Many Investors May Want to Rebalance Their Portfolios After Bitcoin’s Strong Year, Experts Say
Many investors are still deciding whether to hold onto their bitcoin or cash in some of their profits from the latest bull run. As the price of the flagship digital currency continues to soar, experts suggest that investors may want to consider rebalancing their portfolio to align with their financial goals.
The price of bitcoin has sailed past $100,000 and is up over 130% year-to-date, making it a tempting opportunity to “take some risk off the table,” according to certified financial planner Douglas Boneparth. However, he advises using the gains to fund other financial goals, such as retiring early or buying a home, rather than using it to buy other investments.
If investors want to keep their money invested, they should consider their “line in the sand,” or the maximum percentage of a single asset that they are comfortable with. Boneparth typically uses a maximum of 20% of a client’s investable net worth before trimming allocations of one holding.
Investors should also be aware that selling crypto in a brokerage account or exchange may result in taxes on growth, depending on how long they’ve owned the asset. “There’s no free lunch,” Boneparth said. “Just because it’s crypto doesn’t mean you’re exempt from paying taxes on your gains.”
However, investors who are in the 0% long-term capital gains bracket for 2024, making less than $47,025 in taxable income as a single filer or $94,050 as a married couple filing jointly, may be able to harvest crypto gains tax-free. This could be a “very effective strategy” for those in this bracket, according to tax attorney and certified public accountant Andrew Gordon.
