This Week In Your Wallet: Bitcoin: Be There Or Beware?
Three signs there might be a Bitcoin bubble from my own life:
1. My 23-year-old son called last week to ask if it was too late to get in on it.
2. One of the 10-year-old kids my team surveyed for a story for Your $, the in-school magazine we produce with TIME For Kids and the PWC Charitable Foundation for fourth-, fifth- and sixth-graders, said he was saving not for a puppy or a Nintendo Switch but for a Bitcoin.
3. The driver who ferried me from the D.C. airport to my hotel yesterday was despondent that he’d sold his Bitcoin too early. (I’m here for AARP’s 2018 Family Caregiving Summit, which you can live-stream here. You can also follow along on Twitter by searching the hashtag #FutureofCaregiving.)
What’s all the fuss about? In July 2010, you needed just eight cents to purchase one unit of the cryptocurrency (or digital currency). But today, following the opening of trading on the futures market, one Bitcoin costs upwards of $17,000. A barrage of traffic caused the Chicago Board Options Exchange website to go down, and circuit breakers were triggered twice, reports The New York Times. If you’re kicking yourself for not even knowing what Bitcoin was — let alone buying it — back then, you’re not alone. If someone had bought $100 worth of Bitcoin in January 2011, it’d be worth more than $5.7 million today.
Bitcoin, for the uninitiated, is a digital currency that has no physical representation but is stored in a digital wallet online, where it can be traded among users and even used to buy a few things at select traditional retailers (like Overstock and Expedia). Bitcoin (and if you want more detail, here’s a good explanation) is not the only digital currency. You may start to hear about these six as well.
So what, if anything, should you do about the new developments? My feeling about speculating is that if you want to take a flier in an uncertain market (by investing in an early-stage start-up, buying art you think will appreciate or doing anything else particularly high-risk), do it with a portion of your money you’d be comfortable losing — typically no more than 5 to 10 percent.
State Of The Index Fund
And while we’re talking about investing: The Wall Street Journal’s Jason Zweig was one of the first journalists to sing the praises of index funds. That’s why I found it notable that his latest column advises investors to think outside the index box for the purpose of diversification by looking at smaller stocks that aren’t included in the most common indexes. “An academic study found in 2008 that wealthier individual investors who directly owned only one or two stocks outperformed those who are more diversified by about two percentage points annually — and up to nearly six percentage points when the stocks weren’t in the S&P 500,” he writes.
Passive funds continue to rise. For U.S. equity funds in October 2017 alone, investors pulled $18.8 billion from actively-managed funds and put $27.6 billion into passive ones, reports Morningstar. The active vs. passive investing debate has always been a hot-button one. About 90 percent of active stock managers didn’t beat their index targets over the previous one-, five- and ten-year periods, according to a 2016 study by S&P Dow Jones Indices. On the flip side, active managers say the period since the 2008 financial crisis has been “an abnormal one,” reports Bloomberg. Diversifying in this way “is not for the chicken-hearted,” Zweig notes. “Even if you keep most of your money in index funds, you may well buy a few stocks on the side.”
Avoiding Holiday Theft
Switching gears: How’s that holiday shopping going? In my house, it hit high gear as we prepped to light the first Hanukkah candles tonight. A very happy holiday to all of you who will be doing that with me. If your shopping consists of surfing, clicking and waiting for delivery, you should know that nearly one-third of Americans say they’ve had a package stolen from their doorstep or driveway. So be vigilant. Get to know the UPS and FedEx schedule — or, even better, schedule specific delivery windows when possible — and agree with neighbors that you’ll take in packages for one another if the other person isn’t home.
That’s not the only type of residential theft that tends to spike during the holiday season, however. When compared to the rest of the year, claims were up about 6 percent in November and December between 2010 and 2016, according to American Modern Insurance Group. There are things you can do to minimize risk: Secure your doors. (Sliding doors can be reinforced by measuring your door’s track, then cutting a metal or wooden rod to brace it against opening if the lock is compromised, says Healther Bolyard, vice president of claims at American Modern Insurance Group.) Keep in mind that some thieves gain access to homes using universal garage door openers, so it’s a good idea to keep valuables out of the garage and lock the connecting door. When away from home, keep a few lights on or consider using a “light timer.” Finally, avoid throwing out expensive-looking packages (like television or computer boxes) in plain sight on the curb.
Open Enrollment Reminder
Finally, here’s your quick reminder that open enrollment for the Affordable Care Act ends on December 15. Yes, that’s three days from now. If you miss the deadline, you might have to wait another year to sign up — unless you qualify for a special enrollment period. So if you’re planning on enrolling for 2018, do whatever you have to do to remember — whether it’s sending yourself a reminder text to leave unread or putting a post-it note above your doorknob. And if you need a reminder of how important it is to actually have coverage, particularly for children, Jimmy Kimmel has it covered.
Have a great week,
Jean
