Bitcoin as a Store of Value and Hedge Against Monetary Debasement
The director of global macro at Fidelity, Jurrien Timmer, recently shared his outlook on bitcoin, describing it as a commodity currency that aims to be a store of value and a hedge against monetary debasement. In his view, bitcoin is like "exponential gold."
According to Timmer, gold tends to shine and gain market share relative to GDP during periods of structural regimes with high inflation, negative real rates, and excessive money supply growth. However, he believes that gold is too deflationary and clunky to be used as a medium of exchange. As a result, investors primarily own gold as a store of value, which is one of the reasons why bitcoin is often compared to gold.
Bitcoin's Correlation with Other Assets
When discussing bitcoin's correlation with other assets, Timmer noted that based on monthly data as of September, bitcoin still has a positive correlation with equities, although less so than many other assets. He suggests that in a 60/40 portfolio, bitcoin should be placed in the alternative assets bucket. However, he also mentioned that bitcoin is not negatively correlated with the S&P 500 or other assets.
Timmer further highlighted that bitcoin is negatively correlated with the U.S. dollar and T-bills, but surprisingly, it is uncorrelated with gold. While this challenges the idea that bitcoin and gold are on the same team, it is positive because it means that bitcoin and other alternative assets can offer diversification benefits.
Fidelity's Director of Global Macro on Bitcoin and Gold
Fidelity's director of global macro has expressed his belief that bitcoin has the potential to be "exponential gold." He sees bitcoin as a commodity currency that can serve as a store of value and a hedge against monetary debasement. While gold is often seen as a store of value, Timmer believes that it is too deflationary and impractical as a medium of exchange.
Regarding bitcoin's correlation with other assets, Timmer acknowledges that it still has a positive correlation with equities but less so than many other assets. He suggests that bitcoin should be included in the alternative assets bucket of a 60/40 portfolio. Despite not being negatively correlated with gold, Timmer sees this as an opportunity for diversification among alternative assets.
What are your thoughts on Fidelity's director of global macro's statements about bitcoin and gold? Let us know in the comments section below.
Frequently Asked Questions
Who owns the gold in a Gold IRA?
An individual who has gold is considered to be a “form of money” by the IRS and subject to taxation.
This tax-free status is only available to those who have owned at least $10,000 of gold and have kept it for at minimum five years.
The purchase of gold can protect you from inflation and price volatility. But it's not smart to hold it if your only intention is to use it.
If you are planning to sell your gold someday, it is necessary that you report its value. This can affect the capital gains taxes that you owe when cashing in on investments.
To find out what options you have, consult an accountant or financial planner.
What precious metals can you invest in for retirement?
The best precious metal investments are gold and silver. They're both easy to buy and sell and have been around forever. These are great options to diversify your portfolio.
Gold: Gold is one the oldest forms currency known to man. It's stable and safe. This makes it a good option to preserve wealth in uncertain times.
Silver: The popularity of silver has always been a concern for investors. It's a great option for those who want stability. Unlike gold, silver tends to go up instead of down.
Platinium: Another form of precious metal is platinum, which is becoming more popular. It's durable and resists corrosion, just like gold and silver. It's also more expensive than the other two.
Rhodium: Rhodium is used in catalytic converters. It's also used in jewelry making. It's also relatively inexpensive compared to other precious metals.
Palladium: Palladium, which is a form of platinum, is less common than platinum. It's also more accessible. For these reasons, it's become a favorite among investors looking to add precious metals to their portfolios.
Is it possible to hold a gold ETF within a Roth IRA
A 401(k) plan may not offer this option, but you should consider other options, such as an Individual Retirement Account (IRA).
Traditional IRAs allow for contributions from both employees and employers. Another option is to invest in publicly traded corporations with an Employee Stockownership Plan (ESOP).
An ESOP can provide tax advantages, as employees are allowed to share in company stock and the profits generated by the business. The money invested in the ESOP is then taxed at lower rates than if it were held directly in the hands of the employee.
A Individual Retirement Annuity is also possible. With an IRA, you make regular payments to yourself throughout your lifetime and receive income during retirement. Contributions to IRAs do not have to be taxable
What is the best way to hold physical gold?
Not just paper money or coins, gold is money. People have used gold as a currency for thousands of centuries to preserve their wealth and keep it safe from inflation. Investors today use gold to diversify their portfolios because gold is more resilient to financial turmoil.
Many Americans are now more inclined to invest in precious metals like gold and silver than stocks or bonds. Although owning gold does not guarantee that you will make money investing in it, there are many reasons to consider adding gold into your retirement portfolio.
Another reason is that gold has historically outperformed other assets in financial panic periods. The S&P 500 declined 21 percent during the same period. Gold prices increased nearly 100 per cent between August 2011 – early 2013. Gold was one of the few assets that performed better than stocks during turbulent market conditions.
Another advantage of investing in gold is that it's one of the few assets with virtually zero counterparty risk. You still have your shares even if your stock portfolio falls. However, if you have gold, your value will rise even if the company that you invested in defaults on its loans.
Finally, gold provides liquidity. You can sell your gold at any time without worrying about finding a buyer, which is a major advantage over other investments. It makes sense to buy small quantities of gold, as it is more liquid than other investments. This allows you to profit from short-term fluctuations on the gold market.
What Is a Precious Metal IRA?
An IRA with precious metals allows you to diversify retirement savings into gold and silver, palladium, rhodiums, iridiums, osmium, or other rare metals. These rare metals are often called “precious” as they are very difficult to find and highly valuable. These are good investments for your cash and will help you protect yourself from economic instability and inflation.
Precious metals are sometimes called “bullion.” Bullion refers actually to the metal.
You can buy bullion through various channels, including online retailers, large coin dealers, and some grocery stores.
You can invest directly in bullion with a precious metal IRA instead of buying shares of stock. This ensures that you will receive dividends each and every year.
Precious metal IRAs do not require paperwork nor annual fees, unlike regular IRAs. Instead, you only pay a small percentage on your gains. Plus, you can access your funds whenever you like.
How do you withdraw from an IRA that holds precious metals?
First, you must decide if you wish to withdraw money from your IRA account. You should also ensure that you have enough money to cover any fees and penalties associated with withdrawing funds.
Consider opening a taxable brokerage instead of an IRA if it is possible to pay a penalty if your withdrawal is made before the deadline. You will also have to account for taxes due on any amount you withdraw if you choose this option.
Next, you need to determine how much money is going to be taken out from your IRA. This calculation depends on several factors, including the age when you withdraw the money, how long you've owned the account, and whether you intend to continue contributing to your retirement plan.
Once you have an idea of the amount of your total savings you wish to convert into cash you will need to decide what type of IRA you want. Traditional IRAs allow you to withdraw funds tax-free when you turn 59 1/2 while Roth IRAs charge income taxes upfront but let you access those earnings later without paying additional taxes.
Once the calculations have been completed, it's time to open a brokerage accounts. Most brokers offer free signup bonuses and other promotions to entice people to open accounts. You can save money by opening an account with a debit card instead of a credit card to avoid paying unnecessary fees.
You will need a safe place to store your coins when you are ready to withdraw from your precious metal IRA. Some storage facilities can accept bullion bar, while others require you buy individual coins. Either way, you'll need to weigh the pros and cons of each before choosing one.
For example, storing bullion bars requires less space because you aren't dealing with individual coins. But you will have to count each coin separately. However, keeping individual coins in a separate place allows you to easily track their values.
Some prefer to store their coins in a vault. Some people prefer to store their coins safely in a vault. Regardless of the method you prefer, ensure that your bullion is safe so that you can continue to enjoy its benefits for many years.
How much should I contribute to my Roth IRA account?
Roth IRAs let you save tax on retirement by allowing you to deposit your own money. You can't withdraw money from these accounts before you reach the age of 59 1/2. There are some rules that you need to keep in mind if you want to withdraw funds from these accounts before you reach 59 1/2. You cannot touch your principal (the amount you originally deposited). This means that you can't take out more money than you originally contributed. If you are able to take out more that what you have initially contributed, you must pay taxes.
The second rule is that you cannot withdraw your earnings without paying income taxes. You will pay income taxes when you withdraw your earnings. Let's assume that you contribute $5,000 each year to your Roth IRA. Let's also say that you earn $10,000 per annum after contributing. This would mean that you would have to pay $3,500 in federal income tax. That leaves you with only $6,500 left. You can only take out what you originally contributed.
The $4,000 you take out of your earnings would be subject to taxes. You'd still owe $1,500 in taxes. In addition, 50% of your earnings will be subject to tax again (half of 40%). You only got back $4,000. Even though you were able to withdraw $7,000 from your Roth IRA,
There are two types if Roth IRAs, Roth and Traditional. A traditional IRA allows you to deduct pre-tax contributions from your taxable income. You can withdraw your contributions plus interest from your traditional IRA when you retire. There are no restrictions on the amount you can withdraw from a Traditional IRA.
A Roth IRA doesn't allow you to deduct your contributions. But once you've retired, you can withdraw the entire contribution amount plus any accrued interest. There is no minimum withdrawal amount, unlike traditional IRAs. You don't have to wait until you turn 70 1/2 years old before withdrawing your contribution.
Statistics
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
External Links
cftc.gov
bbb.org
finance.yahoo.com
wsj.com
- Saddam Hussein’s InvasionHelped Uncage a Bear In 1989 – WSJ
- How do you keep your IRA Gold at Home? It's Not Exactly Lawful – WSJ
How To
Tips for Investing in Gold
One of the most sought-after investment strategies is investing in gold. This is due to the many benefits of investing in gold. There are many options for investing in gold. Some people purchase physical gold coins. Others prefer to invest their money in gold ETFs.
Before you purchase any type or gold, here are some things to think about.
- First, find out if your country allows gold ownership. If your country allows you to own gold, then you are allowed to proceed. Otherwise, you can look into buying gold from abroad.
- Second, it is important to know which type of gold coin you are looking for. You can go for yellow gold, white gold, rose gold, etc.
- The third factor to consider is the price for gold. It is best to begin small and work your ways up. You should diversify your portfolio when buying gold. You should invest in different assets such as stocks, bonds, real estate, mutual funds, and commodities.
- You should also remember that gold prices can change often. Therefore, you have to be aware of current trends.
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By: Kevin Helms
Title: The Director of Global Macro at Fidelity Believes Bitcoin is “Exponential Gold”
Sourced From: news.bitcoin.com/financial-giant-fidelitys-director-sees-bitcoin-as-exponential-gold/
Published Date: Sun, 05 Nov 2023 04:30:17 +0000
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