A top financial advisor has a surprisingly high recommendation for the percentage of a portfolio that should be allocated to cryptocurrencies.
Ric Edelman, founder of advisory firm Edelman Financial Engines and author of multiple investing books, recently published a white paper detailing some new investment strategies — and some new thinking on crypto investing.
Edelman recommended investors allocate at least 10% of their portfolio for crypto assets and, in some cases, as much as 40%.
Most financial advisors would likely recommend a much lower crypto allocation, and not long ago, Edelman would have been counted among them. In his book “The Truth about Crypto,” published in 2021, he said crypto should be a much smaller part of any portfolio, at about 1%.
He’s changed his tune, though, advocating for an investment strategy that’s highly bullish on the continued growth of digital assets.
“There’s no logic to omitting an asset class that’s outperformed all others for 15 consecutive years and is widely projected to continue doing so for the next decade or more,” Edelman said in the paper.
He cited historic performance data showing that portfolios with bitcoin have generated “higher returns with lower risk.”
That said, Edelman doesn’t think all investors should allocate the same amount to crypto. His recommendation is that conservative investors allocate 10% of their portfolios to crypto, while moderate investors target 25%. For aggressive investors, it should be as much as 40%.
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“Owning crypto is no longer a speculative position; failing to do so is,” he said. “A passive market-weighted index comprised of all asset classes would have 3% in crypto, so an investor who lacks crypto is now effectively shorting it.”
Edelman also criticized a popular investment strategy. He said that the 40/60 mix of stocks and bonds, something that many investors have used to guide their decisions for decades, is “dead.”
He cited “unprecedented rates of longevity” generated by “remarkable advances in exponential technologies.” Therefore, Edelman sees the need for financial portfolios that can generate revenue for 50 years or more.
As the paper makes clear, Edelman believes that the answer to this lies in further crypto exposure. In his view, the economy is currently in the “third evolution” of the internet, a phase driven by blockchain technology, which he sees as revolutionizing how money is transferred.
“Blockchain technology is evolving into the internet of money, moving value at internet speed,” Edelman said. “When you can move money as easily as sending an email, everything changes.”
As investor and crypto bull Anthony Pompliano recently highlighted, Edelman’s statements are in line with arguments that bitcoin bulls have been making for years. However, Edelman is the first prominent financial advisor to advocate for such a high crypto allocation.
