Long-term investors know the key to success is time in the market. But as the recent performance of the new bitcoin exchange-traded funds shows, over the short term, timing the market has an impact, too.
If you bought into one of the new bitcoin ETFs within the first few weeks of their January 10 approval by the Securities and Exchange Commission, congratulations! In the six months that ended July 31, the median return for the first 10 funds that invest directly in bitcoin was 53.5%.
Nine of the 10 have nearly identical returns, ranging from 53.7% by Franklin Bitcoin (symbol EZBC) to 53.3% for Fidelity Wise Origin Bitcoin ETF (FBTC). All 10 trounced the 14.8% return of the S&P 500 over the period. (Bitcoin itself was up some 52%, measured by closing prices. Funds buy throughout the day, which accounts for some of the discrepancy.)
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you waited a few months and jumped into the bitcoin pool at the end of March, condolences. You’re down about 7% over the past four months; investors in the S&P 500, meanwhile, gained 5.5%.
The similarity in the funds’ performance is not surprising, considering that expenses are also (mostly) comparable. Franklin’s fees are 0.19%; three of the ETFs currently charge 0.25%.
The outlier is the first bitcoin fund, Grayscale Bitcoin Trust (GBTC), charging 1.5%. Its six-month returns appear to lag significantly, but it’s important to note that on July 30, Gray-scale converted 10% of its shares into shares of its newly issued Grayscale Bitcoin Mini Trust (BTC), which has a low expense ratio of 0.15%. Investors in the original fund received shares in the new ETF, and the original fund’s returns were reduced by the spin-off. Prior to the spin-off, the Grayscale Bitcoin Trust’s returns were at the rear of the pack, but still competitive.
Buying stampede. Despite the funds’ volatility, investors have poured a cumulative $17.5 billion into digital-currency ETFs so far this year, according to fund research firm VettaFi. The iShares Bitcoin Trust (IBIT) has become the single most successful ETF launch in history, rising from nothing to $21.5 billion in assets in seven months.
The flow of dollars has sparked the launch of other cryptocurrency funds. On July 22, the SEC approved eight ETFs that invest directly in the second-largest digital currency, ethereum.
Crypto funds can add a little diversification to portfolios and give intrepid investors an easy way participate in the growth of new financial technologies, says Aniket Ullal, head of ETF data and analytics at CFRA Research. But he warns that cryptocurrencies are more than twice as volatile as the S&P 500, and they aren’t a perfect counterweight to stocks. Bitcoin plunged along with stocks in 2022, and struggled in this year’s summer sell-off.
Even the most enthusiastic cryptocurrency investors should pay close consideration to basics such as cost and volatility, says Bryan Armour, head of index fund and ETF research at Morningstar. He suggests keeping an allocation to crypto below 3% of portfolio holdings. “And if investors are wary of or don’t understand crypto, it’s completely okay not to invest,” he says. “Fear of missing out is never a good investment strategy.”
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related Content
-
The Most Tax-Friendly States for Investing in 2025 (Hint: There Are Two)State Taxes Living in one of these places could lower your 2025 investment taxes — especially if you invest in real estate.
-
Want To Retire at 55? See If You Can Answer These Five QuestionsWho said you can’t retire at 55? If you say yes to these questions, you may be on your way to an early retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
One Small Step for Your Money, One Giant Leap for RetirementSaving enough for retirement can sound as daunting as walking on the moon. But what would your future look like if you took one small step toward it this year?
-
This Is What You Really Need to Know About Medicare, From a Financial ExpertHealth care costs are a significant retirement expense, and Medicare offers essential but complex coverage that requires careful planning. Here's how to navigate Medicare's various parts, enrollment periods and income-based costs.
-
I'm a Financial Planner: Could Partial Retirement Be the Right Move for You?Many Americans close to retirement are questioning whether they should take the full leap into retirement or continue to work part-time.
-
From Mortgages to Taxes to Estates: How to Prepare for Falling Interest RatesAs speculation grows that the Federal Reserve will soon start lowering interest rates, now is a good time to review your financial plans for housing, estate, taxes, investing and retirement to make the most of potential changes.
-
This Is How Lottery Winners Build Lasting Legacies, From a Financial ProfessionalWinning a massive lottery jackpot, like the recent $1.4 billion Powerball, requires seeking immediate legal and financial counsel, protecting your identity and winnings and planning your legacy.
-
S&P 500 Slips Ahead of Fed Week: Stock Market TodayAll eyes are on the Federal Reserve ahead of next week's critical policy meeting.
-
September Fed Meeting: Live Updates and CommentaryThe September Fed meeting is a key economic event, with Wall Street keyed into what Fed Chair Powell & Co. will do about interest rates.
