In a compelling tale of persistence and financial prudence, a Reddit user embarked on a unique investment experiment, demonstrating the potential rewards of consistently investing small amounts, or dollar cost averaging, into Bitcoin.
The Redditor, going by the handle u/Gorillahair2000, initiated an experiment to determine whether allocating just $5 per day into Bitcoin was a worthwhile endeavor, and over the course of one full year, diligently recorded their progress.
After 365 days of investing $5 per day, the Redditor accumulated a total stack of 0.075 Bitcoin. The average purchase price stood at $24,108.58, while the current price of Bitcoin was $34,158.20.
The total expenditure over the year amounted to $1,825.00, and the current value of the investment was $2,585.75, yielding a net change of +41.68%.
Accounting for Fees
The Redditor also noted that they accounted for the 0.5-1.0% spread on each of their purchases, meaning the gains remained after adjusting for fees. The user indicated that they buy with Strike, a popular Bitcoin Lightning wallet, and then withdraw the Bitcoin to a hardware wallet, in line with industry best practices.
In a year's time, they transformed the daily expense equivalent to a Starbucks coffee into $2,500 in current value, or a $750 gain.
The Power of Dollar-Cost Averaging
The experiment proves that even with a modest budget, investing in Bitcoin can yield significant returns, and it further demonstrates the power of dollar-cost averaging, a strategy that involves consistently purchasing assets at fixed intervals, regardless of their price, thereby mitigating the effects of market volatility.
Furthermore, the experiment highlights Bitcoin's main advantages as a sound money, one that doesn't depreciate like traditional savings vehicles tied to inflationary fiat currencies.
In conclusion, this experiment conducted by the Reddit user showcases the potential rewards of consistent and disciplined investment in Bitcoin, even with a small budget. It emphasizes the effectiveness of dollar-cost averaging as a strategy to mitigate market volatility and generate significant returns over time. Bitcoin's qualities as a sound and inflation-resistant form of money are further highlighted. So, whether you have a modest budget or ample resources, considering Bitcoin as part of your investment portfolio may prove to be a wise decision.
Frequently Asked Questions
How can I withdraw from a Precious metal IRA?
First, decide if it is possible to withdraw funds from an IRA. Make sure you have enough cash in your account to cover any fees, penalties, or charges that may be associated with withdrawing money from an IRA.
An IRA is not the best option if you don't mind paying a penalty for early withdrawal. Instead, open a taxable brokerage. If you choose this option, you'll also need to consider taxes owed on the amount withdrawn.
Next, you need to determine how much money is going to be taken out from your IRA. The calculation is influenced by several factors such as your age at withdrawal, the length of time you have owned the account and whether or not you plan to continue contributing to retirement plans.
Once you determine the percentage of your total saved money you want to convert into cash, then you need to choose which type IRA you will use. Traditional IRAs permit you to withdraw your funds tax-free once you turn 59 1/2. Roth IRAs have income taxes upfront, but you can access the earnings later on without paying additional taxes.
Once these calculations have been completed you will need to open an account with a brokerage. Most brokers offer free signup bonuses and other promotions to entice people to open accounts. However, a debit card is better than a card. This will save you unnecessary fees.
When it's time to make withdrawals from your precious-metal IRA, you'll need a place to keep your coins safe. Some storage areas will accept bullion, while others require you to purchase individual coins. Either way, you'll need to weigh the pros and cons of each before choosing one.
Bullion bars, for example, require less space as you're not 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 people prefer to keep coins safe in a vault. Others prefer to store them in a safe deposit box. Whichever method you choose, make sure you store your bullion safely so you can enjoy its benefits for years to come.
Which precious metal is best to invest in?
This question depends on how risky you are willing to take, and what return you want. Gold is a traditional haven investment. However, it is not always the most profitable. You might not want to invest in gold if you're looking for quick returns. You should invest in silver if you have the patience and time.
If you don’t desire to become rich quickly, gold may be your best option. If you want to invest in long-term, steady returns, silver is a better choice.
How much gold can you keep in your portfolio
The amount of capital required will affect the amount you make. Start small with $5k-10k. Then as you grow, you could move into an office space and rent out desks, etc. Renting out desks and other equipment is a great way to save money on rent. Rent is only paid per month.
You also need to consider what type of business you will run. My company is a website creator. We charge our clients about $1000-2000 per monthly depending on what they order. Consider how much you expect to make from each client, if you decide to do this kinda thing.
Freelance work is not likely to pay a monthly salary. The project pays freelancers. So you might only get paid once every 6 months or so.
So you need to decide what kind of income you want to generate before you know how much gold you will need.
I recommend starting with $1k-$2k in gold and working my way up.
Who has the gold in a IRA gold?
The IRS considers any individual who holds gold “a form of income” that is subject to taxation.
To be eligible for the tax-free status, you must possess at least $10,000 gold and have had it stored for at least five consecutive years.
Gold can be used to protect against inflation and price volatility. However, it is not a good idea to own gold if you don't intend 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.
A financial planner or accountant should be consulted to discuss your options.
What is a Precious Metal IRA and How Can You Benefit From It?
An IRA with precious metals allows you to diversify retirement savings into gold and silver, palladium, rhodiums, iridiums, osmium, or other rare metals. These are “precious metals” because they are hard to find, and therefore very valuable. These are good investments for your cash and will help you protect yourself from economic instability and inflation.
Precious metals are often referred to as “bullion.” Bullion refers simply to the physical metal.
You can buy bullion through various channels, including online retailers, large coin dealers, and some grocery stores.
A precious metal IRA allows you to invest directly in bullion, rather than buying stock shares. You'll get dividends each year.
Precious Metal IRAs don’t require paperwork nor have annual fees. Instead, you pay only a small percentage tax on your gains. You also have unlimited access to your funds whenever and wherever you wish.
How much is gold taxed under a Roth IRA
An investment account's tax is calculated based on the current value of the account, and not on what you paid originally. If you invest $1,000 into a mutual fund, stock, or other investment account, then any gains are subjected tax.
But if you put the money into a traditional IRA or 401(k), there's no tax when you withdraw the money. Only earnings from capital gains and dividends are subject to tax. These taxes do not apply to investments that have been held for more than one year.
The rules governing these accounts vary by state. For example, in Maryland, you must take withdrawals within 60 days after reaching age 59 1/2 . Massachusetts allows you to wait until April 1. New York allows you to wait until age 70 1/2. To avoid penalty fees, it is important to plan and take distributions in time to pay all your retirement savings.
How to open a Precious Metal IRA
It is important to decide if you would like an Individual Retirement Account (IRA). You must complete Form 8606 to open an account. You will then need to complete Form 5204 in order to determine which type IRA you are eligible. This form must be submitted within 60 days of the account opening. After this, you are ready to start investing. You can also contribute directly to your paycheck via payroll deduction.
For a Roth IRA you will need to complete Form 8903. Otherwise, the process will be identical to an ordinary IRA.
To be eligible for a precious metals IRA, you will need to meet certain requirements. The IRS states that you must be at least 18 and have earned income. Your annual earnings cannot exceed $110,000 ($220,000 if you are married and file jointly) for any tax year. Contributions must be made regularly. These rules apply whether you're contributing through an employer or directly from your paychecks.
You can invest in precious metals IRAs to buy gold, palladium and platinum. However, you won't be able purchase physical bullion. This means you won't be allowed to trade shares of stock or bonds.
Your precious metals IRA can be used to directly invest in precious metals-related companies. This option is offered by some IRA providers.
However, there are two significant drawbacks to investing in precious metals via an IRA. First, they are not as liquid or as easy to sell as stocks and bonds. This makes it harder to sell them when needed. They also don't pay dividends, like stocks and bonds. Therefore, you will lose money over time and not gain it.
- (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)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- 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)
- 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)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- Saddam Hussein's InvasionHelped Uncage a Bear In 90 – WSJ
- How do you keep your IRA Gold at Home? It's Not Exactly Legal – WSJ
- Gold IRA – Add Sparkle to Your Retirement Nest Egg
- Understanding China's Evergrande Crisis – Forbes Advisor
- Fraud Advisory: Precious Metals Fraud
By: Reed Macdonald
Title: The Power of Consistent Investment: A Reddit User's Bitcoin Experiment
Sourced From: bitcoinmagazine.com/markets/redditor-investing-5-into-bitcoin-every-day-for-1-year
Published Date: Mon, 30 Oct 2023 14:00:48 GMT