Thursday , 19 April 2018


How Much, If Anything, Should You Allocate To Bitcoin In Your Portfolio?

A lot of people think cryptos are in a big bubble. They’re some of the mostDigital-Currencies-Should-Be-Led-by-the-Central-Banks1-300x225 volatile asset markets have ever seen and, with so many different types of cryptos out there, it can be hard to know how much of your portfolio you should allocate to any one of them so today, I’m clearing up the confusion.

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1. Start small

The first thing to keep in mind when you’re investing in cryptos is to start small and when I say small, I mean with a few hundred bucks. (Remember that you can buy a fraction of a bitcoin… the minimum lot size is not one bitcoin.)

Using a small sum, get used to the process of transferring, trading and safely storing cryptos. Once you’re comfortable, then you can start to level up to bigger sizes.

You see, the process of buying, moving and storing cryptos it is not like traditional online banking or investing. In the world of crypto, if you make a mistake you can lose your money in an instant. If you send bitcoin to the wrong address, it’s gone. That’s it. There’s no recourse. And there are very few, if any, “I forgot my password” options in the crypto world so it’s critical to familiarise yourself with the mechanics of buying crypto and moving it around first with a relatively small sum, before moving on to larger dollar amounts.

2. Never invest more than you can afford to lose

By that I mean, if you woke up tomorrow and your entire crypto portfolio was worthless, you’d be fine financially. It would sting of course, but it wouldn’t be ruinous or anywhere close so be conservative.

The table below is a very general portfolio allocation guide…

…The left-hand column denotes the MAXIMUM PERCENTAGE of a portfolio that should be invested in cryptos depending on your experience AND your market bullishness.

Even the most enthusiastic beginner who’s in the process of learning the ropes should not allocate a position that exceeds 1% of their total investment portfolio to begin with at an absolute maximum. If your portfolio grows to exceed your maximum allocation, that’s fine – but I’m talking about the hard dollars you initially commit to crypto and, remember, never invest more than you can afford to lose.

How much do you allocate amongst different cryptos?

3. There’s bitcoin, and then there’s everything else

In my opinion, bitcoin should be the largest single position of any crypto portfolio – even after its recent price surge. You see, bitcoin is still the “reserve” currency of all cryptocurrencies so it makes sense to understand bitcoin first.

…Bitcoin is the first crypto asset that tens of millions of people who enter the space after you will be buying so you should buy it before them.

If you are looking to become an active crypto investor, I think you should hold anywhere from 30-70% of your crypto portfolio in bitcoin, with other crypto assets taking up the rest and note: The newer you are to the space, the higher the percentage of bitcoin you should own. Total beginners will start by allocating 100% into bitcoin as that’s the first crypto they buy. Then they’ll get more comfortable and start to buy other cryptos so the proportion of bitcoin will fall below 100% as you begin to diversify…

Please remember: Do not allocate more personal capital to this sector than you can afford to lose. This is as speculative and risky as it gets – that’s the price we pay for the kind of returns on offer…

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