Cryptocurrency remains a popular choice for investors seeking portfolio diversification and potential high returns. However, its volatile nature and regulatory uncertainties make it a risky asset. Financial experts weigh in on how much crypto exposure is appropriate for different investors.
Most advisors recommend a modest allocation. David Kindness, CEO of Your Creative CPA, suggests crypto should be a small part of a portfolio—about 1% to 5%.
He compares it to a side dish rather than the main course, advising that investors first secure retirement savings, an emergency fund, and eliminate high-interest debt before adding crypto. This approach limits risk while allowing some exposure to potential gains.
Nicky Amore, CFP and wealth advisor, says crypto can serve as a “satellite holding” for clients with high risk tolerance and financial capacity to absorb losses. However, it is not a core asset class and may be unsuitable for those nearing retirement or with lower risk tolerance.
Stan Gregor, CEO of Summit Financial, agrees that crypto can diversify portfolios but recommends keeping it up to 5% to minimize downside risk while participating in possible price appreciation.
For younger investors with steady incomes and long time horizons, Andrew Lokenauth suggests a slightly higher allocation of 5% to 8% max. He warns that crypto should be money investors can afford to lose and not needed for at least five to ten years. Near-retirement investors should avoid crypto or keep exposure under 1%.
Some experts, like Don Grant, CFP, advise that average investors should avoid crypto altogether unless they have money they can afford to lose and expert guidance. He notes that crypto has yet to become a stable, regulated currency.
Others see a place for crypto in moderate to aggressive portfolios. Jeffrey Maged, president of Lifetime Wealth Management, says high-quality cryptocurrencies can reduce risk and enhance returns as part of a speculative allocation, but only in small amounts.
Edward Piazza, president of Titan Funding, highlights crypto’s potential to diversify portfolios due to its different behavior from traditional assets. He emphasizes the importance of regulatory awareness to avoid compliance issues.
David Zuckerman, CFP, cautions that crypto carries too many unknowns to be considered a reliable investment. He distinguishes speculation from investment, noting that crypto currently leans toward speculation due to its short history and volatility.
Kevin Marshall, CPA, reminds investors that crypto is not necessary to build wealth. Traditional investments like index funds and real estate remain effective. Crypto can be a speculative layer for those with high risk tolerance and a solid financial foundation.
In summary, financial professionals generally agree that cryptocurrency should be a small part of a diversified portfolio, typically between 1% and 5%, depending on individual risk tolerance and investment horizon. Younger investors may consider slightly higher allocations, while those closer to retirement should limit or avoid crypto exposure.
