By Mike Cordak, RICP®
Unless you’ve been living under a rock or ignoring financial news completely, you’re likely to have heard the term “Bitcoin” or “cryptocurrency” over the past several years. Digital currency is a popular and highly controversial financial topic today, mainly due to the unique nature of the asset, how it is created and maintained, and the rapid rise and fall of each currency’s prices over a period of time—including over days or even hours. It’s hardly debatable that cryptocurrency is the Wild West of finance today.
Cryptocurrency has also drawn the scrutiny of federal officials, especially the Securities and Exchange Commission (SEC). As the top U.S. regulator, the SEC has been taking a hard look at cryptocurrencies, trying to determine how to both regulate (or not) this investment and how to protect investors from harm from the inherent and real risks associated with digital assets.
New Developments in the Cryptocurrency Arena
On January 10, 2024, the SEC approved the listing and trading of a select number (11) of so-called “spot Bitcoin ETF” (exchange-traded fund) shares. This action provided the means for everyday investors to invest in shares that are designed to closely track the actual price of Bitcoin without actually having to purchase Bitcoin directly. Proponents use the example of investing in the State Street Global Advisors SPDR gold ETF (GLD) as an example of how one can invest in the indexed ETF rather than own the actual commodity directly, with the problems that entails.
So far, a limited number of fund managers have been allowed to participate and offer spot Bitcoin ETF products of their own. These include well-known names such as BlackRock, Invesco, and Fidelity Investments. Each fund manager has introduced and promoted their own version of spot Bitcoin ETF and inflows have reached $11 billion since January 11, 2024. Investment bank JPMorgan projects inflows of $62 billion over the next two years.
Opportunity or Minefield?
As with many entrants to a new opportunity, a few spot Bitcoin ETFs have fared better than others. Among these, the ETFs from BlackRock’s iShares, crypto-specialist Grayscale and the Fidelity Wise Origin Bitcoin Fund have been the frontrunners. Choosing which to invest in can be tricky—like flying without a radar!
As with any other investment, it pays to do your research and go through your pre-flight checklist before committing to take-off. Some criteria to look for:
- Volume and provider assets under management: With any new investment idea, you want to know the provider is large enough to stand behind it and will be around for the long run. Look to start with a large fund manager.
- ETF expenses: Like other investments, internal expenses matter in the long run. Look for those on the lower end of the annual expense spectrum.
- Experience: It matters. Cryptocurrencies have been around since 2007 or so, but have only gone mainstream over the past several years. Look for a fund manager with the resources and experience to know what they’re doing.
- Positive inflows: With new idea investments, you don’t want to be the “last man standing” in the fund. Many times it pays to choose a large fund manager that has a good track record within the investment world and has the confidence of the investing public. If you see a fund manager with a lot of outflows from its offerings, it makes sense to keep looking.
Is This Type of Alternative Right for You?
Investing for the future involves many factors, and one of the first is whether the investment is appropriate for your risk tolerance and investment objectives. Cryptocurrency investments carry their own special risks, especially due to the extreme volatility and the fact these investments are heavily traded day to day. (After all, a 30,000-foot cruising level is no place to be trading on your portfolio.)
There are many critics and pundits who want nothing to do with digital assets, but for some investors (who are willing to accept the risk and volatility of these investments), allocating a small portion of their portfolio in an informed, diversified manner might be worthwhile in the long term.
Delta Air Lines pilots are used to certain risks—that goes with the profession—but risks can be managed with safeguards, prudence, professional skills, and discipline.
It’s also worth seeking out the guidance of an experienced advisor who understands both the investment world and your own unique needs and concerns as a commercial pilot. If you’d like to learn more about whether alternative investments should be part of your long-term investment program, let’s connect.
We’re Here for You
Optimum Wealth Management can help you navigate alternative investments with ease. We serve the financial, retirement, and wealth planning needs of Delta pilots and their families. We do this starting from when a pilot is first hired all the way through the transition to retirement and beyond.
As an RIA, I have a fiduciary responsibility to you, meaning I’m held to a higher standard of fairness than other advisors, and am required by law to make decisions based on my clients’ best interest, not my own.
To schedule a complimentary meeting, get in touch online, call (678) 778-2694, or email mcordak@optimumwlth.com.
About Mike
Mike Cordak is founder and owner of Optimum Wealth Management, a Registered Investment Advisor serving the financial, retirement, and wealth planning & management needs of airline pilots—from hiring all the way through the transition to retirement and beyond. As a Delta pilot himself for more than two decades, Mike’s goal is to cultivate authentic life-long relationships with pilots to help them and their families create, grow, and preserve their wealth. As someone familiar with the pilot lifestyle and their unique goals and concerns, he offers a different investment strategy than the average advisor. Combining a fee-only business model with a fact-based tactical investment management style, he creates an environment that allows him to fulfill his mission of bringing clients financial peace.
Mike received his finance degree from Gies College of Business – University of Illinois Urbana-Champaign before pursuing a career as a pilot. After losing the defined-benefit plan at his airline in 2006, he entered the financial industry, inspired to create his own firm and take control of his finances to pursue financial stability after retiring as a pilot. He obtained the Retirement Income Certified Professional® designation, which means he has a legal and ethical duty to put clients’ interests first.
Mike and his wife, now empty nesters, love getting together with their kids as often as their schedules allow. Outside of reading financial news, he enjoys flying his own plane, golfing, hiking, skiing, and playing tennis and pickleball. He also can be found enjoying good wine and food, spending time at the beach, or traveling to foreign countries. He also has an interest in the Atlanta Mission, which helps out homeless people, the Woodstock City church, and contributes to various young people going out on mission trips and working on college campuses. To learn more about Mike, connect with him on LinkedIn.
