Every time I mention the word "bitcoin," my inbox fills with the same question...
"Doc, you're a conservative investor. Why would you tell folks about bitcoin?"
It's true that I am largely conservative. If you've read anything from me, you've probably heard of "sleep well at night" stocks. These are the kinds of companies you can hold for years without having to worry about your portfolio. I don't want readers to make investments that would destroy their finances.
But I also don't believe in missing out on amazing potential moneymaking opportunities out of fear. You just have to make the investment with a clear awareness of the risk, and to make sure the worst case won't destroy your overall finances.
This is something I've practiced in my own life...
My wine label, Eifrig Cellars, is a good example of this. I recently mentioned how the California wildfires destroyed this year's harvest. While it's disappointing, it's OK. Fortunately for me, I can handle years without a harvest. By my research, that meant that odds were I'd only have a successful harvest once every two to three years.
I know the risks and I'm prepared for them.
That's one reason I sometimes write about bitcoin and other cryptocurrencies. Even if you're a skeptic, you can't deny that cryptocurrencies have become more popular. The problem is, lots of folks don't really know what they're getting themselves into. They see cryptos climbing higher in the headlines and go all-in, thinking this will be the investment of a lifetime.
That's not the way to go. Still, there's no denying bitcoin is a hot speculation right now. So it's worth taking some time to understand what's going on in the cryptocurrency markets... why bitcoin is getting so much buzz... and how to invest wisely in cryptocurrencies if you choose to do so.
That's because my job is to empower you to make the best decisions. And that includes getting the absolute best research available.
Like me, our in-house cryptocurrency expert Eric Wade believes in smart speculation. Every month in his research service called Crypto Capital, Eric does all that work for you. He simply hands you the names of his best crypto recommendations, along with his in-depth analysis, based on intense due diligence nobody else is doing at this level.
Recently, Eric released a video where he...
- Walks you through his crypto strategy...
- Explains why cryptos aren't as complicated as you think...
- And details why the crypto boom is far from over.
Now for this week's Q&A... Keep sending us your suggestions, comments, and questions. We read every e-mail... [email protected].
Q: I'm aware of the health benefits and I've come to favor cold-brewed (less acidic) coffee, but, as a diuretic, how much water should I drink to cancel out the coffee? – M.T.
A: Coffee has a bad, and largely undeserved, reputation as a diuretic. True, the caffeine in coffee dehydrates you. But remember that coffee also contains a lot of water. So on balance, a cup of American coffee is going to hydrate you, not dehydrate you.
Alcoholic drinks dehydrate you a bit. And dehydration from too much alcohol is one of the leading causes of headaches. The rule of thumb I follow is to drink one glass of water after every glass of wine.
Certain medications (like actual diuretics) and chronic illnesses like diabetes require extra care for hydration, so you'll need to increase your water intake to account for those cases. But that's true regardless of your coffee intake.
Q: Some of your successful recommendations have become more than the 5% allocation in my portfolio that you recommended. Should these be sold down to the 5% level? – J.F.
A: This is a great question... I rebalance my portfolio at least once a year. I'll do it more frequently if certain categories have moved particularly fast. But in general, even with a few great picks, most people don't need to rebalance more than three or four times a year.
Imagine an investor has a $100,000 portfolio with 20 investments ($5,000 each). If one position goes up 25% in a year – a strong one-year return – you now have a portfolio worth $101,250 and your one position is up to $6,250. Your investment is just 6.17% of the total.
Sure, you can rebalance back down to 5% at this point, but I wouldn't worry about it until a successful position like this started to approach 10% or 15% of your portfolio. And don't sell within 365 days of purchasing the stock if you want to avoid paying short-term capital gains.
The bottom line is that the 5% rule is really meant to create awareness for investors when initially placing money on new investments... i.e., don't put all your eggs in one basket.
Q: I'm getting ready for tax season and we have a filing cabinet full of old tax papers going back years. What should we keep and what can we clear out? – J.C.
A: The IRS generally has a three-year window after your filing date to initiate an audit, so you want to keep documents at least that long. That includes W-2s, 1099s for capital gains, receipts for gifts to charity, 1098s for mortgage interest, and any records for contributions to plans like 529s or traditional IRAs.
But there are some records you do need to keep longer. For any investment purchases, keep the transaction records for at least three years after you sell the investment. Similarly, keep the receipts and records for three years after you sell your home. And finally, keep records for any contributions you made to a nondeductible IRA (like a Roth) for the life of the account plus three years. The reason is to prove you paid taxes before making withdrawals, so you aren't double-taxed.
Editor's note: Our offices are closed for Presidents' Day next Monday. Expect your next Health & Wealth Bulletin issue on Tuesday, February 16.
What We're Reading...
- Stay hydrated... Save your life.
- Something different: The auto industry is facing a disastrous shortage.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
February 12, 2021