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Many investors are pouring their cash into crypto — with the youngest segment making up the majority.
A recent survey by Select and Dynata found that nearly half (45%) of 18- to 34-year-olds say they have purchased crypto. They represent the greatest share of crypto investors, followed closely by 37% of 35- to 44-year-olds. Meanwhile, only 11% of 55- to 64-year-olds and a mere 4% of 65+ investors are buying into the digital currency fad.
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Investors may purchase coins for various reasons, whether it’s with hope of turning a quick profit, the potential for long-term growth or just to get in on the excitement. Some young investors, however, are choosing crypto over investing for their retirement. And herein lies the problem.
The same survey found that 44% of investors who have less than $10,000 in investable assets are currently investing in crypto, but only 26% have a 401(k) or 403(b) and 17% have an IRA.
While cryptocurrencies can certainly be fun, short-term investments, Lindsey Bell, chief markets and money strategist at Ally Invest, doesn’t recommend putting a substantial portion of your portfolio into these assets or forfeiting your retirement fund.
“Investing for the long term should always take precedence over investing for the short term,” she says. “The advantages of a 401(k) or IRA, including a company match, should be pursued before allocating short-term, fun money.”
Here’s what to consider
Tony Molina, a CPA and product evangelist at Wealthfront (the first robo-advisor to offer crypto access — up to 10% of your portfolio), agrees that the eagerness to join the crypto craze shouldn’t get in the way of building long-term wealth for retirement. And it’s even more important if your employer offers a 401(k) contribution match (hey, that’s essentially free money).
But saving for retirement doesn’t need to mean missing out on crypto if that’s something you’re really excited about, Molina says. If you have a 401(k), he recommends you contribute at least up to the amount your employer will match and then think about buying crypto with the extra funds you have leftover. For example, if your company matches up to 6% of your salary, contribute 6% so you’re first doubling what you’re able to put away before you’re strategizing investing elsewhere.
“I’d encourage investors to think of cryptocurrency as one type of asset class they could include in their long-term, wealth-building strategy,” Molina adds. “Crypto shouldn’t necessarily be the main focus of your strategy because of the uncertainty and risk involved, but it can fit into your portfolio overall.”
Crypto investing, though easily accessible through finance apps like Square’s Cash App and PayPal, comes with risks. Most cryptocurrencies and crypto tokens see significant price volatility, which is why it’s seen as a risky choice for many retail investors.
“While it’s easy to get caught up in the hype and potential instant gratification of crypto or other hot asset classes, it’s important to remain grounded in reality as well,” Bell says. “These types of assets are very volatile, and while they are becoming more mainstream, the future around growth and regulation remains uncertain.”
“An IRA is a great option for saving for retirement because you have a lot of control over what you’re invested in, you may be eligible for some great tax breaks and you can open an account on your own without relying on your employer,” Molina says.
You can find IRA options offered through many national banks, investment firms, online brokers and robo-advisors. Select narrowed down those offering the best IRAs for all types of investors, as well as the best Roth IRAs for growing your money tax-free. Charles Schwab, Fidelity Investments and Betterment made both rankings.
Bottom line
Whether you want to invest in cryptocurrency because it has performed well in the past or because you feel pressure seeing everyone else do it, it’s important to first prioritize your retirement funds. Crypto’s past performance doesn’t necessarily mean it will continue to do well in the future, and FOMO isn’t a solid reason to get involved, warns Molina.
Investors curious about crypto can get the best of both worlds by first contributing enough to their 401(k) to meet an employer’s match, if offered, or funneling funds into an IRA. If you have extra money, then consider buying crypto but make sure you know what you’re getting into beforehand and don’t allocate more than 10% of your portfolio to these risky investments. Remember, diversification is key to a successful investing portfolio.
“Before you go all in on any investment, especially a riskier asset like crypto, make sure you have a logical argument for why you believe that investment will increase in value over time,” Molina adds.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
