Money Pilot Financial Advisor Podcast

Cyber criminals have many motives and goals, but separating you from your hard earned cash is one of the most lucrative for the criminals and potentially devastating for you.  I've put  a checklist on my website at https://www.moneypilotadvisor.com you can download for free with more details and tips.

Do you use the same password to log into multiple websites? Or use common phrases or personal information in your passwords?  If someone gets your login for one account they may be able to log into other important accounts, like your bank account or investment accounts. I know it’s a pain to have all those t passwords with random letters, numbers, symbols. Try using a password manager that can generate and save unique passwords for you. If your device has biometric authentication, use it to unlock our devices and to access stored passwords. And whenever possible used two factor identification. That's when the company you're trying to login to sends you a text or an email to verify it's actually you logging in. 

Do you sharealot of personal information on social media sites? Some cyber criminals look on these sites for key information like your birth date, place of birth, or mothers maiden name which can aid them in resetting passwords associated with your financial accounts giving them access and locking you out. Consider making your social media account private where possible or hiding sensitive personal information. 

Are images in emails you receive set by default to download to your computer automatically? This is one way cyber criminals lure you into clicking links or opening attachments which are then redirected to a compromised website. When you receive an unsolicited email don't open any attachments until you can confirm who the sender really is. 

Research the apps before you install them on your phone.  And give them the minimal permission necessary to use your data. Cyber criminals can build legitimate looking apps that can steal your data and monitor your phones actions. 

Always remember if someone calls claiming to be from a government agency either offering you relief payments or demanding payments for fines or taxes, this is a scam. The IRS for example will never call or email you. Any official communication they will send you through snail mail. The same goes for someone claiming you won sweepstakes. Or someone calling from the “credit card department” asking you for your credit card information .

A common thread is the thieves will contact you by email, phone, or text, pressure you with immediate deadlines or threats, and try to get you to send them money, gift cards, credit card information, or a check. Or work to get key personal information from you like account numbers, passwords, to steal your identity and rob you through impersonation. Hang up, don’t text back, and don’t open the email. Call the company or agency directly using a phone number you know is correct to see if they are legitimately trying to contact you.

If your data is stolen, consider freezing your credit immediately by contacting the three major major credit bureaus, Experian, Equifax, and Trans Union. Change your password on any sites that have the same credentials. Report fraud immediately to your financial institutions . If you lost money in a scam or victim of identity theft file a report with your local police and the Federal Trade Commission. Check you credit report details regularly. By law you can receive a free copy from each of the three credit agencies once a year at https://www.annualcreditreport.com/index.action  
Don’t wait to find out our a victim of fraud until you get denied for a mortgage, car loan, or line of credit, or worse flagged on your security clearance investigation. 

Cyber criminals have many motives and goals, but separating you from your hard earned cash is one of the most lucrative for the criminals and potentially devastating for you.  I've put  a checklist on my website at https://www.moneypilotadvisor.com you can download for free with more details and tips.

Do you use the same password to log into multiple websites? Or use common phrases or personal information in your passwords?  If someone gets your login for one account they may be able to log into other important accounts, like your bank account or investment accounts. I know it’s a pain to have all those t passwords with random letters, numbers, symbols. Try using a password manager that can generate and save unique passwords for you. If your device has biometric authentication, use it to unlock our devices and to access stored passwords. And whenever possible used two factor identification. That's when the company you're trying to login to sends you a text or an email to verify it's actually you logging in. 

Do you sharealot of personal information on social media sites? Some cyber criminals look on these sites for key information like your birth date, place of birth, or mothers maiden name which can aid them in resetting passwords associated with your financial accounts giving them access and locking you out. Consider making your social media account private where possible or hiding sensitive personal information. 

Are images in emails you receive set by default to download to your computer automatically? This is one way cyber criminals lure you into clicking links or opening attachments which are then redirected to a compromised website. When you receive an unsolicited email don't open any attachments until you can confirm who the sender really is. 

Research the apps before you install them on your phone.  And give them the minimal permission necessary to use your data. Cyber criminals can build legitimate looking apps that can steal your data and monitor your phones actions. 

Always remember if someone calls claiming to be from a government agency either offering you relief payments or demanding payments for fines or taxes, this is a scam. The IRS for example will never call or email you. Any official communication they will send you through snail mail. The same goes for someone claiming you won sweepstakes. Or someone calling from the “credit card department” asking you for your credit card information .

A common thread is the thieves will contact you by email, phone, or text, pressure you with immediate deadlines or threats, and try to get you to send them money, gift cards, credit card information, or a check. Or work to get key personal information from you like account numbers, passwords, to steal your identity and rob you through impersonation. Hang up, don’t text back, and don’t open the email. Call the company or agency directly using a phone number you know is correct to see if they are legitimately trying to contact you.

If your data is stolen, consider freezing your credit immediately by contacting the three major major credit bureaus, Experian, Equifax, and Trans Union. Change your password on any sites that have the same credentials. Report fraud immediately to your financial institutions . If you lost money in a scam or victim of identity theft file a report with your local police and the Federal Trade Commission. Check you credit report details regularly. By law you can receive a free copy from each of the three credit agencies once a year at https://www.annualcreditreport.com/index.action  
Don’t wait to find out our a victim of fraud until you get denied for a mortgage, car loan, or line of credit, or worse flagged on your security clearance investigation. 

This week I'm speaking at Military Money Conference near Raleigh, NC. It's the biggest gathering of the military and money community ever. If you've ever thought about a career in the personal finance field, this conference is for you.  Attendees can expect inspiration and actionable advice and connecting within the personal finance community. Here's all the information  https://milmoneycon.com/register/ 

Today I'll talk about some of the different career options related to personal finance. First, personal financial planning and Certified Financial Planner (CFP) designation. https://www.cfp.net/why-cfp-certification/why-get-certified CFP’s meet with clients to explore what’s important to them and create holistic financial plans to meet their unique financial dreams and challenges. CFPs provide advice in a wide range of specialties, like budgeting, planning for transitions, paying for college and retirement, managing risk, taxes, investing, and what ifs like disability or premature death. If you enjoy helping people in a very comprehensive way, this path may be for you. Learn more at The Military Financial Advisors Association (MFAA) which is a nonprofit of independent financial planning experts that specialize in military and veteran families. And we're on a mission to help service members, spouses, and veterans get started in the profession. Check out and the Military to Financial Planner podcast

Learn more at the Financial Planning Association (FPA). If you’d like real taste sign up for the FPA Externship https://fpaexternship.org which this year June - July. You get to peek behind the curtain and see over 25 firms and experts at work, and do the work yourself. No experience necessary and all are welcome. It’s totally virtual and if you miss a session live, it’s recorded. If you are interested in helping people in their financial lives but don’t know what that even looks like this will be the best $250 you’ve ever spent.

 If you like educating and counseling check out the Association for Financial Counseling & Planning Education® (AFCPE®) It believes in empowering all people to achieve lasting financial well-being through the highest standards of financial counseling, coaching, and education. Their Accredited Financial Counselor (AFC) designation delves into financial issues relevant for lower and middle-class Americans, like managing credit cards and debt, budgeting, and managing cash flows. For  military spouses, this can be a great way to enter the personal finance field,  find volunteer and PAID opportunities. AFCPE also offers special pricing for military spouses.

Like people, but love numbers and rules? You might excel as a tax preparer and become an Enrolled Agent (EA). An enrolled agent is a person who can represent taxpayers before the IRS after passing a test covering individual and business tax returns. You could start your own tax return preparation service or work for another preparer. There's volunteer work like the IRS Volunteer Income Tax Assistant (VITA) Program provides free income tax preparation for servicemembers and lower income Americans. There's paid work with commercial tax preparation companies like H&R Block which also provide entry level training, often for free.

 If you have questions and would like to know more, don’t hesitate to reach out. This field is really breaking open opportunities for new faces in different places. Come join the party.

This week I'm speaking at Military Money Conference near Raleigh, NC. It's the biggest gathering of the military and money community ever. If you've ever thought about a career in the personal finance field, this conference is for you.  Attendees can expect inspiration and actionable advice and connecting within the personal finance community. Here's all the information  https://milmoneycon.com/register/ 

Today I'll talk about some of the different career options related to personal finance. First, personal financial planning and Certified Financial Planner (CFP) designation. https://www.cfp.net/why-cfp-certification/why-get-certified CFP’s meet with clients to explore what’s important to them and create holistic financial plans to meet their unique financial dreams and challenges. CFPs provide advice in a wide range of specialties, like budgeting, planning for transitions, paying for college and retirement, managing risk, taxes, investing, and what ifs like disability or premature death. If you enjoy helping people in a very comprehensive way, this path may be for you. Learn more at The Military Financial Advisors Association (MFAA) which is a nonprofit of independent financial planning experts that specialize in military and veteran families. And we're on a mission to help service members, spouses, and veterans get started in the profession. Check out and the Military to Financial Planner podcast

Learn more at the Financial Planning Association (FPA). If you’d like real taste sign up for the FPA Externship https://fpaexternship.org which this year June - July. You get to peek behind the curtain and see over 25 firms and experts at work, and do the work yourself. No experience necessary and all are welcome. It’s totally virtual and if you miss a session live, it’s recorded. If you are interested in helping people in their financial lives but don’t know what that even looks like this will be the best $250 you’ve ever spent.

 If you like educating and counseling check out the Association for Financial Counseling & Planning Education® (AFCPE®) It believes in empowering all people to achieve lasting financial well-being through the highest standards of financial counseling, coaching, and education. Their Accredited Financial Counselor (AFC) designation delves into financial issues relevant for lower and middle-class Americans, like managing credit cards and debt, budgeting, and managing cash flows. For  military spouses, this can be a great way to enter the personal finance field,  find volunteer and PAID opportunities. AFCPE also offers special pricing for military spouses.

Like people, but love numbers and rules? You might excel as a tax preparer and become an Enrolled Agent (EA). An enrolled agent is a person who can represent taxpayers before the IRS after passing a test covering individual and business tax returns. You could start your own tax return preparation service or work for another preparer. There's volunteer work like the IRS Volunteer Income Tax Assistant (VITA) Program provides free income tax preparation for servicemembers and lower income Americans. There's paid work with commercial tax preparation companies like H&R Block which also provide entry level training, often for free.

 If you have questions and would like to know more, don’t hesitate to reach out. This field is really breaking open opportunities for new faces in different places. Come join the party.

You may have heard that the Thrift Savings Plan (TSP) may finally be joining us in the 2st century. There are some good and important changes coming, and there's going to be a transition period when you won’t be able to access to your TSP.

According to TSP, it is launching its official mobile app that will give you access to your TSP My Account. You'll be able to log onto your account using biometric identification software on your mobile device, like fingerprint access and facial recognition which will add an extra level of security. They are also promising virtual assistance  via the mobile app or the web. There will be an interactive virtual assistant and automated support 24 hours a day. The virtual assistant can transfer you to an in-person representative during business hours, if needed. TSP is also promising an online chat function to connect you directly to a real representative for personalized support during business hours.

New streamlined paperwork processing is also coming, promising the ability to complete many transactions online with an "Easy, secure, and legally binding e-signature.”  In particular, they're promising assistance and a streamlined processing for rollovers from other 401(k)s or IRAs into TSP. And you should be able to make electronic transfers for loan payments and payoffs, and disbursements from your account.

Here's the key dates they need to know:

April 8 – Last day to request paper loan documents by telephone

• April 21 – Last day to submit paper loan documents
• April 29 – Last day to request all other paper forms, whether by phone or online.
• Mayy 16 – Last day to submit or access all forms (online or hard copy). This includes withdrawal, rollover or transfer requests as well as beneficiary changes..
• So basically if you want to make any request that needs a form you must submit it by May 16. 
• May 16 is also the last day to contact TSP via email
• May 26 – Last day to make transfers between different mixes of investments  or change contributions. So if you want to rebalance, do it before May 26th. 
• May 26th is also the last day you can contact TSP via telephone.
• From May 26 at noon Eastern time through the first week of June, account access of any kind will NOT be available. All your investments in TSP will still be there, your automatic payroll contributions will continue, and invested funds will continue to reflect market changes. 

Think of this May 26th through the first week of June as a total eclipse of the TSP. Seeing the world go dark in a total eclipse of the sun can be scary. But have faith the sun is still there and will come out again from behind the moon. In the same way TSP will “go dark” from May 26 through the first week of June. But what comes out on the other side should be a much improved, more participant-friendly TSP.

Now after the upgrade, all TSP users will have to update your login information before accessing your online account for the first time. TSP is promising step-by-step prompts to walk you through it. You’ll verify your identity, update your contact information and set up your account security.

Coming later this year, but not with this upgrade TSP plans to add a window within TSP where you could purchase outside mutual funds through the TSP website. I'm keeping an eye on this as well and will certainly do a podcast on that as details become available.

For more information watch your emails or go to tsp.gov and click on the banner right at the top of the page New features and other changes coming to TSP later this year.”  Can I put a link to that in the show notes

https://www.tsp.gov/new-tsp-features/key-transition-dates/

You may have heard that the Thrift Savings Plan (TSP) may finally be joining us in the 2st century. There are some good and important changes coming, and there's going to be a transition period when you won’t be able to access to your TSP.

According to TSP, it is launching its official mobile app that will give you access to your TSP My Account. You'll be able to log onto your account using biometric identification software on your mobile device, like fingerprint access and facial recognition which will add an extra level of security. They are also promising virtual assistance  via the mobile app or the web. There will be an interactive virtual assistant and automated support 24 hours a day. The virtual assistant can transfer you to an in-person representative during business hours, if needed. TSP is also promising an online chat function to connect you directly to a real representative for personalized support during business hours.

New streamlined paperwork processing is also coming, promising the ability to complete many transactions online with an "Easy, secure, and legally binding e-signature.”  In particular, they're promising assistance and a streamlined processing for rollovers from other 401(k)s or IRAs into TSP. And you should be able to make electronic transfers for loan payments and payoffs, and disbursements from your account.

Here's the key dates they need to know:

April 8 – Last day to request paper loan documents by telephone

• April 21 – Last day to submit paper loan documents
• April 29 – Last day to request all other paper forms, whether by phone or online.
• Mayy 16 – Last day to submit or access all forms (online or hard copy). This includes withdrawal, rollover or transfer requests as well as beneficiary changes..
• So basically if you want to make any request that needs a form you must submit it by May 16. 
• May 16 is also the last day to contact TSP via email
• May 26 – Last day to make transfers between different mixes of investments  or change contributions. So if you want to rebalance, do it before May 26th. 
• May 26th is also the last day you can contact TSP via telephone.
• From May 26 at noon Eastern time through the first week of June, account access of any kind will NOT be available. All your investments in TSP will still be there, your automatic payroll contributions will continue, and invested funds will continue to reflect market changes. 

Think of this May 26th through the first week of June as a total eclipse of the TSP. Seeing the world go dark in a total eclipse of the sun can be scary. But have faith the sun is still there and will come out again from behind the moon. In the same way TSP will “go dark” from May 26 through the first week of June. But what comes out on the other side should be a much improved, more participant-friendly TSP.

Now after the upgrade, all TSP users will have to update your login information before accessing your online account for the first time. TSP is promising step-by-step prompts to walk you through it. You’ll verify your identity, update your contact information and set up your account security.

Coming later this year, but not with this upgrade TSP plans to add a window within TSP where you could purchase outside mutual funds through the TSP website. I'm keeping an eye on this as well and will certainly do a podcast on that as details become available.

For more information watch your emails or go to tsp.gov and click on the banner right at the top of the page New features and other changes coming to TSP later this year.”  Can I put a link to that in the show notes

https://www.tsp.gov/new-tsp-features/key-transition-dates/

There are two types of 529 plans: prepaid tuition plans and education savings plans. Today I'm only focusing on the 529 Education Savings Plan which is an investment account you use to save for future education tuition and expenses. The plans are set up by each state. You to invest your savings in the plan, where your investment grows tax-free. And when you withdraw the money for approved education expenses, that distribution is also tax-free. 

You can use it to pay for higher education tuition, mandatory expenses, room and board at any college or university, and some vocational schools. Now 529 accounts can also be used for up to $10,000 a year of K-12 school tuition only.

If you pay state income tax, you may get a break for your 520 contributions, including deductions on your state income tax or getting matching grants. You'll only be eligible for these state specific benefits if you invest in a 529 plan sponsored by your state of residence. It’s important to note that you can participate in ANY state’s 529 plan. Look at the plan’s administrative fees and investment fees. If you don’t pay state income tax, like many active duty military, you may be best off going with a plan with lower fees, better customer service, and/or investment options that best fit your needs. Details are on each plan’s website. There are also websites you can use to compare different states plans. A great place to start is Morningstar’s 529 plan ratings. https://www.morningstar.com/articles/1006084/the-top-529-college-savings-plans-of-2020

Anyone can open a 529 account for a designated beneficiary, family, friends and even the designated beneficiary themself. Anyone can contribute to the 529 plan once it’s open. Many plans also make it simple for others to gift money to the 529 account, like providing a donation link unique.

You typically choose from a range of investment portfolio options that often include mutual funds or exchange traded fund. Many also include age-based portfolios, which automatically shift from more aggressive investments to more conservative  investments as a beneficiary gets closer to college age. Give these  a look if you’d like to fire and forget.

529 accounts owned by a parent or dependent student are count as parental assets toward your expected family contribution. Higher expected family contribution can mean lower financial aid. Parental assets are counted to a max of 5.64% which is more favorable than student assets which are counted at 20%. So accounts owned by parents or the student may decrease financial aid. But not as much as if the student had the savings outside of a 529 account.

Assets held in 529 plans owned by grandparents or anyone else have no affect on the FAFSA. But when funds are distributed to pay for college expenses, it will be counted as student income on the FAFSA. One strategy to avoid this problem is  wait to withdraw funds until after the student’s third semester of college, since the FAFSA looks at income from two years prior. 

The owner that opened the account can change the beneficiary at anytime. There is a long list of people you can make a new beneficiary, including nearly any relative of the beneficiary. And you can change the beneficiary more than once. Check with your plan to see who qualifies. 

If you withdraw money from a 529 plan that is not used for qualified education expenses it may be subject to both state and federal income tax and an additional 10% early distribution penalty. There are a few exceptions to the penalty if the beneficiary dies or becomes disabled. 

 One last note for parents. Remember, you can borrow money for college, but you can’t borrow for retirement.  At a bare minimum invest enough in your TSP or 401k to get any match. 

There are two types of 529 plans: prepaid tuition plans and education savings plans. Today I'm only focusing on the 529 Education Savings Plan which is an investment account you use to save for future education tuition and expenses. The plans are set up by each state. You to invest your savings in the plan, where your investment grows tax-free. And when you withdraw the money for approved education expenses, that distribution is also tax-free. 

You can use it to pay for higher education tuition, mandatory expenses, room and board at any college or university, and some vocational schools. Now 529 accounts can also be used for up to $10,000 a year of K-12 school tuition only.

If you pay state income tax, you may get a break for your 520 contributions, including deductions on your state income tax or getting matching grants. You'll only be eligible for these state specific benefits if you invest in a 529 plan sponsored by your state of residence. It’s important to note that you can participate in ANY state’s 529 plan. Look at the plan’s administrative fees and investment fees. If you don’t pay state income tax, like many active duty military, you may be best off going with a plan with lower fees, better customer service, and/or investment options that best fit your needs. Details are on each plan’s website. There are also websites you can use to compare different states plans. A great place to start is Morningstar’s 529 plan ratings. https://www.morningstar.com/articles/1006084/the-top-529-college-savings-plans-of-2020

Anyone can open a 529 account for a designated beneficiary, family, friends and even the designated beneficiary themself. Anyone can contribute to the 529 plan once it’s open. Many plans also make it simple for others to gift money to the 529 account, like providing a donation link unique.

You typically choose from a range of investment portfolio options that often include mutual funds or exchange traded fund. Many also include age-based portfolios, which automatically shift from more aggressive investments to more conservative  investments as a beneficiary gets closer to college age. Give these  a look if you’d like to fire and forget.

529 accounts owned by a parent or dependent student are count as parental assets toward your expected family contribution. Higher expected family contribution can mean lower financial aid. Parental assets are counted to a max of 5.64% which is more favorable than student assets which are counted at 20%. So accounts owned by parents or the student may decrease financial aid. But not as much as if the student had the savings outside of a 529 account.

Assets held in 529 plans owned by grandparents or anyone else have no affect on the FAFSA. But when funds are distributed to pay for college expenses, it will be counted as student income on the FAFSA. One strategy to avoid this problem is  wait to withdraw funds until after the student’s third semester of college, since the FAFSA looks at income from two years prior. 

The owner that opened the account can change the beneficiary at anytime. There is a long list of people you can make a new beneficiary, including nearly any relative of the beneficiary. And you can change the beneficiary more than once. Check with your plan to see who qualifies. 

If you withdraw money from a 529 plan that is not used for qualified education expenses it may be subject to both state and federal income tax and an additional 10% early distribution penalty. There are a few exceptions to the penalty if the beneficiary dies or becomes disabled. 

 One last note for parents. Remember, you can borrow money for college, but you can’t borrow for retirement.  At a bare minimum invest enough in your TSP or 401k to get any match. 

Most of you already know that digital assets like Bitcoin, Etherium, and Nonfungible Tokens (NFT) experience huge price swings or volatility. Today's focus is diversification of your portfolio and digital assets. When you choose from among different investment options, you diversify. You likely already started do this by investing in mutual funds or exchange traded funds through a workplace retirement plan like the Thrift Savings Plan or a 401k. If you  have a portfolio of stock and maybe bond funds, what happens  if you add in VERY volatile digital assets in the hopes of earning a bigger return (profit)? Will  those stormy seas will turn into a tsunami of risky volatility?

Not necessarily. That’s due to correlation, the tendency of different investments to swing up and down together.  Two investments with a correlation of 1, are perfectly correlated, they go up and down together. If the value of investment A goes up, investment B also always goes up. If the value of investment B goes down, investment A goes down too.  This could be the stormy seas turned tsunami scenario. If you need that invested money for something else, you’re going to take a loss. 

If two investments have a correlation of -1, they are perfectly negatively correlated, when one investment goes up the other always goes down. And vice versa. But just like unicorns, perfect negative correlation pretty much never occurs. it they have a correlation of 0, there is no correlation. If A goes up,  B has an equal chance of going up, going down, or not changing at all. 

The volatility, or price swings of digital assets is VERY high.  Fortunately digital assets are NOT perfectly correlated to stocks, or any other assets. In plain English, most of the time digital assets values do their own thing and fluctuate in ways that do not match stocks or bonds.

Although Bitcoin is almost a decade old and many investors have jumped on the digital asset band wagon, the digital asset market is still more like the wild west than traditional investments. In addition to wild price swings, regulations and insurance programs that help protect investors of traditional assets haven’t developed yet for digital assets. Fees associate with buying, trading, and holding digital assets can be high and are often buried in fine print. If you do invest in digital assets, you literally need to be prepared for the possibility you could lose your entire investment.  

Because digital asset prices are not strongly correlated to other assets like stocks and bonds they could be beneficial to broader portfolio. But be careful. Adding too much digital assets to a portfolio can have the affect of the tail wagging the dog. How much? Depending on your tolerance for risk probably just 1% to 5% of your overall portfolio. Yes, that small an amount could make a meaningful difference in your portfolio’s return, while managing the risk of price volatility and the very real uncertainty of the new investment type over all. 

Always keep very detailed trading records. You are responsible for reporting and paying taxes on your profits and losses. If you’re a HODLer that buys and never sells, you won’t owe taxes until you eventually do trade or sell your assets. If you are an active trader, be very careful. You can wrack up a huge tax bill before you realize it if your unfamiliar with the tax laws, especially around short term capital gains, short term capital losses, and the wash rule. One way to minimize these problems is not to sell an asset within one year of buying it. If you plan to trade more often, seriously get some tax help.

For more information on investing, check out Ep 63 Crypto Currency, Ep 57 Risk Profile, Ep 52 Stocks, Ep 45 Rebalance, and Ep 44 Capital Gains.

Most of you already know that digital assets like Bitcoin, Etherium, and Nonfungible Tokens (NFT) experience huge price swings or volatility. Today's focus is diversification of your portfolio and digital assets. When you choose from among different investment options, you diversify. You likely already started do this by investing in mutual funds or exchange traded funds through a workplace retirement plan like the Thrift Savings Plan or a 401k. If you  have a portfolio of stock and maybe bond funds, what happens  if you add in VERY volatile digital assets in the hopes of earning a bigger return (profit)? Will  those stormy seas will turn into a tsunami of risky volatility?

Not necessarily. That’s due to correlation, the tendency of different investments to swing up and down together.  Two investments with a correlation of 1, are perfectly correlated, they go up and down together. If the value of investment A goes up, investment B also always goes up. If the value of investment B goes down, investment A goes down too.  This could be the stormy seas turned tsunami scenario. If you need that invested money for something else, you’re going to take a loss. 

If two investments have a correlation of -1, they are perfectly negatively correlated, when one investment goes up the other always goes down. And vice versa. But just like unicorns, perfect negative correlation pretty much never occurs. it they have a correlation of 0, there is no correlation. If A goes up,  B has an equal chance of going up, going down, or not changing at all. 

The volatility, or price swings of digital assets is VERY high.  Fortunately digital assets are NOT perfectly correlated to stocks, or any other assets. In plain English, most of the time digital assets values do their own thing and fluctuate in ways that do not match stocks or bonds.

Although Bitcoin is almost a decade old and many investors have jumped on the digital asset band wagon, the digital asset market is still more like the wild west than traditional investments. In addition to wild price swings, regulations and insurance programs that help protect investors of traditional assets haven’t developed yet for digital assets. Fees associate with buying, trading, and holding digital assets can be high and are often buried in fine print. If you do invest in digital assets, you literally need to be prepared for the possibility you could lose your entire investment.  

Because digital asset prices are not strongly correlated to other assets like stocks and bonds they could be beneficial to broader portfolio. But be careful. Adding too much digital assets to a portfolio can have the affect of the tail wagging the dog. How much? Depending on your tolerance for risk probably just 1% to 5% of your overall portfolio. Yes, that small an amount could make a meaningful difference in your portfolio’s return, while managing the risk of price volatility and the very real uncertainty of the new investment type over all. 

Always keep very detailed trading records. You are responsible for reporting and paying taxes on your profits and losses. If you’re a HODLer that buys and never sells, you won’t owe taxes until you eventually do trade or sell your assets. If you are an active trader, be very careful. You can wrack up a huge tax bill before you realize it if your unfamiliar with the tax laws, especially around short term capital gains, short term capital losses, and the wash rule. One way to minimize these problems is not to sell an asset within one year of buying it. If you plan to trade more often, seriously get some tax help.

For more information on investing, check out Ep 63 Crypto Currency, Ep 57 Risk Profile, Ep 52 Stocks, Ep 45 Rebalance, and Ep 44 Capital Gains.