Having a Vanguard account grants you access to all sorts of investment options; from low-cost index funds (including Vanguard) to commission-free transactions of stocks and options. But what about Bitcoin? Can you buy Bitcoin on Vanguard?
Yes, you can buy Bitcoin with a Vanguard brokerage account, but not directly. Right now, there is only one way you can get access to Bitcoin and in this article, I will help you decide whether it’s for you or not.
But first, let’s get something out of the way that is on many investors’ minds…
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Does Vanguard Have a Bitcoin Fund?
Vanguard doesn’t have a Bitcoin fund and they most likely never will.
In Vanguard’s chief executive Tim Buckley’s own words: “You will never see a fund from Vanguard on Bitcoin. We tend to stay away from assets that don’t have underlying economic value. They don’t generate earnings or cash flows.”
The CEO makes clear that over at Vanguard, they appreciate the Blockchain technology underlying Bitcoin, but it’s very hard to predict any long-term return coming from it besides speculation.
Surely not very encouraging is what Vanguard’s chief economist Joe Davis has to say about Bitcoin either: “For investors, adding some exposure to Bitcoin would mean reducing their allocations to tried and true asset classes such as shares, bonds and cash […]. With no cash flows and extreme volatility, the investment case for Bitcoin is hardly compelling.”
Joe Davis, like Tim Buckley, also emphasizes the point that with Bitcoin there is no underlying rate of return like cash flows and dividends as with stocks. Its value is only based on assumptions about the future of the underlying technology; not economic fundamentals.
As you can see, Vanguard’s culture will probably never allow them to launch a Bitcoin fund. Besides, they have a reputation for being the most conservative investment managers in Wall Street and a fund that’s invested in something with no intrinsic value is a great danger to that reputation.
Keep in mind that the founder of Vanguard, John Bogle, advised investors to “avoid Bitcoin like the plague”. So, it makes sense that the founder’s mindset when it comes to risk and what can be considered conservative investing may have had an influence on Vanguard’s decision to stay away from Bitcoin in regards to a fund.
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How Do you Buy Bitcoin on Vanguard?
If you got a Vanguard brokerage account, however, you might want to know what your options are when it comes to buying Bitcoin.
As we already mentioned, you can buy Bitcoin through Vanguard but not directly. The only way right now is to invest in the Grayscale Bitcoin trust.
Simply put, the Grayscale Trust is an investment product deriving all of its value from Bitcoin itself. It can be traded like an ETF and you can buy as many shares as you want.
On top of that, you can also invest in it through a retirement IRA or 401(k) if you have any to reap the tax benefits.
A great advantage of investing through the trust is that you don’t have to worry about buying, storing, and mining Bitcoin yourself which is extremely challenging when it comes to safety. Just think about all those past data breaches and millions of dollars lost over the years and you will come to see it for yourself.
But that service comes with a fee, of course. Right now, the annual management fee the Grayscale trust charges is 2%, which may seem high for those used to buying index funds.
Another drawback is that you can’t buy it unless you have at least $50,000 to spare; the required minimum for accredited investors.
Except for these drawbacks, there are some other things you should take into account before you bite the bullet and invest in the trust.
Should you Buy Bitcoin on Vanguard through the Grayscale Trust?
If you can afford the buy-in of the Grayscale Bitcoin trust and are not discouraged by the management fee, then there is only one thing that is left for you to consider.
Investing your money in the trust comes with the implication that you’re not a direct Bitcoin owner. That is, you won’t be holding your own private keys and therefore you will be in no position to sell Bitcoin through an exchange or spend it.
If this is no issue for you, then great. If it is, though, you might want to not use Vanguard as your access point to Bitcoin and try to buy it directly by yourself.
To do this, you first need to pick an Exchange that Bitcoin can be traded through. An exchange account will allow you to trade Bitcoin just like a brokerage account allows you to trade stocks.
Then you will want to connect your account to a payment option. That can take the form of directly connecting your bank account or a credit/debit card (just keep in mind that buying Bitcoin with a credit card is risky due to the high volatility of the cryptocurrency).
After these two steps, you’re all set to place an order. Just make sure that you safely store your keys in a digital wallet if you don’t want to leave this up to the exchange. Here is a list of the best Bitcoin wallets to choose from.
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To recap, Vanguard doesn’t have a Bitcoin fund and doesn’t plan on launching one in the future.
If you have a Vanguard account, you can actually buy Bitcoin with it but only through the Grayscale Bitcoin Trust.
This may be a good option for those who are not necessarily interested in trading the cryptocurrency itself or spending it. It’s also great if you don’t want the hassle of buying and storing it safely by yourself.
But you must be able to invest at least $50,000 and be alright with the 2% annual management fee.
If not, then you’re better off buying Bitcoin directly through a Cryptocurrency exchange and storing your keys in a digital wallet.
I hope you found this article useful and if you got any questions, let me down in the comments. I will also greatly appreciate it if you shared this with others!
Thank you for reading!
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