Ask Doc Bitcoin.
It's one of the biggest financial stories of the past decade.
But gaining a real understanding of it is difficult and confusing. There are hundreds of different options, with new listings to choose from every week.
Are we seeing a bubble, or are we in the early stages of a massive bull market? Is it safe, or does it set you up to get hacked?
It's no wonder people still don't really understand bitcoin.
Before bitcoin was invented about 10 years ago, no true digital currency existed. Bitcoin was a novelty, and not many businesses accepted it.
The truth is, it's still pretty hard to use. You need to be good with computers and software to understand the cryptocurrency. And bitcoin is like cash: If you lose it (or lose your bitcoin password), it's gone – and no one can get it back for you. So it has its own risks.
Cash works because its ownership is clear. If I hand you a dollar, you know we've transacted, and you now own it. However, cash transactions can only happen in person. How do you move cash to the digital era?
So far, it has been credit cards. These, however, rely on the trust of the issuing bank. When you sell something to a customer with a credit card... Citibank, Chase, or whoever issued the card promises to pay you. You don't have to trust the buyer. You trust the issuer and the credit-card company. Even if the person on the other end of the transaction is a deadbeat, you'll still get your money.
With bitcoin, there's no bank. There's no credit. There's no trust necessary. It's just like handing someone cash, but over the Internet.
Bitcoin also appeals to those distrustful of fiat currencies. Dollars are only worth anything because the U.S. government has told us so and we trust the government. Specifically, we trust that the government will accept dollars to pay taxes, and that gives dollars intrinsic value.
It's the same with any currency. A currency can only be trusted as much as the businesses that will accept it and the institutions that back it.
Bitcoin is different. It's open and free software. It exists on a worldwide network of computers and can never be shut down, revoked, or removed from the Internet. There's no central authority, recordkeeper, or server.
And the Federal Reserve or other government agencies can't inflate away the value of bitcoin.
As I've said before, I'm no bitcoin expert. I do know folks who've made a lot of money investing in bitcoin, but I also have heard plenty of stories of those who've lost a lot of money.
That's why, if you want to invest in bitcoin, you need someone who knows how to do it profitably and safely.
And last week, Porter Stansberry spoke with our in-house cryptocurrency expert Eric Wade.
Eric explained how bitcoin protects you from the government, how to know which cryptocurrencies to invest in, and why the crypto boom isn't over yet.
We're only sharing this video for a few more days, so make sure you watch it soon – right here.
Now for this week's Q&A... As always send us your topic suggestions and questions – [email protected].
Q: A question for Doc... I love the specifics he gives on [Retirement Trader], as far as what to do, but the one area where that might improve is to not only give the month of expiration for a put or call, but also give the day of that month. The August put could have meant any day in August – and I believe there were four listed by Fidelity on the options chart. Thanks! – J.M.
A: Traditionally, options expire on the third Friday of the month. For August, that's the 21st. This is known as a "standard" option, and most (but not all) brokerage platforms will highlight in some way which expiration is standard.
However, as option markets have grown, investors have wanted more flexibility. Now, you can trade options known as "weeklys" on many stocks that expire throughout the month on Fridays.
In Retirement Trader, we stick to standard options as much as possible. If you don't see a date in our recommendation, we're always talking about the standard option.
We generally only branch into weekly options when they offer particularly compelling prices.
Great suggestion on the clarification, J.M. We'll make sure it's clearer in future Retirement Trader issues.
Q: Thanks for the continued useful information that you provide.
While contributing to a self-directed Roth IRA, there is a limit to annual contributions. There is also the ability to contribute to a Roth under a 401(k) plan. If you have maxed out your personal Roth, does that mean you cannot contribute under a 401(k) Roth? Or if you put your 401(k) contributions under a Roth, does that mean you cannot contribute to your personal Roth? Thanks again. – J.W.
A: A 401(k) plan is a type of employer-sponsored retirement plan. An individual retirement account is an account any individual can open – with no need of an employer – so long as they have taxable compensation.
There are several different kinds of 401(k)s and IRAs, but the two most folks are familiar with are the traditional and the Roth. The basic difference between the two is taxation. You pay tax on a traditional account when you withdrawal the money sometime in the future. For a Roth account, you pay taxes when you make the contribution, and your future withdrawals are tax-free (assuming you meet all of the distribution requirements).
401(k) and IRA contributions are separate from each other – whether the accounts are traditional or Roth. For 2020, you can contribute $19,500 to a 401(k) with a $6,500 catch-up contribution if you're 50 or older. IRA contributions for 2020 are limited to $6,000 (or $7,000 if you're 50 or older).
Let's say you're 55 and you want to maximize your contributions for this year. You could put up to $26,000 in a 401(k) and $7,000 in an IRA. It doesn't matter if those accounts are traditional or Roth (or if they're self-directed). The same contribution limits apply.
So if you have a Roth 401(k) through an employer and your own Roth IRA, go ahead and max out those contributions. They're two of the best ways to secure your retirement.
Q: Doc – your recent remarks about cholesterol are very informative. How is the liver/bile/blood dynamic altered after your gallbladder has been removed? Thanks. – M.B.
A: After the liver makes bile, the bile moves to your intestines where it helps break down and absorb the fats in your food. The bile also gets resorbed and winds up returning to your liver, so the "cholesterol-bile" essentially stays in your system.
You need extra bile when you eat fatty foods (think anything processed or fried). That's why your gallbladder stores extra bile. If you have a hard-to-digest fatty meal, the gallbladder dumps in the excess bile. If you regularly eat these fatty foods, especially certain types of fat, you'll put a lot of strain on your liver as it has to ramp up its production of bile.
If you don't have a gallbladder, you lose that reserve of bile that it stored. That means if you eat these fatty foods, you'll have more trouble breaking them down. That puts more of a strain on your liver.
A few studies, including an Iranian study in 2014, found that after surgery to remove the gallbladder, patients had lower total cholesterol numbers. However, triglyceride levels rose. That could be worrisome given that high triglyceride levels increase your risk of fatty liver disease – the disease where you store excess fat in the organ that causes functional problems.
There's some fascinating stuff out there about how this all works, but we don't want to get too into the weeds. The main point is that folks who had their gallbladder removed should take care to avoid those over-processed and fried foods. And talk to your doctor about tests for fatty liver levels. Remember, don't just treat the triglyceride number.
You can read our full report on cholesterol and the real cause of heart disease right here.
What We're Reading...
- Did you miss it? How to keep yourself safe from the COVID-19 pandemic.
- Something different: What's behind the murder hornet mania?
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
August 7, 2020