Does Bitcoin Belong in Your Portfolio?
By Brian Wheeler, Director of Wealth Management & Business Brokerage
Bitcoin has a way of getting people’s attention. When the price is going up, people wonder if they’re missing out. When it drops, the question quickly becomes whether it was ever a good investment in the first place. Maybe there’s a better way to look at it.
Instead of trying to predict where Bitcoin is headed next, I think the more useful question is: does Bitcoin deserve a small place in a well-diversified portfolio?
There are good arguments on both sides.
The Case for a Small Allocation
One of the most interesting things about Bitcoin is that the supply is limited. There will never be more than 21 million Bitcoin. At the same time, it’s becoming much easier for everyday investors, investment firms and large institutions to own it.
Limited supply and growing demand can be a powerful combination.
The Risks to Keep in Mind
But let’s not ignore the other side.
Bitcoin doesn’t produce earnings or pay a dividend. We can’t look at its profits and calculate what we think it’s worth like we can with a business. And we’ve already seen how quickly the price can rise—or fall.
That’s why I don’t think this needs to be an “all in or all out” decision.
Why Position Size Matters
Think about a 3% allocation.
If you put 3% of a portfolio into Bitcoin and Bitcoin fell 80%, the impact on the overall portfolio would be about 2.4%, assuming everything else stayed the same.
Nobody wants to lose 80% on an investment. But losing 80% on 3% of your portfolio is very different from losing 80% on 30% of it.
Now look at the other side.
If Bitcoin continues to gain acceptance over the next 10 or 20 years and increases significantly in value, even a small investment could have a meaningful impact on your portfolio.
You don’t have to make a huge bet to participate in a potential opportunity.
A Broader Way to Think About Investing
And really, this isn’t just about Bitcoin. It’s about how we think about investing.
We don’t have to know exactly what will happen next. We need to understand the opportunity, understand the risk, and decide how much of that risk makes sense for you.
For some people, the right amount of Bitcoin may be zero. For others, maybe it’s 1%, 3% or 5%.
There isn’t one answer that works for everyone.
Your investments should fit your financial plan, your goals and the amount of risk you’re comfortable taking—not what’s getting the most attention in the news.
Bitcoin’s future is uncertain. But that doesn’t mean we should ignore it.
It means we should understand it.
Ready to Talk It Through?
Wondering whether Bitcoin—or another alternative investment—belongs in your portfolio? Let’s have a conversation.
We can help you look at the opportunity, understand the risk and decide whether it makes sense as part of your overall financial plan.