Should Bitcoin Be Part of My Portfolio? The Benefits of Owning Cryptocurrency In Your Portfolio

Should Bitcoin be part of my portfolio? There are many benefits of owning cryptocurrency as a very small portion of your portfolio. I will preface this article by saying that I am not a huge fan of cryptocurrency overall as a long-term play, even though I do believe that it will probably exceed inflation and even stock market returns over the long term. I just don’t fully believe in the model of cryptocurrency necessarily, because it is not backed by any fundamentals, and because it is way too speculative in nature, and with an asset as volatile as bitcoin, ripple or Monero, I see more harm than good being done. This is not to say that I don’t believe in Blockchain technology, and that I think it is an extremely efficient way of moving funds and that’s it definitely has a place in high finance over the long term.

How to Properly Add Crypto Exposure To Your Portfolio

Here’s why I say you should own cryptocurrency as a very small portion of your portfolio, something like 5% of the total balance regardless of net worth. In the times of inflation that we are currently in, even an average stock market return does not get you much when you look at real rate of returns, and inflation adjusted numbers. If we look at the average annual stock market return, which is something like 10% non-inflation adjusted, and 7% inflation adjusted, and our current inflation rate of 6.9%, we have a serious problem here.

Put your money in the stock market, and over the long term right now you are actually breaking even in terms of real spending power. Put your money in a CD or a savings account, and you are likely losing as much is 6% for holding these liquid money market instruments. With this in mind, I don’t think that speculating on cryptocurrency has a very small portion of your portfolio, via a diversified stock market index fund that tracks the quality of all different cryptocurrency‘s, is necessarily a bad idea.

Should Bitcoin Be Part of My Portfolio? Yes But Via An NYSE Traded ETF

If we look at the rise of cryptocurrency over the long term, you have likely gotten several hundred percent in gains over the last 5 to 10 years, depending on which crypto asset you held in your portfolio. Even given this, no one can time the market, and the same is true in the market of cryptocurrency. There’s no free lunch, and obviously there are going to be those that get a massive reward for taking a mass risk, but I would not recommend syncing all your eggs into the basket of cryptocurrency. As a small piece of a portfolio however, it can enhance your risk profile enough so that you were able to beat stock market returns, and serve as a fantastic inflation hedge, and even an alternative to the general equities market, over the long term.

Well I would recommend doing, is using something like the new Coinbase IPO, or GBTC, which is a trust trades just like a stock on the secondary market exchange, as a small piece of your portfolio. In say a $1 million portfolio, someone has 90% bonds, corporate credit, and diversified ETF exposure, who wants to take a very small position in a crypto fund the trades just like a stock, say $50,000, does not upset me. In fact I would call this type of investor very smart, and that they are not afraid to take some additional risk, in order to hedge their portfolio against the massive Inflation numbers that we are currently getting.

Final Thoughts On Should Bitcoin Be Part of My Portfolio? The Benefits Of Crypto Exposure

What I do not recommend, is necessarily ever buying a crypto asset as naked cryptocurrency. The thought of having money stashed away in bitcoin, ripple, or an actual Monero assess when you could have it on a secondary exchange on the stock market, in a way that is far more liquid, weightless hacker bowl, and way more able to seem like a legitimate asset, is just crazy. I don’t recommend using the bitcoin exchanges, at least for this type of strategy, and the last reason for this, is that an adz possible unnecessary scrutiny your tax return. Bitcoin and other cryptocurrencies are on this year‘s IRS dirty dozen list, right up there with captive insurance companies, and foreign bank accounts. Especially for someone with $1 million in assets, I do not recommend purchasing naked cryptocurrency. It is something of a stupid speculative gamble, especially when you can get legitimate crypto exposure through the secondary market via a trust trade on the New York Stock Exchange. Be smart, take a risk but take a calculated risk, make crypto a very small portion of your portfolio, and make it a small portion through legitimate means.

Thanks for reading and I hope you enjoy the article, for more information on all things business, finance, and now Crypto. 

Cheers!

*Inflation Hedging.com

Sources:

https://www.bankrate.com/banking/cds/cd-rates/

https://money.cnn.com/data/markets/

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