A Framework for Making Decisions for Your Cryptocurrency IRA

The cryptocurrency IRA is becoming increasingly popular. This is in part due to the fact that cryptocurrencies such as bitcoin have been in the news a lot as of late, with their value rising tremendously. Additionally, since the Great Recession, people have started to take responsibility for their own financial future and they are looking above and beyond the traditional investment classes such as stocks, bonds, and options. Because cryptocurrency IRAs are relatively new, there is not much advice out there yet on how to properly manage it. This is why the following framework for decision-making may be of benefit.

A Cryptocurrency IRA Decision-Making Framework

There are a number of important questions you have to ask yourself before you decide what to invest in and how much money to use on that investment. Those questions include:

  1.  What risks are involved with your investment. You have to be completely honest and try your best to not be driven by emotions. Cryptocurrencies are exciting but that does not necessarily mean that they are good. You must be realistic about the risks involved with them, such as the fact that the sudden increase in value may be indicative of a bubble.
  2.  What the odds are of the risks happening. You need to find actual data on each risk that you have identified comma while also trying to speak to experts. Because cryptocurrency investments are relatively new, it can be quite difficult to determine the likelihood of a risk actually occurring, but you have to try as much as possible.
  3.  What potential rewards exist with your investment choice. As with the risks, you have to be realistic. A potential reward is that you buy a bitcoin and the value shoots up even more, allowing you to quit your day job and enjoy the easy life. Another potential reward is that you will be able to put your children through college, buy boat for your retirement, or enjoy that much desired vacation of life though.
  4.  What the odds are of the rewards happening. This is where it gets really difficult because you have just gotten excited about the possibilities. Looking at the above potential rewards, it is unlikely that you will be able to quit your day job by investing in a cryptocurrency. It is possible that you could put your kids through college or buy a boat. And if things continue the way they are, it is quite likely that you will be able to pay for that vacation.
  5.  Think about the other options that are available to you. This is all about diversification. A good investment portfolio has a lot of different investment included in it, rather than focusing solely on cryptocurrencies. You need to think about which other asset classes may be of interest to you.
  6.  Consider when you have to make decisions. You may not need to open your cryptocurrency IRA today. Or, if you do, you don’t have to yet set in stone what percentage of your overall investment will go towards cryptocurrencies.

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