Introduction
In a captivating tale of persistence and financial prudence, a Reddit user by the name of u/Gorillahair2000 embarked on a unique investment experiment to showcase the potential rewards of consistently investing small amounts into Bitcoin. This experiment aimed to determine whether allocating just $5 per day into Bitcoin was a worthwhile endeavor. Over the course of one full year, the Redditor diligently recorded their progress, providing valuable insights into the effectiveness of dollar cost averaging.
The Experiment
For 365 days, the Redditor invested $5 per day into Bitcoin, resulting in a total stack of 0.075 Bitcoin. The average purchase price throughout the year stood at $24,108.58, while the current price of Bitcoin at the end of the experiment was $34,158.20.
Financial Results
Throughout the year-long experiment, the Redditor's total expenditure amounted to $1,825.00. However, the current value of their investment stood at $2,585.75, yielding a net change of +41.68%. These results indicate a significant return on investment, showcasing the potential gains that can be achieved through consistent, small investments in Bitcoin.
Accounting for Fees
The Redditor made a note of accounting for the 0.5-1.0% spread on each of their purchases, ensuring that the gains remained after adjusting for fees. To make their purchases, the user utilized Strike, a popular Bitcoin Lightning wallet, and then securely withdrew the Bitcoin to a hardware wallet, adhering to industry best practices.
Transforming Expenses into Value
By transforming the daily expense equivalent to a Starbucks coffee into an investment, the Redditor was able to accumulate $2,500 in current value over the course of a year. This represents a gain of $750, highlighting the potential for significant returns even with a modest budget.
The Power of Dollar-Cost Averaging
This experiment showcases the power of dollar-cost averaging, a strategy that involves consistently purchasing assets at fixed intervals, regardless of their price. By employing this strategy, the Redditor mitigated the effects of market volatility and was able to achieve impressive returns on their investment in Bitcoin.
Bitcoin as Sound Money
This experiment also underscores Bitcoin's main advantages as a sound form of money. Unlike traditional savings vehicles tied to inflationary fiat currencies, Bitcoin does not depreciate over time. This highlights its potential as a reliable store of value and an effective hedge against inflation.
Conclusion
The year-long investment experiment by u/Gorillahair2000 serves as a testament to the potential rewards of consistent, small investments in Bitcoin. It demonstrates that even with a modest budget, investing in Bitcoin can yield significant returns. Moreover, it highlights the power of dollar-cost averaging as a strategy to mitigate market volatility. As Bitcoin continues to establish itself as a sound form of money, more individuals may consider harnessing its potential for long-term wealth accumulation.
Frequently Asked Questions
Should You Purchase Gold?
In the past, gold was considered a haven for investors during economic turmoil. Many people are now turning their backs on traditional investments like stocks and bonds, and instead look to precious metals like Gold.
Gold prices have been on an upward trend over recent years, but they remain relatively low compared to other commodities such as oil and silver.
Some experts think that this could change in the near future. Experts predict that gold prices will rise sharply in the wake of another global financial collapse.
They also mention that gold is becoming more popular due to its perceived worth and potential return.
These are some important things to remember if your goal is to invest in gold.
- First, consider whether or not you need the money you're saving for retirement. You can save for retirement and not invest your savings in gold. However, when you retire at age 65, gold can provide additional protection.
- Second, be sure to understand your obligations before you purchase gold. Each offers varying levels of flexibility and security.
- Don't forget that gold does not offer the same safety level as a bank accounts. It is possible to lose your gold coins.
So, if you're thinking about buying gold, make sure you do your research first. And if you already own gold, ensure you're doing everything possible to protect it.
Do you need to open a Precious Metal IRA
Precious metals are not insured. This is the most important fact to know before you open an IRA account. If you lose money in your investment, nothing can be done to recover it. This includes all investments that are lost to theft, fire, flood, or other causes.
Investing in physical gold and silver coins is the best way to protect yourself from this type of loss. These items can be lost because they have real value and have been around for thousands years. You would probably get more if you sold them today than you paid when they were first created.
If you decide to open an IRA account, choose a reputable company that offers competitive rates and products. It's also wise to consider using a third-party custodian who will keep your assets safe while giving you access to them anytime.
If you decide to open an account, remember that you won't see any returns until after you retire. Keep your eyes open for the future.
Can I own a gold ETF inside a Roth IRA
While a 401k may not offer this option for you, it is worth considering other options, such an Individual Retirement Plan (IRA).
Traditional IRAs allow for contributions from both employees and employers. A Employee Stock Ownership Plan, or ESOP, is another way to invest publicly traded companies.
An ESOP provides tax advantages because employees share ownership of company stock and profits the business generates. The money in the ESOP can then be subject to lower tax rates than if the money were in the individual's hands.
You can also get an Individual Retirement Annuity, or IRA. An IRA allows you to make regular payments throughout your life and earn income in retirement. Contributions to IRAs will not be taxed
Is gold a good investment IRA option?
For anyone who wants to save some money, gold can be a good investment. It is also an excellent way to diversify you portfolio. There is much more to gold than meets your eye.
It's been used as a form of payment throughout history. It is often called “the oldest currency in the world.”
But gold, unlike paper currency, which is created by governments, is mined out from the ground. It is very valuable, as it is rare and hard to create.
The price of gold fluctuates based on supply and demand. If the economy is strong, people will spend more money which means less people can mine gold. The value of gold rises as a consequence.
The flip side is that people tend to save money when the economy slows. This results in more gold being produced, which drives down its value.
This is why it makes sense to invest in gold for individuals and companies. If you have gold to invest, you will reap the rewards when the economy expands.
Also, your investments will earn you interest which can help increase your wealth. In addition, you won’t lose any money if gold falls in value.
What are the benefits of having a gold IRA?
It is best to put your retirement money in an Individual Retirement Account (IRA). You can withdraw it at any time, but it is tax-deferred. You can decide how much money you withdraw each year. And there are many different types of IRAs. Some are better for those who want to save money for college. Some are better suited for investors who want higher returns. Roth IRAs permit individuals to contribute after the age 59 1/2. Any earnings earned at retirement are subject to tax. However, once they begin withdrawing funds, these earnings are not taxed again. This account is a good option if you plan to retire early.
Because you can invest money in many asset classes, a gold IRA works similarly to other IRAs. Unlike a regular IRA which requires taxes to be paid on gains as you wait to withdraw them, a IRA with gold allows you to invest in multiple asset classes. For people who would rather invest than spend their money, gold IRA accounts are a good option.
An additional benefit to owning gold through an IRA, is the ease of automatic withdrawals. It means that you don’t have to remember to make deposits every month. To ensure that you never miss a payment, you could set up direct debits.
Finally, gold is one the most secure investment options available. It is not tied to any country so its value tends stay steady. Even during economic turmoil the gold price tends to remain fairly stable. This makes it a great investment option to protect your savings from inflation.
How do I Withdraw from an IRA with Precious Metals?
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.
If you are willing to pay a penalty for early withdrawal, you should consider opening a taxable brokerage account instead of an IRA. 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 is dependent on several factors like your age when you take the money out, how long you have had the account, and whether or not your plan to continue contributing.
Once you know what percentage of your total savings you'd like to convert into cash, you'll need to determine which type of IRA you want to use. Traditional IRAs let you withdraw money tax-free after you turn 59 1/2, while Roth IRAs require you to pay income taxes upfront but allow you access the earnings later without paying any additional taxes.
Once you have completed these calculations, you need to open your brokerage account. Many brokers offer signup bonuses or other promotions to encourage people to open accounts. It is better to open an account with a debit than a creditcard in order to avoid any unnecessary fees.
When you do finally decide to withdraw from your precious metallic IRA, you will need a safe space where you can safely store your coins. Some storage facilities can accept bullion bar, while others require you buy individual coins. You will need to weigh each one before making a decision.
Because you don't have to store individual coins, bullion bars take up less space than other items. But, each coin must be counted separately. However, you can easily track the value of individual coins by storing them in separate containers.
Some people like to keep their coins in vaults. Others prefer to place them in safe deposit boxes. You can still enjoy the benefits of bullion for many years, regardless of which method you choose.
How does a gold IRA work?
Individuals who want to invest with precious metals may use the Gold Ira accounts, which are tax-free.
You can buy physical gold bullion coins at any time. To invest in gold, you don't need to wait for retirement.
The beauty of owning gold as an IRA is you can hold on to it forever. You won't have to pay taxes on your gold investments when you die.
Your gold is passed to your heirs without capital gains tax. Your gold is not part of your estate and you don't have to include it in the final estate report.
You'll first have to set up an individual retirement account (IRA) to open a gold IRA. Once you've completed this step, an IRA administrator will be appointed to your account. This company acts as a middleman between you and the IRS.
Your gold IRA custodian can handle all paperwork and submit necessary forms to IRS. This includes filing annual reports.
Once your gold IRA is established, you can purchase gold bullion coins. Minimum deposit required is $1,000 A higher interest rate will be offered if you invest more.
When you withdraw your gold from your IRA, you'll pay taxes on it. If you're withdrawing the entire balance, you'll owe income taxes plus a 10 percent penalty.
However, if you only take out a small percentage, you may not have to pay taxes. There are some exceptions, though. If you take out 30% of your total IRA assets or more, you will owe federal income taxes and a 20 percent penalty.
It is best to not take out more than 50% annually of your total IRA assets. If you do, you could face severe financial consequences.
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)
- 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)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.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)
External Links
bbb.org
cftc.gov
investopedia.com
finance.yahoo.com
How To
Online buying gold and silver is the best way to purchase it.
Before you can buy gold, it is important to understand its workings. Gold is a precious metallic similar to Platinum. It's rare and often used to make money due its resistance and durability to corrosion. It's difficult to use, so most people prefer purchasing jewelry made from it rather than actual bars.
There are two types today of gold coins. One is legal tender while the other is bullion. Legal tender coins are those that are intended for circulation in a country. They typically have denominations of $1, $5 or $10.
Bullion coin are not intended for investment. However, their value will increase with inflation.
They cannot be used in currency exchanges. For example, a person who buys $100 worth or gold gets 100 grams. This gold has a $100 price. For every dollar spent, the buyer gets 1 gram of Gold.
Next, you need to find out where to buy gold. There are a few options if you wish to buy gold directly from a dealer. First, your local currency shop is a good place to start. You might also consider going through a reputable online seller like eBay. Finally, you can look into purchasing gold through private sellers online.
Private sellers are individuals who offer gold for sale, either at wholesale prices or retail prices. Private sellers typically charge 10% to 15% commission on each transaction. Private sellers will typically get you less than a coin shop, eBay or other online retailers. However, this option is often a great choice when investing in gold since it gives you more control over the item's price.
An alternative option to buying gold is to buy physical gold. You can store physical gold much more easily than you can with paper certificates. However, it still needs to be safe. It is important to keep your physical gold safe in an impenetrable box such as a vault, safety deposit box or other secure container.
You can either visit a bank, pawnshop or bank to buy gold. A bank can offer you a loan for the amount that you need to buy gold. These are small businesses that let customers borrow money against the items they bring to them. Banks typically charge higher interest rates than pawn shops.
Finally, another way to buy gold is to simply ask someone else to do it! Selling gold is also easy. A company such as GoldMoney.com can help you set up a simple bank account and get paid immediately.
—————————————————————————————————————————————————————————————–
By: Reed Macdonald
Title: The Power of Consistent Investment: A Year-long Experiment with Bitcoin
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
