boonchai wedmakawand | Moment | Getty Images<\/p>\n
Crypto enthusiasts had reason to cheer last week as digital currencies notched another milestone: the first U.S. bitcoin futures exchange-traded fund.<\/p>\n
Investors rushed in. The ProShares Bitcoin Strategy ETF (BITO) had the second-biggest trading debut for any ETF on record when it launched Oct. 19. Its share price jumped 4%. A similar fund, the Valkyrie Bitcoin Strategy ETF (BTF), started Friday.<\/p>\n
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However, cost-conscious investors who want exposure to bitcoin and other cryptocurrencies in their portfolios may be better off buying them outright instead of via a futures ETF, according to some financial advisors.<\/p>\n
That's primarily the case for buy-and-hold investors, who'd save money over the long term, advisors said.<\/p>\n
\"They're always better off buying bitcoin directly,\" said Ivory Johnson, certified financial planner and founder of Delancey Wealth Management, based in Washington, D.C.<\/p>\n
The ProShares and Valkyrie ETFs, for example, each have a 0.95% expense ratio. That's the asset manager's fund fee; for every $10,000 someone invests, the managers keep $95 a year.<\/p>\n
That might not sound like much, but costs can add up over decades of saving. The investor loses out on the fee, earnings on those fees and compound interest.<\/p>\n
Here's an example from the Securities and Exchange Commission: An investor who saves $100,000, earns 4% a year and pays a 0.25% annual fee would have $30,000 more after two decades than the same person who pays a 1% fee (which is about the cost of the bitcoin futures ETFs). <\/p>\n
\"If it will be part of your portfolio for one, five, 10 years or longer, 1% is a big fee to pay for a mutual fund or an ETF,\" said Charlie Fitzgerald III, CFP, principal and founding member of Moisand Fitzgerald Tamayo, based in Orlando, Florida.<\/p>\n
Of course, buying bitcoin or other cryptocurrencies directly (not via an ETF) often isn't free. Crypto platforms and exchanges like Coinbase typically charge a one-time fee (though not always) that varies by provider. But it'd generally be much less costly for buy-and-hold investors relative to the annual fund fee, Johnson said.<\/p>\n
And fees aren't the only consideration. Investors may feel safer getting crypto access through a professionally managed ETF if they're worried about hackers or losing passwords or private keys needed to access the funds.<\/p>\n
\"We feel this is a small price to pay to hold an easily accessible, secure and regulated product, traded at a stock exchange, tracking a regulated investment vehicle,\" said a spokesperson for Valkyrie.<\/p>\n
Short-term investors might also not mind a 0.95% fee if they plan to sell the ETF within days or weeks. (The fee amounts to 26 cents a day on a $10,000 investment.)<\/p>\n
\"The fee is inconsequential if you're holding for two weeks then selling it,\" Fitzgerald said.<\/p>\n
In that case, a broker's one-time trading fee is likely more consequential, he said.<\/p>\n
Overall, there's been a general trend toward lower investment fees. The average expense ratio of U.S. mutual funds and ETFs was 0.41% in 2020, less than half the 0.93% in 2000, according to Morningstar. (These costs are asset-weighted, meaning they account for relative fund popularity.) <\/p>\n
Another important distinction: The bitcoin futures ETFs don't directly own bitcoin; they buy \"futures\" contracts, which are agreements to buy or sell the asset later for an agreed-upon price. Such funds will generally track bitcoin prices, Fitzgerald said. <\/p>\n
(It's a similar concept to oil and gold futures, for example. Such investors don't own the physical gold or barrels of oil.)<\/p>\n
However, investors might be remiss paying a 0.95% fee for a fund that may or may not track the price of bitcoin, Johnson said.<\/p>\n
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View original post here: boonchai wedmakawand | Moment | Getty Images Crypto enthusiasts had reason to cheer last week as digital currencies notched another milestone: the first U.S. bitcoin futures exchange-traded fund. Continue reading
\nBitcoin futures ETF may be a costly way to get long-term crypto exposure - CNBC<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"