Fidelity now allows clients to put bitcoins in IRAs
blogs.marketwatch.com
blogs.marketwatch.com
Here's a random Google result about the variety of bizarre funds out there: http://money.usnews.com/money/personal-finance/articles/2009...
edit: corrected my mistaken categorization of SecondMarket investment vehicle.
edit: invest in fine art (sorry, no funds open to new investment) - http://www.thefineartfund.com/index.php/en/products-and-serv...
edit: invest in vintage wines - http://www.wineinvestmentfund.com/index.aspx ... and so on.
Please don't play with more than you can afford to lose. It's bad for bitcoin, and a crash might be bad for you. If you can't afford to retire, society may compel others to help you. Please be responsible.
I'm not a tax lawyer: The tax-free nature of Roth IRAs might render some of the questions of bitcoin taxation less of a concern?
I've also started to wonder recently about the relationship between the gambling instinct and entrepreneurship. While there is obviously a distinction (entrepreneurs are often pursuing genuine passions and/or creating real value), when you look at the real-world risks and returns, it certainly seems to have a similarly irrational component, both for founders and investors. (Not that I'm judging; the line between genius and madness is a thin one.)
When considering investing in something like bitcoin, draw out a table of what you expect the outcome to be 10 years from now. Rows can be bitcoin price ranges (each row having what you believe is a roughly equal chance of happening), and columns can be how much you invested in it. Rate your expected happiness (use some scale -100 to 100?) from each result in each square. Keep in mind that if bitcoins reach a high number like $100,000 and you didn't invest, you will feel like you lost that money. (I feel this way now, from not investing previously - and it kills me. Happiness -25 maybe.)
The only logical thing to do, at this point, is pick the column that results in the highest happiness.
It turns out that for those of us who believe there's a reasonable likelihood (25% or greater) that bitcoins will be very high ($1 million or higher) over its lifetime, the logical thing to do is actually to put the vast majority of our savings into bitcoin. Nearly all of it, in fact.
If you have a sizable savings that you have been building for 5 or more years then the vast majority of your savings shouldn't be invested in any single asset.
The craziness is doing it with one asset and trying to maximize happiness based on assumptions about that asset and not with all possible alternative assets and trying to maximize overall happiness.
Well, one part of the craziness.
Really, what you should be doing is considering (1) overall returns of competing investments, (2) overall risk of competing investments, and (3) the degree to which those risks are independent, and (4) your own sensitivity to risk, and then combine assets and allocate investment funds among them so as to, achieve the maximum expected return possible with enough diversification to acheive a risk profile you are willing to accept.
Bitcoin (cryptocurrency) is different, because it hasn't been priced yet by investors who truly understand the technology or its implications. It's like the stock market for web companies in 1995. As an analogy, we're maybe in 1996 or 1997.
If you're gambling on the hope that all of M1 in the world will be replaced by Bitcoin and actually have come up with any sort of likelihood of that happening then you should reevaluate your ability to have ideas. In your case you think the likelihood is "25% or greater" which is to say you've got some probability distribution of probabilities -- that's not how reasoning about probability works in any high-functioning investing mind. Why can't you just collapse that to an actual percentage? Because it's all just made-up numbers.
If you get the numbers right, you will arrive at the same advice any financial advisor would give you: in something as novel and hard to price as bitcoin, only invest risk capital, defined as money you could lose in its entirety and still have a sound financial plan.
Fear and greed are emotions that Bitcoin will teach you about. Don't risk what you can't afford and are not willing to lose.
Maybe I should suffix this and say that I don't think Bitcoin is a bad investment. It has an enormous potential and I still fervently have "faith" that it's going to turn out being something extremely useful long-term, which is why I haven't "cashed out" yet. I'd also gladly trade my BTC for goods as and when stores come online that accept them (e.g. I would gladly trade BTC for second hand books)
You can see that it hit a black number 20 times in and feel remorse for not letting 10 dollars ride all of the way up to 10 million for that run. -25 happiness.
You are making the same mistake gamblers and amateur stock pickers make all of the time. It's really sad and it destroys lives and relationships depending on how many people you also convince this is a good deal.
But even if you played a special roulette wheel where your odds are fair (100% return), a loss of $X more than offsets a gain of $X because the more money you have, the less happy you feel from gaining a specific amount. Conversely, the less money you have, the worse you will feel about losing a flat amount. So playing a fair (50/50) roulette game is still a losing game, in terms of happiness.
By my estimates (I may be wrong about the estimates, but they're what I'm going by) - Bitcoin is completely different from roulette. It's more like you get to take one chance on a coin flip. Heads, you win some huge multiple (suppose 100x?) of your bet; tails you lose your bet. How much would you bet on this coin?
The only point to argue is what the odds of that coin flip are, and what you'll win if it lands favorably. You may think it's 2x. Others might think it's 10x or 1000x. I believe it will replace the speculation value of gold, so that puts it at a minimum of 350 times its current value. I also believe that it will do way more than replace gold, because of how convenient it is.
I also believe that it takes a long time (months to years) for people to understand how it works, and they won't invest until they understand it, so the current market value is far below these estimates.
Try to understand my logic here, and tell me if you still think it's totally unreasonable. I can't be convinced of different values. I am putting it at a 50% chance of getting to $500k/BTC in 15 years.
So I have a chance to flip this coin; 15 years from now it's 500x my bet or zero. How much should I bet on this coin if I really believe this is accurate?
This plan is based on the idea that there is an amount of money X that allows you to significantly change your life, while amounts below X merely give you incremental improvements. If that's not the case, the plan is obviously not for you. :)
Wealth tests ought to be just as illegal as other forms of discrimination.
Apparently, you can lie: http://www.quora.com/How-do-you-become-an-accredited-investo...
I suspect the bigger risk is that the buyer – the not-really-'accredited' – has some dispute with the company and sues, causing problems because the various assumptions-of-competence (that come with 'accredited' status) are then voided. It gives a bad-faith or disgruntled investor more leverage over the issuer.
It is better to forcefully stop rational people from risking their money, in an attempt to protect irrational people from making irrational decisions.
People who want to let the middle class take risks that could help them become wealthy are operating under the premise that this is supposed to be a free country---a premise that the country's elected and respected political leadership has wisely decided to adamantly ignore.
Who am I? I have no intent to judge, however, as the act was prompted not by fantasy, but by watching many, many investors get sold on bad deals via poor information. In fact, the event which led to this was considered one of the greatest financial disasters in the history of America.
So, you may be smart - and you may in fact be smarter than all of the swindlers who may try to take your money. I'd wager most who don't invest as a primary exercise aren't that smart (I only need to look back a couple of years), and I can't imagine how you'd propose to change a -means- test with an -abilities- test. Before you can invest in an oil well, should you be required to prove that you are above average in knowledge about the business of running oil wells?
To restate my point without sarcasm:
If somebody genuinely wants to risk their money as an investor, it's not in their self-interest for us to forbid them to do so. That is what they want to do. And it's also not in anyone else's self-interest to forbid them from doing it. Investment and entrepreneurship is what drives the economy.
More abstractly: There is no valid chain of logic that starts at perceptual reality and ends in the conclusion that we should forbid people from investing as they please.
I'm not claiming that this exhausts the topic---there are objections you can raise, but I believe I would always be able to answer them. (I've dedicated much of my life to these kinds of philosophical issues and have achieved a rare level of clarity on them, but I recognize that from your point of view, this is just an arbitrary assertion.)
So, you're saying Ponzi schemes should be legal?
The potential crime would be fraud - pretending a ponzi is a non-ponzi. With accurate disclosure, it's just an odd form of gambling where some late-entrants are still paying in, when there's no more chance to win.
When you engage in trade with someone, you are implicitly or explicitly authorizing them to come after you with the force of the law if you have intentionally deceived them.
Note that the government isn't, anyway, necessarily capable of policing Ponzi schemes, because it's not omniscient. Madoff was regulated by the SEC, which gave some of his investors false confidence.
Leveraging your residence 95% or more to speculate in your local real-estate market is favored by tax policy.
Equity investing, day-trading, and option investing are all available to non-accredited investors.
In all of these activities, your principal can go to zero very quickly, and will if you're overconfident and misinformed. How is private investment any more irrational or dangerous? Can't 'poor' people sometimes have excellent, inside information on a new business, or are only already-wealthy people informed and rational?
In the case of the Bitcoin Investment Trust, the effect of the accreditation-barrier is even more pernicious and counterproductive. There's no block against the poor owning Bitcoins - they can buy them in many ways. There's just a block against those Bitcoins being professionally secured, and getting the tax-advantages available in IRAs.
How are poor, irrational people protected by making them self-secure their Bitcoins while paying higher taxes on any gains?
If you want every body and their brother to invest with minimal restrictions: you register the security and create all of the disclosures. If you don't want to go through the effort of creating prospectus and accurately describing the risk, and requiring lots of sign-off from the investor? You limit yourself to the wealthy.
Those things the equity investor, day-trader, and optioneer may invest in are all registered securities with all information required by law filed and up-to-date.
I'm not arguing that poor people are irrational (that's a straw-man, and nothing in the laws have ever stated that poor people are irrational), and I find it offensive that you jump to this sort of polarizing attack rather than making a more substantive argument, as if to paint me as a person who thinks all poor people are dumb.
Now, we ask ourselves, how did this come to be the law of the land? Because people were regularly not disclosing all aspects of their investments to investors, and people, both rational and irrational, were regularly losing money they wouldn't have invested had they been given complete information as was known to the promoter of that investment.
However, many investors (quite rightly) balked at the idea that they could only invest in full-registered securities, so some test was created - it happened to be a means test. What would you replace with as a test for securities that do not require complete and accurate disclosure (which is what pretty much every early stage investment is)?
We've seen what that looks like: more disclosure. [0]
[0] http://boss.blogs.nytimes.com/2013/11/14/what-the-proposed-c...
Why would a tradeoff from 80 years ago be appropriate for today's wealthier, more informed era? And when the other competing ways that people can lose all their net worth (gambling, real-estate speculation, leveraged/optioned public-security speculation) are so much more available?
It's no longer serving a protective function... but that rationalization is still trotted out, out of habit and status-quo bias.
You implied irrationality among non-accredited investors, with your question, "how can you make a rational decision...?" Well, non-millionaires can be just as rational as millionaires, within these domains.
As a practical matter, firms can't just increase their disclosures and then accept investment from everyone. The costs and legal risks are too high - the regulations preclude non-millionaires from rationally accepting the same level of disclosure and disclaimers as millionaires are allowed. So less-wealthy people get locked out, by regulation-imposed costs.
The means-test is unjust discrimination, just like if a community said, "you may have the cash to pay the asking price for a house here, but we'll need to x-ray your personal finances to determine if you're really suitable for our community".
I would replace the means test with the same test required to buy a state lottery ticket: are you 18 and do you have the cash?
If compromise is required, I'd replace the means test with a means-oblivious competence-evaluation: do you understand the risks and instruments involved? Wealthy people – heirs, lottery winners, successful businesspeople – wouldn't get a free pass, they'd have to pass the same test. (That would help ensure that politically-influential wealthy people also lobby to keep the test from becoming too exclusionary.) Many kinds of certifications – like college degrees in business/economics/law or the standard tests that already exist to qualify people as a banker/lawyer/accountant/investment-adviser – should serve as adequate proof of competence. (For example, pass the 'Series 7' that allows you to recommend and manage investments for others, and we'll assume you can also invest for yourself.)
After all, who's more at risk from a shady private investment: a trustfunder 'accredited investor' or an MBA/CPA/licensed-investment-professional? Current law favors the trustfunder at the expense of the certified expert!
If even more compromise to paternalism is required, private-security investments could be subject to a proportion-of-net-worth test. For example, perhaps only 1/2 to 1/3 of net-worth could be placed in such securities. Or, only an amount that's less that that already saved in tax-advantaged retirement accounts (IRAs/501ks/etc).
Any of those standards make more sense than the "are you already rich?" test.
I don't think it's as awful as you make it out to be. I think the situation before it was passed into law was far, far worse for the prosperity of individuals than it has ever been after. But, that's just, you know, my opinion.
> You implied irrationality among non-accredited investors, with your question, "how can you make a rational decision...?" Well, non-millionaires can be just as rational as millionaires, within these domains.
No, I didn't, as I assume you're familiar with securities law, I would presume that you could see that I was contrasting registered securities with required disclosures, and unregistered securities with little or no disclosure. Perhaps I should've phrased the question instead as "How can you make a good decision when the other party is intentionally hiding relevant information from you?"
> If compromise is required, I'd replace the means test with a means-oblivious competence-evaluation:
That sounds awfully complex to codify. Who gets to write the questions? What happens when the subject is not previously coded up into a test? Endless questions.
What this all really boils down, what I'm getting from this, is that you feel that you're smarter than the average bear, and you feel that the rules are holding you back from really succeeding, so let's make some rules that you'll pass. That's not intended as a personal insult, that's just how it comes across.
> If even more compromise to paternalism is required, private-security investments could be subject to a proportion-of-net-worth test. For example, perhaps only 1/2 to 1/3 of net-worth could be placed in such securities. Or, only an amount that's less that that already saved in tax-advantaged retirement accounts (IRAs/501ks/etc).
Actually, that makes a lot more sense than anything else you've come up with, and more akin to my reading of the reasoning behind the means test. It has nothing to do with any one individual, but instead to avoid massive culling of the fortunes of the middle class at once and causing social unrest. If its more difficult for the masses to invest primarily in high risk investments that more often fail than succeed, then they will likely invest in lower-risk, or at least more well codified risk, which is more likely to achieve a more stable economy and reduce the risk of public upheaval. We have a lot of history in the unregulated investment markets to draw from in painting a picture of the potential future. Your assumption that people have more information now, readily available to them about the quality of investments with little or no disclosure is one I'd call into question. People in the 'teens certainly felt they had a lot more information about the quality of investments with little or no disclosure than they did in the early 1800's.
But, we have a stark difference of opinion. I never felt that the accredited investor test was holding me back from succeeding and making good investments. In fact, I've never found a rule that was really holding me back from succeeding, but that's just me, I guess.
Nor is a competence test complex: I already outlined a possible regime. Just reuse any college degree in a related field, or any existing related professional certification (CPA/Series7/Bar). More generally, simply saying that "whatever test applies to the rich, will also apply to the poor" will tend to work itself out. Regulators will figure out some protective test that the rich can tolerate, and that's good enough for the poor as well.
People are wealthier and more educated than ever before. More information about others' experiences is available at little cost. More people have incremental experience with similar instruments (such as public companies).
But most importantly, anyone who's stayed 'middle-class' has already resisted thousands of kinds of legal scams, some promoted by the government (like lotteries and home-ownership-at-all-costs) that could easily relieve them of all their money. "Massive culling of the fortunes of the middle class at once and causing social unrest" is a paranoid, fancifully unrealistic scenario. Some people would dabble in private-investing like they have with many other financially risky activities, and over time they'd either receive positive reinforcement for sustainable actions, or negative reinforcement for recklessness. Investing in the same sorts of deals as millionaires is not an unprecedented and magically addictive activity that the poor can't resist.
[1] http://www.sec.gov/answers/accred.htm
[2] http://www.institutionalinvestorsalpha.com/Article/3214072/S...
For instance, I know right now that I'd like to invest a chunk of cash into several VR companies. I can't, though, because I'm not accredited. I have to wait for their IPOs, which will happen way after everyone already finds out how much it's all worth.
Without accredited investor laws you would just pour tons and tons of dumb money into the system and the volume of scams would go way up.
This is not to say there are not rich people being conned, but when that happens it often does not bankrupt them because they are less likely to go all in on a single asset. Something people with poor money management skills want to do all the time.
And, 'dumb money' mainly gets smart by trial-and-error, and observing the lessons of peers. Locking all non-millionaires out of private investing prevents that process from even starting.
I wonder if this is hurtful in the long run -- thinking about bitcoin as something to stock away for retirement rather than a useful tool in transactions. Great for prices in the short term I guess.
The more mainstream investors come on, the more people will have a stake in BitCoin, the less single individuals can influence or manipulate the price, the more points of failure there are, the more stable it will be.
I have a fidelity IRA with risk spread across very risk-averse mutual funds with dependable year after year growth. For me, this will just be one more thing I can add to my already fairly stable IRA, shielded from taxes, which is great...
972 people control half of all bitcoins, right now.
What makes you think things will get better?
source: http://www.businessinsider.com/927-people-own-half-of-the-bi...
How many people do you think are spending their coins vs how many are holding them hoping they will be worth more?
In my opinion the word "currency" is about as stupid as that thing in your pocket people still keep calling a "phone". It's best approximated legacy words we have to express ideas about something which it doesn't entirely fit. More interesting, for me, is a comment I read on HN a few days back where someone said "I could be carrying a million dollars on this thumb drive and no one would even know.", a distributed ledger, the script language in the bitcoin protocol, etc. these things transcend the word "currency" as we ordinarily use it.
As with life.
Anyone know the symbol?
I'm pretty sure satoshi created btc to make a ton of money. All ideological attachments to that endeavor seem to have been added by other people who may or may not understand his/their motivation.
Is there any feasible way to get any BTC when I only have my home couple of machines (none of which are GPU giants)?
Mining bitcoin without special purpose hardware is pointless. Your best bet would be to predict whatever copycat was going to get popular and have mined some of it before that happened (but this isn't a simple prediction to get right...). Then you can probably trade those for bitcoin.