A friend of mine recently posed a question on her blog about Cryptocurrency.
You know-Bitcoin, Dogecoin, Ethereum-to name a few.
She was asking her followers what they knew about it, had they invested in it, and she made the statement that she thinks it may be here to stay.
I think she’s right, but whether I think the average person should be investing in it is another question.
Around the same time, I was talking with my oldest about needing to get his taxes filed so we could make a Roth contribution. I was trying to educate him about why this was a great investment for his future. I liken what he was probably hearing was akin to the teacher’s voice from Charlie Brown.
His response, to my surprise, “I want to buy Dogecoin.”
My darling first born, you don’t even know what FICA taxes are or the difference between owning a stock vs a mutual fund, and you don’t necessarily need to understand all of this right now, but it’s also why you should not be buying Dogecoin with your very few hard earned dollars.
“Crypto” – it’s all the hype, I know. And don’t get me wrong, I’m not saying it’s a scam or investors haven’t or won’t in the future make money by investing in it. They have and they will. They’ve also lost a lot of money over the past month as well, at least on paper.
At this stage of the game, it is unregulated (which is kind of its modus operandi ), extremely volatile and very speculative. Its “buy in” has grown exponentially since its inception. I do think it has the POTENTIAL to EVENTUALLY be a small part of every investor’s diversified portfolio. Maybe. Time will tell.
It is my opinion, and only my opinion, that the AVERAGE investor, of which most of us are and why the term “average investor” was coined, should not be pouring our hard earned money into crypto, at least not for the hyped up reasons of turning a quick profit or easily becoming uber rich.
Unless you plan to “set it and forget it” like you would your 401(k) contributions and savings, and earmark it for the long term, then don’t do it.
Unless you are OK with potentially losing whatever you invest, don’t do it.
If you want to buy it to ride the wave and think it’s a get rich quick option,
DEFINITELY DON’T DO IT.
Because honestly, no one knows for sure what direction this is heading and I’m just not comfortable with the fact that a tweet from Elon Musk can singlehandedly make it soar or tank in a 24 hour period. Are you???
For the majority of us, investing is meant for the long term, using investment strategies that are tried and true, and have proven to pay off for 100% of those of us who follow a disciplined and diversified approach to saving and investing.
A very small percentage of your portfolio…for the long term…with money you don’t need and are OK with losing? OK, if you must, but do your research. Be aware, be informed and understand your decision.
To be buying and selling crypto currencies on a regular basis is nothing short of day trading or trying to time the market. Most lose at that game in the long run.
That’s my two cents…I wonder what it’s worth in Crypto?
Financial Fitness
When you make an IRA contribution of any kind during the tax year, the institution where you made the contribution is required to file Form 5498 with the IRS. You will also receive a copy and it should be kept with your tax records. It is usually right around now.
For a deductible IRA contribution, this filing “proves” to the IRS that you did indeed make the contribution for which you are getting a tax break.
For non-deductible IRA contributions, keeping track of the contributions you make is important because you don’t want to pay taxes on that portion (known as your cost basis) of the IRA again in the future.
The usual deadline for these filings is May 31st and you would receive your copy in June. Since the tax filing deadline was extended this year, they have until June 30th, so don’t be concerned if you don’t see it until July.
There is no action on your part other than to make sure it is accurate and keep it for your records.
Favorite Quote
This month I’m taking a proud auntie moment to congratulate my nephew Jimmy, who is Valedictorian of his Class of 2021 and off to West Point in just a few weeks. He gave an awesome speech to his Senior class this past weekend and used this quote from Mark Twain that I really loved:
“The two most important days in your life are the day you are born and the day you find out why.”