to 2011.

Instead of charging an annual fee, Bitcoin IRA charges a 15 percent upfront setup fee. The company uses Genesis Trading to buy bitcoins and Bitgo for wallet management. Kingdom Trust is its custodian. According to a recent post on Reddit by the company’s Director of Marketing Amith Nirgunarthy:

Once the account is established with our custodian (Kingdom Trust) we purchase the bitcoin through our liquidity partner Genesis trading.

“The IRA owner has viewing privileges of its Bitgo wallet and has access to the public wallet address to verify its bitcoin content at any time with blockchain.info or any other company,” he added. In addition, Bitcoin IRA has a $1 million consumer protection insurance policy with Lloyds of London, he revealed.

Currently, the company does not offer retirement accounts for non-US customers. However, “50% of our inquiries are international,” Nirgunarthy told Bitcoin.com. This is “something we are looking into,” he added.

Do you think people should invest in bitcoin for retirement? Let us know in the comments section below.

Images courtesy of Shutterstock, Gabi, Gbtc, XBT Provider

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