Bitcoin skeptics often argue that bitcoin lacks intrinsic value, stating that investments like real estate, with their tangible cash flows, are superior.
The Myth of Intrinsic Value
The idea that objects have inherent value is a misconception. Influenced by the labor theory of value (LTV), this belief misinterprets how value is perceived in the economy. The concept of intrinsic value, tied to labor or output, is flawed.
Subjectivity of Value
In a free market, value is subjective, determined by individual perception rather than inherent qualities. Understanding this subjectivity is crucial in evaluating assets like bitcoin and real estate.
Bitcoin's Value Proposition
Bitcoin's value comes from the protection the network provides to stored value and its scarcity. The limited supply and network security drive demand for bitcoin.
Real Estate's Value Proposition
Real estate's high valuation is more about scarcity and inflation hedging than immediate cash flow generation. The correlation between housing prices and the money supply reflects this.
Real Estate vs. Bitcoin
Real estate's popularity is influenced by monetary inflation, leading to investments in scarce assets like real estate. Bitcoin's advantages as a store of value surpass those of real estate.
Bitcoin vs Fiat
Real estate offers advantages in the fiat system but faces competition from bitcoin as a store of value. Bitcoin's scarcity and resilience against inflation make it a compelling option.
The Recalibration of the Cash Flow Investment Thesis on a Fiat Standard
Bitcoin's role as a digital scarce asset is increasingly valuable in the face of fiat inflation. It offers a secure store of value without reliance on cash flow.
The Revaluation of Real Estate on a Bitcoin Standard
Real estate faces regulatory and physical degradation risks, unlike bitcoin, which provides a secure and transferable store of value. Bitcoin challenges real estate's dominance as a store of value.
Conclusion
As bitcoin emerges as a new form of value preservation, the narrative around cash flow and intrinsic value in investments is evolving. Bitcoin offers a glimpse into the future of finance, shaping how we approach investment and wealth preservation in the digital era.
Frequently Asked Questions
Is buying gold a good retirement plan?
Although it may not look appealing at first, buying gold for investment is worth considering when you consider the global average gold consumption per year.
The best form of investing is physical bullion, which is the most widely used. There are other ways to invest gold. It's best to thoroughly research all options before you make a decision.
If you don’t need a safe place for your wealth, then buying shares of mining companies or companies that extract it might be a better alternative. If you need cash flow from an investment, purchasing gold stocks is a good choice.
ETFs allow you to invest in exchange-traded funds. These funds give you exposure, but not actual gold, by investing in gold-related securities. These ETFs typically include stocks from gold miners, precious metallics refiners, commodity trading companies, and other commodities.
How much of your portfolio should you hold in precious metals
This question can only be answered if we first know what precious metals are. Precious metals refer to elements with a very high value relative other commodities. This makes them valuable in investment and trading. Gold is by far the most common precious metal traded today.
However, many other types of precious metals exist, including silver and platinum. The price for gold is subject to fluctuations, but stays relatively stable in times of economic turmoil. It is also unaffected significantly by inflation and Deflation.
In general, all precious metals have a tendency to go up with the market. They do not always move in the same direction. If the economy is struggling, the gold price tends to rise, while the prices for other precious metals tends to fall. This is because investors expect lower rates of interest, which makes bonds less attractive investments.
In contrast, when the economy is strong, the opposite effect occurs. Investors want safe assets such Treasury Bonds and are less inclined to demand precious metals. These precious metals are rare and become more costly.
It is important to diversify your portfolio across precious metals in order to maximize your profit from precious metals investments. Because precious metals prices are subject to fluctuations, it is best to invest across multiple precious metal types, rather than focusing on one.
Should You Buy or Sell Gold?
In the past, gold was considered a haven for investors during economic turmoil. Today, many people are looking to precious metals like gold and avoiding traditional investments like bonds and stocks.
The trend for gold prices has been upward in recent years but they still remain low relative to other commodities like silver and oil.
Some experts think that this could change in the near future. They say that gold prices could rise dramatically with another global financial crisis.
They also pointed out that gold is gaining popularity due to its perceived value, and potential return.
Consider these things if you are thinking of investing in gold.
- Consider first whether you will need the money to save for retirement. You can save for retirement and not invest your savings in gold. The added protection that gold provides when you retire is a good option.
- Second, be sure to understand your obligations before you purchase gold. Each account offers different levels of security and flexibility.
- Finally, remember that gold doesn't offer the same level of safety as a bank account. You may lose your gold coins and never be able to recover them.
You should do your research before buying gold. Make sure to protect any gold you already own.
What are the pros and disadvantages of a gold IRA
An Individual Retirement Account is a more beneficial option than regular savings accounts. You don't pay taxes on any interest earned. An IRA is a great way to save money and not have to pay taxes on the interest you earn. However, there are also disadvantages to this type of investment.
You could lose all of your accumulated money if you take out too much from your IRA. The IRS may prevent you from taking out your IRA funds until you reach 59 1/2. If you do withdraw funds, you'll need to pay a penalty.
A disadvantage to managing your IRA is the fact that fees must be paid. Many banks charge between 0.5% and 2.0% per year. Other providers may charge monthly management fees, ranging between $10 and $50.
Insurance is necessary if you wish to keep your money safe from the banks. Most insurers require you to own a minimum amount of gold before making a claim. You might be required to buy insurance that covers losses up to $500,000.
If you choose to have a gold IRA you will need to establish how much gold to use. Some providers restrict the amount you can own in gold. Some providers allow you to choose your weight.
You'll also need to decide whether to buy physical gold or futures contracts. The price of physical gold is higher than that of gold futures. Futures contracts provide flexibility for purchasing gold. They allow you to set up a contract with a specific expiration date.
You will also have to decide which type of insurance coverage is best for you. The standard policy does NOT include theft protection and loss due to fire or flood. However, it does cover damage caused by natural disasters. If you live in a high-risk area, you may want to add additional coverage.
In addition to insurance, you'll need to consider the cost of storing your gold. Insurance won't cover storage costs. In addition, most banks charge around $25-$40 per month for safekeeping.
Before you can open a gold IRA you need to contact a qualified Custodian. Custodians keep track of your investments and ensure compliance with federal regulations. Custodians can't sell assets. Instead, they must keep your assets for as long you request.
Once you've decided which type of IRA best suits your needs, you'll need to fill out paperwork specifying your goals. Your plan should include information about the investments you want to make, such as stocks, bonds, mutual funds, or real estate. It is also important to specify how much money you will invest each month.
After completing the forms, send them along with a check or a small deposit to your chosen provider. The company will then review your application and mail you a letter of confirmation.
Consider consulting a financial advisor when opening a golden IRA. Financial planners have extensive knowledge in investing and can help determine the best type of IRA to suit your needs. They can help you find cheaper insurance options to lower your costs.
Should You Invest in Gold for Retirement?
It depends on how much you have saved and if gold was available at the time you started saving. You can invest in both options if you aren't sure which option is best for you.
Gold offers potential returns and is therefore a safe investment. Retirement investors will find gold a worthy investment.
Most investments have fixed returns, but gold's volatility is what makes it unique. This causes its value to fluctuate over time.
However, it doesn't necessarily mean that you shouldn't invest your money in gold. It just means that you need to factor in fluctuations to your overall portfolio.
Another advantage of gold is its tangible nature. Unlike stocks and bonds, gold is easier to store. It's also portable.
You can always access your gold as long as it is kept safe. Physical gold is not subject to storage fees.
Investing in gold can help protect against inflation. Gold prices are likely to rise with other commodities so it is a good way of protecting against rising costs.
You'll also benefit from having a portion of your savings invested in something that isn't going down in value. Gold tends to rise when the stock markets fall.
Another advantage to investing in gold is the ability to sell it whenever you wish. Like stocks, you can sell your position anytime you need cash. You don't even need to wait for your retirement.
If you do decide to invest in gold, make sure to diversify your holdings. Do not put all your eggs in one basket.
Don't purchase too much at once. Start with a few ounces. Then add more as needed.
Keep in mind that the goal is not to quickly become wealthy. It is to create enough wealth that you no longer have to depend on Social Security.
While gold may not be the best investment, it can be a great addition to any retirement plan.
How Much of Your IRA Should Include Precious Metals?
When investing in precious metals, the most important thing to know is that they aren't just for wealthy people. You don't have to be rich to invest in them. There are many methods to make money off of silver and gold investments.
You might think about buying physical coins such a bullion bar or round. Stocks in companies that produce precious materials could be purchased. Another option is to make use of the IRA rollover programs offered by your retirement plan provider.
You can still get benefits from precious metals regardless of what choice you make. They offer the potential for long-term, sustainable growth even though they aren’t stocks.
They also tend to appreciate over time, unlike traditional investments. If you decide to make a sale of your investment in the future, you will likely realize more profit than with traditional investments.
Statistics
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- 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)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
External Links
investopedia.com
- Are You a Good Candidate for a Gold IRA
- What are the Options? Types, Spreads and Example. Risk Metrics
bbb.org
forbes.com
- Gold IRA, Add Sparkle to Your Retirement Nest egg
- Understanding China's Evergrande Crisis – Forbes Advisor
wsj.com
- Saddam Hussein's Invasion Helped Uncage a Bear In 1990 – WSJ
- Want to Keep Gold in Your IRA at Home? It's Not Exactly Legal – WSJ
How To
The growing trend of gold IRAs
Investors seek diversification and protection against inflation by using gold IRAs.
Gold IRA owners can now invest in physical gold bullion or bars. It can be used for tax-free growth and provides an alternative investment option for those concerned about stocks and bonds.
A gold IRA allows investors to manage their assets without worrying about market volatility. Investors can protect themselves from inflation and other possible problems by using the gold IRA.
Investors also benefit from physical gold's unique properties, such as durability and portability.
Additional benefits of the gold IRA include the ability to quickly pass ownership to heirs. Additionally, the IRS does not consider gold a money or a commodity.
All this means that the gold IRA is becoming increasingly popular among investors seeking a haven during financial uncertainty.
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By: Leon Wankum
Title: Dismantling The Cash-flow Narrative: Real Estate vs. Bitcoin
Sourced From: bitcoinmagazine.com/markets/dismantling-the-cash-flow-narrative-real-estate-vs-bitcoin
Published Date: Tue, 21 May 2024 17:00:00 GMT
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