Retirement: How to incorporate crypto into your portfolio

iTrustCapital CEO Todd Southwick joins Yahoo Finance Live to discuss reasons to consider investing in bitcoin and other cryptocurrencies in retirement portfolios, how traditional investors are planning for retirement, and the ongoing interest in the crypto space despite volatility.

Video transcript

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ADAM SHAPIRO: So we were talking about Bitcoin and cryptocurrencies falling today. And we saw Bitcoin at one point was trading below $38,000. I bring all of that up because as part of our retirement series brought to you by Fidelity Investments, we want to talk about the way people can invest in crypto-- it's much easier-- but also including that in your retirement portfolio. And one of the firms that's making it easier to do this is iTrustCapital. The CEO, Todd Southwick, is joining us right now.

And I guess, you know, a lot of us who are very nervous when we see kind of the fluctuations you get-- I mean, Bitcoin is really ginormous-- but even in Ethereum, how does iTrust make it easier for me to get into this-- because this is a space people want to be in-- but also to measure the volatility as I'm perhaps using my IRA. Because it's my retirement account, I certainly don't want to lose it.

TODD SOUTHWICK: Yeah, I have few comments on that I feel might be helpful. I would say, first, we've seen this type of volatility before and I can't speculate on price, but from our platform side, we have not seen a decrease in the amount of inflows and new clients. We see less transactional activity, but I think it's a good sign for the market that we haven't seen a decrease in the number of people coming onto our platform.

In terms of why use an IRA to invest in cryptocurrency, the first answer is tax advantages. And, you know, especially if you're buying and selling regularly rather than buying and holding, because every time you buy and sell, obviously, is a taxable event. So if you're doing that in a non-tax advantaged account, it's very difficult to make money over the long term with taxes coming out on every transaction. On top of that--

EMILY MCCORMICK: Hey Todd-

TODD SOUTHWICK: --for most Americans-- sorry about that.

EMILY MCCORMICK: Yeah, Todd, this is Emily here. I wanted to ask. Bitcoin and especially many of these newer cryptos haven't necessarily been long enough to see performance over a multi-decade horizon. Especially, you know, that carries implications for those in their 20s and 30s trying to save for retirement decades into the future. How should investors be thinking about this in terms of what percentage or what allocation of their portfolios should potentially be in crypto?

TODD SOUTHWICK: So, just let me preface this by-- I can give my personal opinion, but the company opinion would be that we cannot give that type of advice. I think if you're a younger investor, you can invest a higher percentage of your portfolio. The older you are, it's a higher-risk asset. You're going to want to do less of your portfolio. Then you know, looking at the younger market and how it relates to our platform, I think an interesting factor is, you know, how many new clients are coming in that are opening their IRAs for the first time because it's an interesting new type of asset that, in particular, appeals to the younger investor.

ADAM SHAPIRO: You know, you're talking about the younger investor, but lots of middle aged investors is, especially during the Great Resignation, leaving companies in which they have to roll over 401(k) assets and you can roll those over into IRAs. Are you seeing any kind of momentum from that kind of transfer?

TODD SOUTHWICK: You're going to like the answer. So, you would expect us to have a lot more clients in that 25 to 45-year-old age range, but it's actually quite the opposite. We have twice the amount of clients in the 45 to 65 age range as opposed to the other. So, I mean, you could make a lot of comments on the reasons for that. It's part of it that they have an existing retirement account, but I think it also speaks to the seriousness of the crypto market, especially as it started to change in 2020.

But we have a much broader type of investor base coming in. And there's, you know, the new term floating around is Crypto Dad. So we like to think of ourselves as a platform for Crypto Dads. Somebody coming in and making an investment in this exciting new type of asset that, yes, doesn't have a 20 year history, but I think everyone agrees that it's going to be here.

EMILY MCCORMICK: Do you have data showing whether most of your users are more crypto traders and conducting more trades or are many of these buy-and-hold, longer-term crypto investors?

TODD SOUTHWICK: We're at about 70% buy.

ADAM SHAPIRO: What advice--

EMILY MCCORMICK: And what do you think-- Go ahead, Adam.

ADAM SHAPIRO: Go ahead, Emily. No go, Emily.

EMILY MCCORMICK: I was going to ask, what do you think that really says about the burgeoning crypto investor and what this actually means in terms of the future of the asset prices and its utility going forward?

TODD SOUTHWICK: I think, again, like I said earlier, we're not seeing a decrease of inflows of capital coming onto our platform, which just shows that people are coming in, they're still optimistic, and they're holding their dollars on the sideline waiting to come in. If we were seeing a decrease in the number of clients, I think that would speak more largely to less interest in the cryptocurrency market and that's just not what we see.

ADAM SHAPIRO: I just want to confirm that I heard the term correctly, Crypto Dads? D-a-d-s?

TODD SOUTHWICK: Crypto dads. You know, it's out there. You know, you even have the younger guys calling themselves Crypto Dad. I'm a Crypto Dad and, you know, again, it's the difference between the 2014 bleeding-edge cryptocurrency investor and a more mature and larger audience of investors that have come in more recently.

ADAM SHAPIRO: Crypto Dad sounds like a compliment, whereas dad bod, I wouldn't want anybody to say dad bod looking at me, but anyway. Todd Southwick, iTrustCapital CEO, all the best to you and thank you for joining.