How to Buy Bitcoin: A Step-by-Step Guide for Beginners

My investing strategy has never been very complicated or flashy. I typically stick to buying index funds. If I'm feeling crazy, I'll throw in an individual blue chip stock here and there.

I've been in the financial services industry for over a decade, and I've seen firsthand how people's relationships with money can evolve over time. Some people start out feeling completely lost, but with a little guidance and effort, they eventually become financially literate and empowered. Others may begin their journey with a strong understanding of personal finance, but as life throws them curveballs, they may find themselves struggling to stay afloat.

No matter where you are on your financial journey, there's always something new to learn. And that's why I'm excited to share this story with you — a story about how I, a financial journalist who had never owned bitcoin before, decided to finally take the plunge and invest in the world's most popular cryptocurrency.

Throughout the story, I'll be sharing some of the valuable insights I gained from conversations with three financial experts, as well as my own experiences navigating the world of bitcoin investing. Whether you're a seasoned bitcoin investor or you're just starting to explore this exciting asset class, I hope you'll find something interesting and informative in this story.

So, without further ado, let's dive into the world of bitcoin investing together.

The decision to finally buy bitcoin

As a financial journalist who covers personal finance, investing, and economics, I've been following the development of bitcoin and other cryptocurrencies closely for years. Despite my interest, I had never personally invested in bitcoin — until recently.

Over the years, I've had many conversations with people about bitcoin, ranging from enthusiasts who believe it's the future of money to skeptics who believe it's a bubble waiting to burst. I've also heard from people who made (and lost) a lot of money quickly by trading bitcoin.

While I found these stories interesting, they didn't ultimately convince me to buy bitcoin. What did convince me, however, was the increasing interest from large financial institutions and asset managers in bitcoin, especially postelection.

For example, BlackRock, the world's biggest asset manager, recently suggested a bitcoin allocation within a multi-asset portfolio. Trilliondollar asset managers are throwing their support behind bitcoin, and bitcoin ETFs have taken off this year.

To me, this signaled a growing acceptance of bitcoin as an asset class, and I decided there was no better way to determine if bitcoin was really the next big thing — or if Wall Street simply had FOMO — than by buying bitcoin firsthand.

With that, I set out to learn how to buy bitcoin and decided to ask three financial experts for some guidance. I spoke with John Haar, managing director at the bitcoin services firm Swan Bitcoin; Robert Cannon, a financial advisor at Experity Wealth; and David Laut, chief investment officer at Abound Financial.

Together, they provided me with a comprehensive overview of the different ways to invest in bitcoin, the factors to consider when determining a portfolio weight, and the risks and potential rewards of bitcoin investing.

Here's a summary of my conversation with each expert, along with some of the key takeaways I gleaned from their insights.

John Haar on dollar cost averaging

One of the first questions I had was whether it was a smart choice to buy bitcoin after the price had already run up so much.

Haar gave me an analogy that I found helpful. "If someone said 'Am I too late to bitcoin?' my answer would be 'Do you think you're too late to buying real estate or the S&P 500?'"

He explained that if an asset is a good storer of value, then it's going to appreciate over time and there isn't really a concept of being too late to it.

Of course, bitcoin is a unique asset, and its price has experienced some wild fluctuations over the years. But Haar's analogy still provides a useful framework for thinking about the long-term potential of an asset like bitcoin.

I also asked Haar for his advice on how to determine a portfolio weight for bitcoin. He told me that he personally recommends his clients keep a 5% allocation to a combination of gold and bitcoin if they're looking for a more aggressive investing style.

The reason for this is because these assets aren't typically correlated with the performance of the stock market, Haar explained.

David Laut on inflation hedges

Laut also mentioned that he's seen people use bitcoin as an inflation hedge in their portfolios, which is something I hadn't considered before.

Cannon also mentioned that some people use bitcoin as an inflation hedge, but he added that it ultimately depends on your risk tolerance. He's advised clients with anything between 1-10% of their portfolio in bitcoin.

Robert Cannon on the importance of risk tolerance

When I asked Cannon for his advice on how to determine a portfolio weight for bitcoin, he told me that it really depends on the individual's risk tolerance and financial goals.

Cannon has clients with anywhere from 1-10%