3 Easy Ways to (Properly) Invest in Crypto

We're diving farther into our digital asset theme this week with some actionable steps to take if you've wanted to invest in the space, but aren't sure how.

Digital assets have been one of the most popular investments in recent years.

But there's still a lot of confusion about how to invest in them so today, we're diving into the 3 easiest ways to actually buy and invest in crypto.


The easiest way to purchase crypto: Coinbase

For starters, it doesn't get easier than Coinbase.

Setting up an account is just like setting up an online bank account - you'll have to enter in your contact info, go through ID verification, and link your bank account to get your account fully set up and ready to go.

Coinbase has over 50 different tokens available to invest in - including bitcoin and ether.

Of course, you need to take your own situation and risk tolerance into account before deciding to invest in crypto, but once you do, getting started on Coinbase is one of the easiest options out there.

Now, after you invest in crypto, you have two options on what to do with the crypto you own:

1. Leave it on the Coinbase exchange
or
2. Move it to an external wallet

If you only have a few hundred dollars invested, it's okay to leave your tokens on the Coinbase exchange.

Once you have more than $500-1,000 invested, it's recommended to get a hardware (hard) wallet.

Why?

Because using a hard wallet is the most secure way to hold & store crypto. Leaving it on the exchange is fairly secure, but because exchanges are such large companies, they become targets for hackers. If Coinbase was to be hacked, any crypto you hold on the exchange is vulnerable.

This is why most crypto investors store their holdings on their own hard wallet.

The two most popular hard wallets are Ledger and Trezor.

Also read: A Guide to Buying & Safely Holding Your First Crypto

If you want to transact with your crypto, like buying NFTs or sending someone money, it's recommended to have a hot (soft) wallet.

The nice thing with Coinbase is that they also have a separate, non-custodial hot wallet you can use.

It's a separate app from the exchange and has different functionalities.

Honorable mentions for exchanges: Gemini, BlockFi


The easiest way to invest in crypto for retirement: AltoIRA

IRA's (Individual Retirement Accounts) are one of the most tax-efficient places to invest in crypto.

How come?

Because in a standard crypto account, every time you make a trade or sell crypto, you get taxed.

But if you buy and sell crypto in an IRA, you don't get taxed.

Because funds in an IRA are either tax-free or tax-deferred, any time you make profitable trades within an IRA, you don't have to report those gains.

This is a HUGE deal for regular crypto investors.

That one feature can save thousands of dollars in taxes.

And not only do you get a tax break when trading, but if you invest in a Roth IRA, all of the gains you make throughout your life will be completely tax-free at retirement.

Another huge advantage.

Alto Crypto IRA is one of the most popular choices for alternative IRAs.

Now, there are two types of IRA: Roth and Traditional

For Roth IRAs, you contribute after-tax money and at retirement, you can withdraw the money tax-free.

You can also withdraw your contributions (not any earnings) at any time without penalty because they would already have been taxed when you made the contribution.

So it's almost like a glorified savings account that can be invested in the stock market - pretty cool.

In 2022, Roth IRAs have income limits of $144,000 for individuals and $214,000 for those who are married and file jointly.

For those who exceed those income limits, a backdoor Roth IRA conversion can be used to take advantage of the Roth's tax benefits. It's recommended to talk with a tax advisor or financial planner before completing a backdoor Roth IRA.

For Traditional IRAs, you can receive a tax deduction on contributions in the current year and then at retirement, you have to pay taxes on withdrawals.

View 2022 Traditional IRA income limits

If you think you'll be in a higher tax bracket at retirement or that tax rates in general will go up over time, a Roth IRA might make the most sense so you can pay taxes at today's rate and no taxes in the future.

Both accounts have annual contribution limits of $6,000 (or $7,000 if over age 50)


The easiest way to buy and hold bitcoin: Swan Bitcoin

If you want to buy bitcoin only, it doesn't get easier than Swan Bitcoin.

Setting up an account is quick and once it's created, you can set up automated (or manual) investments.

For example, if you wanted to invest $200 into bitcoin every month, you could set an automated deposit from your bank account and never have to worry about it. The money would automatically get pulled from your account every month and it would buy bitcoin at the current price.

Here's an example:

You can also set up automated transfers to your hard wallet after purchasing for secure storage.


The Takeaway

It's becoming easier and easier to invest in crypto.

Better platforms are being built and more solutions are becoming available.

But all 3 of these solutions have one key common denominator:

They allow for self-custody.

What's self-custody?

It basically means that you're in full control and ownership of your assets.

For example, if you bought crypto on a platform like SoFi, you would not be able to transfer it from the platform and SoFi owns your crypto.

But if you used Coinbase or Gemini, you have the ability to transfer the crypto to your own wallet, meaning you're in full control and own it.

This is a slight, but powerful difference to understand.

Also, before investing in crypto, it's essential to know your risk tolerance and time horizon. Putting money into digital assets is risky and you want to ensure that your financial situation is in a place that can bear the risk and that you have a time horizon that allows for longer term investing.

And as always, do your own research on cryptocurrencies and make sure you understand what you're investing in before doing so.

And if you have any questions about getting invested in digital assets - feel free to reply to this email or send me a DM on Twitter!

related.