Having growth in our portfolio helps us outpace inflation. Although we plan never to sell shares, growth products give us significant leverage by expanding the scope of our power.
With the advent of Bitcoin ETFs, which trade on the stock market, we now have major decisions to make about which growth products will best serve us.
The tried-and-true model is establishing growth via index funds. However, I believe Bitcoin will explode and never look back. We definitely want to capture some of this magic—but how much?
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Today, I want to evaluate which growth model is right for you. Will playing it safe be the way to go? Will going 100% into Bitcoin make you a millionaire faster than standard index fund investing? Let’s find out.
The magic of index funds. The magic of index funds is all you need to do is get your money into them, and they do the rest. Passive Index fund investing doesn’t require much thought, just the effort to budget and save your money.
The four principles of passive index fund investing are automatic investing, dollar-cost averaging, ignoring markets, and never selling shares. Follow these steps to guarantee your own investing success.
My four favorite index funds are: The Nasdaq 100 (QQQ), S&P 500 (SPY), Total Stock Market (VTI), and Dow Jones Industrial (DIA). I also recommend the Small Cap 500 (IJR) and Russell 2000 Index (IWM).
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The goal of passive index fund investing is to create a mountain of capital gains you can leverage, but DO NOT SELL shares. It’s better to generate leverage than whittle down your accounts.
The magic of Bitcoin ETFs. The magic of Bitcoin ETFs is that you can gain exposure to Bitcoin without holding Bitcoin. Bitcoin ETFs fall under the scrutiny of the Securities and Exchange Commission, making them much safer than buying on centralized or decentralized markets.
Some Bitcoin ETFs to consider are iShares (IBIT), Grayscale (GBTC), Fidelity (FBTC), ARKK (ARKB), and WisdomTree (BTCW), among others.
But why is Bitcoin so important to our portfolios? Bitcoin is digital gold, although many people will argue otherwise. You must form your own opinion about Bitcoin if you want to find success.
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People say Bitcoin has no inherent or intrinsic value, which is true. However, gold does not either. Gold only has value because someone else says it has value.
Bitcoin currently sits at around $100,000 per token. In five years, by 2030, it will be $1 million per Bitcoin (my own estimate). That means it will 10X the investments you make today.
There will only be 21 million Bitcoins, so supply is limited. At some point in the future, Bitcoin ETFs will hold Bitcoin, but the price will multiply as their supply remains constant.
There simply is not enough Bitcoin to go around. Countries, banks, corporations, Bitcoin ETFs, and governments are all attempting to horde as much Bitcoin as they can for themselves.
According to treasuries.bitbo.io/countries, nine countries already hold 529,618 Bitcoin, worth $51 billion.
We will soon see an all-out race to acquire as much Bitcoin from all sides, which will drive up the price for the entire world. We small-time investors need exposure now.
Growth versus speculation. Let’s not lose our bearing. There is a massive difference between growth and speculation that you must understand.
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Growth comes from expanding, raising prices, reducing waste, increasing efficiency, and hiring talented people. Companies in these index funds focus on development to ensure they grow faster than inflation.
Investors who hold index funds co-opt this growth by supporting the share price appreciation of these companies. Corporations can leverage their share prices to borrow cheaper, raise capital, and purchase other companies—this is true growth.
Speculation occurs when you combine macro/microeconomic predictions, inside information, and guesswork to arrive at a conclusion. It’s gambling—for all intents and purposes.
Bitcoin is a 100% speculation play, and we must treat it as such. I am sure it will reach $1 million per coin by 2030, but I cannot go all in.
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Speculation is just that: speculation. I cannot use more than 10% of my assets for speculation; even 10% is too much.
The rich become richer because they have a higher amount of money that they can use to speculate. They can speculate on commodities, cryptocurrencies, businesses, and collectibles. Average savers and investors don’t have this luxury—at least not currently.
Bitcoin ETFs vs. Index Funds. How much should we dedicate to Bitcoin ETFs vs. Index Funds? The ratio should never exceed 10 to 1 in favor of index funds.
I believe that Bitcoin ETFs have a higher growth rating. However, I cannot, in good faith, allow myself to overinvest in this product.
I love Bitcoin, but it is still not a proven asset. As a value-holder and currency, it still has a long way to go. We still have much to learn about its effectiveness under pressure and usefulness in transactions worldwide.
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In my Stock Market Investing at Any Age series (20s, 30s, 40s), I allocated Bitcoin to speculation and index funds to growth. I separated them because they represent two different prospects.
We work to earn money, which we then use to invest. With that initial investment, we must be conservative and prudent.
As our money makes money, we can begin to speculate more. That’s where we can add more Bitcoin ETFs to our portfolios.
With money from our paychecks, we want to invest in corporations we know and trust, such as McDonald’s (MCD), Wells Fargo (WFC), Home Depot (HD), Nvidia (NVDA), and Verizon (VZ). These corporations fall under the umbrella of our index funds.
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Bitcoin and the other cryptocurrencies are currently subject to speculation. However, they will become more valuable as we expand into the Metaverse and artificial intelligence.
One thing is for sure, if someone hacks into the Bitcoin blockchain, it’s over for this cryptocurrency. Bitcoin’s most important feature is its security.
Conclusion. If you have $1,000 per month to invest in the stock market, invest $900 into index funds and $100 in Bitcoin ETFs (just a recommendation).
The stock returns roughly 8-10% annually over a 20-year period, while inflation is typically 2-4% annually. Therefore, we are outpacing inflation.
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Bitcoin’s growth will destroy these numbers; however, a black swan event can wipe Bitcoin from the face of the Earth.
Therefore, we must exercise caution in our Bitcoin pursuits. If you have an abundance of capital, you can dedicate more to speculation plays.
However, the average person should focus mainly on index funds to build wealth. They simply don’t have the financial backdrop to take sustained Bitcoin losses.
I love Bitcoin, but I love corporations like McDonald’s (MCD) more. Every day, I see McDonald’s serving long lines of customers. They change and grow with the times.
McDonald’s has changed its image multiple times over the last 70 years, showing actual growth. We will see how Bitcoin changes over the next 70 years. But for now, I will cap my investment at under 10%. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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