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How Investing in Cryptocurrency Works

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

In 2017, Bitcoin went from being worth less than $1,000 to $20,000 per token. The meteoric rise of Bitcoin created an interest in cryptocurrencies that hasn’t disappeared altogether, even though this year’s gains for cryptocurrency investors have been much more modest than last year’s.

As of this writing, Bitcoin is worth around $3,800 per token, and it still has the highest market capitalization of any cryptocurrency. But Bitcoin isn’t the only cryptocurrency out there — here’s what you need to know about cryptocurrency for beginners.

Cryptocurrency for beginners: What is it?

At its most basic level, a cryptocurrency is a digital token secured by cryptography. Because it’s a virtual currency, it’s bought and sold digitally. Many digital currencies are decentralized — a central bank doesn’t control them.

Cryptocurrencies are often based on blockchain technology, which acts as a digital ledger where transactions are recorded chronologically in “blocks” of information. Blockchain platforms are used for sending and receiving payments, executing contracts, managing supply chains, among other purposes.

“The most visible cryptocurrency is Bitcoin,” said Ashe Oro, cryptocurrency enthusiast and co-founder and CEO of cryptocurrency analytics company SteemSmarter. “However, there are hundreds of other cryptocurrencies available.”

Oro pointed out that companies can issue cryptocurrencies in exchange for money as a way to fund different ventures, as well as “mined” by using a particular computer process. However, he added, investors commonly buy cryptocurrencies on an exchange.

How is cryptocurrency traded?

“Just like you can buy a stock on an exchange like the New York Stock Exchange, it’s possible to purchase a cryptocurrency on an exchange like Coinbase,” said Oro, who also spent five years as the head of business development at Euro Pacific Bank.

In many cases, it’s merely a matter of setting up an account on the exchange and connecting a bank account or debit card. Cryptocurrency exchanges display the prices of each token and you can buy (or sell) them at that cost.

A major exchange like Coinbase offers a number of options similar to what you might see when you manage your portfolio using an online stock broker. You can keep your tokens in a portfolio on the website, set up automatic investing so you can buy over time, and set up withdrawals using time delay.

“In terms of cryptocurrency for beginners, Coinbase is a good place to start,” said Oro. “They even have insurance and an offline storage protocol for digital assets.”

If you want access to more obscure cryptocurrencies, other exchanges such as Binance may meet your needs. However, Oro warned, it makes sense to start off with an exchange like Coinbase that more closely mimics the stock buying and selling experience.

In addition to storing your cryptocurrency purchases on an exchange, you can also use a digital wallet. Your wallet is stored on your own computer, and you can only access it with the right key. Oro recommended the wallet offered by Exodus, since it’s compatible with a number of government-based currencies and cryptocurrencies.

“You can withdraw your tokens to your digital wallet from an exchange, much like making a bank withdrawal,” said Oro. “However, just like cash, once you have the tokens in your digital wallet, you’re responsible for them. You could lose them if your computer crashes without a backup.”

What can affect the price of cryptocurrency?

Cryptocurrency prices are often affected by utility, said Oro. He points out that the more useful a currency is, the more valuable it’s likely to be.

“Think about it,” Oro said. “Bitcoin was used to send secure payments around the world without worries about exchange rates and governments being involved. That utility made it valuable.”

Some currencies offer different uses beyond payment transactions. For example, some cryptocurrency enthusiasts see potential in Ethereum because its blockchain platform manages smart contracts.

However, prices are also influenced by speculation. In the 2017 runup, many investors saw that Bitcoin was becoming popular and they wanted a piece of the action. That kind of speculation can inflate the price of any cryptocurrency, Oro pointed out.

But even though cryptocurrencies are becoming more popular, Oro warned that it’s still relatively small potatoes when compared to other asset classes.

“Market caps are small enough that a fairly small number of heavily invested people could make moves that impact cryptocurrency prices in a major way,” Oro said. “Things can be quite volatile, especially with the less popular cryptocurrencies.”

Is cryptocurrency a good investment?

According to Oro, cryptocurrencies were a little less popular in 2018 than in 2017, but they are still picking up steam. “It’s more like things are settling down and people are actually starting to figure out how to invest in them like any other asset class,” he said.

“For many millennials, cryptocurrencies represent a chance to invest in something that isn’t stock,” Oro continues. “On top of that, some cryptos are still being used for exchange, and in some communities looking to live independently of government-controlled money systems, that can be attractive.”

When investing in cryptocurrency for beginners, Oro suggested looking at tokens that have future utility and potential. “You wouldn’t invest in a stock without evaluating it,” he points out. “It’s the same with cryptocurrencies. Really look at what it offers and pay attention to the community around it.”

Oro also warned about some of the risks of investing in cryptocurrencies. “At this point, there’s still a lot of speculation,” he said. “You could bet wrong and lose your investment. Don’t risk money you can’t afford to lose.”

Another risk is in your cryptocurrency wallet. If you keep your tokens in your wallet, you need to make sure you always have the key. “Forget your password and there’s no way to recover it,” said Oro. “And if your computer crashes, it’s all gone unless you’ve backed up your wallet.”

He also points out that if someone somehow gets access to your wallet, there’s no way to recover the money, any more than you could get back cash stolen out of your real-world wallet. That’s why Oro encourages novice cryptocurrency investors to use an exchange like Coinbase and keep the tokens there.

Should you invest in cryptocurrencies?

In the end, Oro said investing in cryptocurrencies can be a smart move, but you have to be careful. Carefully consider whether cryptocurrency investing makes sense for you, and choose tokens that you think are likely to perform well. Then, steel yourself for potential losses.

“If you can’t handle the 80% drops that can come in cryptocurrencies,” said Oro, “you’re not ready for the potential 500% gains.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Miranda Marquit
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Miranda Marquit is a writer at MagnifyMoney. You can email Miranda here

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thinkorswim Review 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Thinkorswim is a free trading platform available to TD Ameritrade customers. You’ll need a TD Ameritrade account to use it and it’s one of several trading platforms available to investors, including a simpler web-based platform as well as a mobile platform that works on iOS and Android.

TD Ameritrade describes thinkorswim as a “professional-level trading platform for serious traders,” and it lives up to this promise. In fact, it’s one of the most feature-rich platforms offered, and only a few others, such as TradeStation, come close to comparing.

But while you’ll get all the premium features you can imagine — including real-time data streaming, more than 400 technical studies, advanced charting tools and much more — the commissions you pay will be higher than many competitors, which increases costs if you make frequent trades.

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The Bottom Line: Thinkorswim is a trading platform with everything a professional trader needs.

  • All TD Ameritrade customers can use thinkorswim for free.
  • Investors can use thinkorswim to trade a wide variety of assets including equities, ETFs, options, futures, forex, and options on futures.
  • You can trade select securities 24 hours a day, 5 days a week, except holidays.

Who should consider thinkorswim?

If you’re already a TD Ameritrade customer, consider using thinkorswim if you’re an active trader or if you want to test out investing strategies without putting real money at risk.

If you don’t currently have an account with TD Ameritrade, it may be worth opening one to get access to this powerful trading platform, along with its paperMoney program, which allows you to test out trading strategies and monitor progress without putting real money at risk. Since there’s no minimum deposit required to open an account with TD Ameritrade — and all account holders can access thinkorswim for free — you have little to lose by giving the platform a try.

But while thinkorswim offers the data you need in an intuitive and easy-to-use app, you’ll pay higher trading commissions with TD Ameritrade than with similar competitors who have equally powerful platforms, such as TradeStation and Zacks Trade. If you’re a frequent trader and want to make regular trades to implement the strategies powerful trading platforms help you develop, you may pay more for the privilege with thinkorswim.

thinkorswim fees and features

Current promotions

Trade commission-free for 60 days + get up to $600

Option trading fees
  • $6.95 / trade + $0.75 / contract
Stock trading fees
  • $6.95 per trade
Account minimum
  • $0
Tradable securities
  • Options
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Futures / commodities
  • Forex
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $75 full account transfer fee
  • $0 partial account transfer fee
  • $0 inactivity fee
Commission-free ETFs offered
Mutual funds (no transaction fee) offered
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Coverdell Education Savings Account(ESA)
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • Custodial IRA
  • SEP IRA
  • Solo 401(k) (for small businesses)
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
  • Guardianship or Conservatorship
Ease of use
Mobile appiOS, Android
Customer supportPhone, 24/7 live support, Chat, Email, 364 branch locations
Research resources
  • Mutual fund reports

Strengths of thinkorswim

Some of the big advantages of using thinkorswim include:

  • Professional level-trading tools and access to endless data. Thinkorswim provides access to advanced charting tools including visuals, Fibonacci tools, and a choice of 20 drawings. You can also use thinkorswim to analyze more than 400,000 economic data points and economic indicators across six continents; can build your own algorithms using thinkScript; and can access options statistics including the Sizzle Index, which allows you to compare current option volume with the five-day average volume.
  • Easy navigation and in-app support. You can quickly find the information you’re looking for with a dedicated in-platform search engine. And if you run into trouble when using the trading platform, the in-app chat allows you to text live with a trading specialist and even share your screen to get immediate assistance.
  • PaperMoney allows you to test out trading strategies and track the performance of your investments. This stock market simulator is a great one for beginning traders and for investors who are more risk averse and who want to see real-world results before putting funds at risk.
  • 24/5 trading of a wide range of investments. You don’t have to limit your trading only to standard market hours.

Drawbacks of thinkorswim

Potential downsides of thinkorswim include:

  • High TD Ameritrade commissions. You’ll pay $6.95 for all equity trades, regardless of trading volume. Competitors with similar advanced trading tools charge less. TradeStation charges just $5 per trade for equity trades, for example. TD Ameritrade also charges $6.95 / trade + $0.75 / contract for options contracts, compared with TradeStation which charges $5 plus $0.50 per contract.
  • A steep learning curve. Mastering thinkorswim can be difficult for beginning investors who aren’t familiar with professional-level trading tools. There’s a learning center, but it may take time to watch demos and read the thinkorswim training manual to learn how to navigate the platform.

Is thinkorswim safe?

Investing is never risk-free. When buying Stocks, ETFs, Options or other investments, you assume the risk of losing money if the investments you buy perform poorly.

But with thinkorswim, you don’t have to worry about losing money because of your broker’s business practices. Thinkorswim is offered by TD Ameritrade, which has $1.3 trillion in assets under management and is a well-respected and established brokerage firm.

TD Ameritrade is a member of the FDIC and SIPC, so cash deposited in your account is federally insured. And the company’s FINRA broker page attests to the fact the broker is in full compliance with regulatory requirements.

TD Ameritrade also aims to deliver the highest security in the industry, and even promises to reimburse you for cash or shares lost from your account due to unauthorized activity that occurs through no fault of your own.

Final thoughts

If you want a full-featured trading platform that provides round-the-clock trading, automatic orders and all the data you could ever need, thinkorswim is a great choice. But if you’d prefer to get similar professional-level trading tools without paying TD Ameritrade’s high commissions for trades, consider looking to competitors such as TradeStation or Zacks Trade instead.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Christy Rakoczy
Christy Rakoczy |

Christy Rakoczy is a writer at MagnifyMoney. You can email Christy here

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Investing

Folio Investing Review 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Folio Investing was one of the first companies to head into online brokering, according to the company. While others were still working with paper, Folio propelled investors to the internet.

Compared to the competition, their flat-fee pricing is enticing to users who might not be well-versed in the online brokerage realm. Their management tools are easy to understand, but don’t come looking for a one-stop shop for your investing. Features are sparse when it comes to in-depth analysis, which might make you look elsewhere for your investing needs.

Folio Investing
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The bottom line: If you’re new to the do-it-yourself world of investing, Folio’s simple management tools are approachable.

  • No account minimums.
  • Flat-fee pricing is charged every month or quarter, depending on the plan.
  • Unlimited personal and retirement accounts.

Who should consider Folio Investing?

As one of the first companies to introduce online investing as an option, Folio has a long history in internet years. The company launched in 2000, though some may be scared off by the company’s relatively young age when compared to more established competitors.

If you’re new to the world of online investing, Folio is a great opportunity for you to learn the basics and grow your knowledge. If you’re only investing in a few different Stocks, you need help, and Folio guides you in the right direction.

Folio Investing fees and features

Account minimum
  • $0
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $100 full account transfer fee
  • $5 fee per security transfer and cash transfer fee ($25 min / $75 max) for partial account transfer
  • $0 inactivity fee
Current promotions

Folio Investing offers a free 60 day trial when you open a new Folio Unlimited Account.

Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • Custodial IRA
  • SEP IRA
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
Automatic rebalancing
Tax loss harvesting
Tax loss harvesting detailFolio offers 10 automated tax strategies that ensures every trade you make in your account will be based on your chosen strategy.
Offers fractional shares
Ease of use
Customer supportPhone, Email

Strengths of Folio Investing

Flat fee: Other brokerages charge a percentage of your investments. Folio charges one flat rate of $29 every month on the unlimited plan. If you’re on the basic plan, it’s $15 every quarter.

While there are charges for other services, such as an IRA Custodial fee, you’re only charged for something that isn’t covered in the flat fee.

No minimum balance: For newer investors who might not have a ton of cash saved up, this is a great gateway into Folio. Other online brokers may require a minimum balance, which can be a turnoff if you know the value of investing but don’t have as much as you need for a specific company.

Unlimited accounts: Whether you’re into individual, retirement or business accounts, you can choose as many as you’d like. You can also add your joint and Trust accounts here.

Tax Football: This is Folio’s patented investment tool that’s the company’s version of tax-loss harvesting. You can sell certain investments that aren’t getting you the results you want and minimize your tax loss.

Drawbacks of Folio Investing

Limited investment types: Folio Investing only offers Stocks, ETFs and Mutual funds options. You don’t have access to things like penny Stocks, Futures / commodities or other types of investments. This is probably fine for beginner investors, but for anyone who is looking for other types of investments, you won’t get that here.

No college accounts: While Folio’s accounts list is long — even including business options! — there are some that are noticeably missing. The lack of a 529 Plan or other educational savings account might be a turnoff if you’re looking for ways to invest in a child’s education.

No apps: If you like the idea of accessing your investments wherever you are, you may have trouble doing that with Folio. There are no phone or tablet apps for on-the-go access.

Is Folio Investing safe?

Folio accounts are FDIC- and SIPC-insured, which protects the securities in your account. This is a good baseline if you’re unsure what happens to your money in case the firm folds.

While all forms of investing carries some amount of risk, Folio doesn’t assure users that their money is protected should there be a data leak or another security breach. Some other online investment companies clearly state the lengths they go to in order to secure your information and money.

Final thoughts

If you’re looking for a simple investing setup with one flat rate, Folio is a great option for your investment needs. It’s an easy tool that allows you to set up as many accounts as you’d like with no account minimum. It’s enticing for a reason: It’s not complicated and takes little effort. This is valuable for newbie investors or those who don’t have a lot of experience hand-picking their investment choices.

But Folio is limited in some areas, such as only offering Stocks, Mutual funds and ETFs. The lack of other securities is a turnoff to hardcore traders. While there are a good amount of ways that investors can make sure their portfolios are giving them the most amount of return, it might not be enough for more advanced investors. If you’re hoping for more in-depth features, like deeper insights or analysis tools, you might want to look elsewhere.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dori Zinn
Dori Zinn |

Dori Zinn is a writer at MagnifyMoney. You can email Dori here

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