Does bitcoin belong in your financial plan?
With cryptocurrency starting to pop up in portfolios managed by institutional investors, it’s a question a growing number of individuals are asking themselves and their financial advisers.
The answer, advisers say, is: It depends—on factors including an investor’s tolerance for risk, financial capacity to absorb losses, and knowledge of the digital asset industry. Among those who use it for some clients, most recommend sticking to a small allocation, on the order of 1% to 2%.
In a recent survey of more than 500 financial advisers conducted by organizations including the Financial Planning Association, nearly half of advisers said clients have asked them about investing in cryptocurrencies, up from 17% in 2020. About 14% said they use or recommend it, compared with fewer than 1% last year.
Bitcoin “is only 10 years old,” said Ric Edelman, founder of advisory firm Edelman Financial Engines LLC and an investor in digital startups. “The focus has been on mining and trading it. But now people are beginning to go to the next level of how to incorporate it as part of a larger portfolio.”