Rick Nott – a CFA, CFP, and senior wealth advisor at Lourd Murray – recently had a few things to say about the world of cryptocurrency.
Rick Nott Discusses Crypto
As a man who has established a large career for himself in finance, Nott had several notes to make in a recent interview about the growing crypto arena. He said that while allotting some of your portfolio into bitcoin and crypto may not be a bad idea, it really depends on how much tolerance you have for risk, and crypto is indeed a risky business. He commented:
The consideration to invest in any asset should be taken within the context of your entire portfolio and your ability to take the risk of that investment. Crypto is no different and is a distinct asset class with, at this point, a decent history.
Also, while he feels crypto is a legitimate asset class, he thinks bitcoin is a standalone asset that should not be part of the same arena. He mentioned:
I think it’s important to separate ‘crypto’ as all the digital assets (new coins, NFTs, etc.) versus bitcoin. I truly believe that bitcoin is in a class of its own, and if someone were looking to invest in crypto, bitcoin is the only asset with enough history, size, accessibility, and legal resiliency to be considered. It is very likely that all other crypto assets are unregulated securities. The U.S. government is actively waging regulatory war against those assets (and rightly so).
Nott also warned that novice investors may not want to jump into crypto so quickly, and that waiting a little bit to garner experience in the field of investing might be a good idea before considering BTC and its cousins. He stated:
Unlike a traditional investment that you might buy at a qualified and insured custodian like Schwab or Fidelity, there is tremendous complexity around buying and storing any bitcoin/crypto that you own. The safety of where you buy, the entity that holds your funds, or the risks if you [engage in] self-custody require much more technical know-how than most other investments.
Be Aware of Tax Issues
Lastly, he said one should always consider the tax implications of crypto before heading forward with digital investing. He commented that the taxes surrounding crypto can be quite complicated, and it’s important to understand things well before getting involved:
In buying any crypto, you will be significantly increasing your tax complexity. Not only are tax laws not truly adapted to crypto yet, but your tax preparer may not have the expertise to properly advise you on it. Even worse, if you transact frequently in it, you [must] keep records of those transactions, and the custodians don’t provide the tax documentation as your trading account would at year-end.
