There are only a few reliable ways to build serious wealth as an investor. You can own productive businesses or scarce assets, and/or give your portfolio's compounding an unreasonably long runway to work its magic. Retirement investors can do all three, in spirit, by owning a single, simple exchange-traded fund (ETF) that places a scarce asset with standard financial industry plumbing.
That ETF is the iShares Bitcoin Trust (IBIT -1.64%). It strips the complexity out of owning Bitcoin (BTC -0.99%), keeps the fees low, and mirrors the coin's price, all within a brokerage account you already use every day. If your aim is a durable path toward a portfolio worth $5 million over a period of between 20 to 30 years, there's a path here. Below, I'll take a look at what you will need to do.
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Why this plan could work
The iShares Bitcoin Trust is a spot Bitcoin ETF, meaning it's tied to current market prices for Bitcoin. It holds only Bitcoin and charges a reasonable and low expense ratio of 0.25%, charging $2.50 for every $1,000 invested. The trust's mandate is straightforward, as it's designed to track Bitcoin's market price and provide exposure to it for investors, minus fees and expenses.
Scarcity is at the core of the investment thesis for Bitcoin, so you need to understand how and why it works the best over long time periods.
Bitcoin has a hard cap of 21 million coins, with new issuance programmatically cut in half roughly every four years via a process called the halving. After the April 2024 halving, only about 450 bitcoins are mined each day.
Scarcity at the asset level means Bitcoin's long-run supply growth is now below 1% annually, which makes the cryptocurrency even rarer than gold's historical 2% mining-supply growth. In 2028, there will be another halving, constraining supply even further -- and another in 2032, and then again about every four years afterward until every last Bitcoin of the 21 millions coins has been mined.
The longer you hold the ETF, the more time there will be for your slice of a relatively small pie to become more and more valuable. That positions Bitcoin in stark contrast to fiat currency, which, during the decades between now and when you retire, is likely to lose a large amount of its purchasing power. Therefore, when you buy the iShares Bitcoin Trust, you're also buying a decent hedge against inflation.
But Bitcoin and the Bitcoin ETF aren't perfect investments, either. Volatility is the toll you will pay, in addition to the ETF's fees. Bitcoin has a history of 40% to 80% declines, and investing in an ETF won't change that.
This is an asset that can expose holders to large and rapid losses. The way to soldier through is position sizing, patience, and a rules-based buying plan that doesn't depend on your mood.
How to make a 20-year plan
If the thesis for buying Bitcoin is based around scarcity, the process for making retirement money with it (and, by extension, the iShares Bitcoin Trust) is discipline plus time. A practical approach is dollar-cost averaging (DCA). When you DCA, you buy a fixed dollar amount of the Bitcoin ETF at regular intervals, no matter what the headlines say and the price is doing.
In practice, the plan can be very simple. First, pick your cadence and contribution. I buy on a weekly basis, but a monthly basis could work fine, too. Revisit the amount annually if your income rises.
Second, pick the kind of account in which to hold your assets. Holding the iShares Bitcoin Trust in a tax-advantaged account can shield your distributions and reduce realized gains, while a taxable account offers flexibility but adds a record-keeping and tax burden. Review fees and trading costs before deciding, then keep changes to a minimum.
Third, and finally, don't sell your ETF shares once you've purchased them. This step sounds easy but is actually the hardest to do over time.
Assuming that Bitcoin's scarcity and demand continue to compound, a 20% compound annual growth rate (CAGR) over the course of two or three decades, while far from guaranteed, would put an investor contributing roughly $1,500 per month on a plausible path toward $5 million. In historical terms, that CAGR estimate is far below what Bitcoin has actually achieved on an annual basis thus far, but it's important to be conservative with these estimates. The future won't look like the past, and your mileage will vary, but the mechanism is for constrained new supply plus persistent new buyers to support the asset's long-run price appreciation.
If you want a simple path to give yourself a shot at a seven-figure nest egg for retirement, automate your iShares Bitcoin ETF purchases and size the position so you can sleep at night. Then, let time, scarcity, and discipline do the compounding for you.
