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Ric Edelman‘s views of how much of your portfolio you should allocate to the cryptocurrency sector have changed significantly.
The famed financial adviser only suggested a 1% allocation to the cryptocurrency sector in 2021. Now, he says this allocation should be between 10% and 40%, depending on your risk appetite—10% for conservative investors, 25% for moderate investors and 40% for aggressive investors.
“Today, I’m saying 40%, that’s astonishing, right?” he told CNBC last week. “Nobody ever, anywhere has said such a thing as what I’m saying now.”
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There are two major reasons for the drastic change in Edelman’s perspective. The first one, which appears seemingly unrelated to cryptocurrencies, is that humans are living longer.
He said that the widely followed 60/40 portfolio with a 60% equities allocation and 40% allocation to bonds was made assuming that most people would retire at 65 and die at 85. But with people living longer as science advances with each passing decade, Edelman said investors needed more investment growth as they are likely to need money for longer after retirement.
Edelman believes that the cryptocurrency sector presents the best growth potential of any asset class. He said the sector has outperformed all others in the past 15 years and was likely to continue doing so in the next decade. One reason for this is that adoption is “still incredibly low,” he said.
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“It’s only about 5% of the global population that own crypto at this stage,” he told CNBC. “As more and more get involved, … we’re going to see massive asset inflows, and because certainly in the case of Bitcoin, it’s a fixed supply asset, the more people who buy it, the higher the price is going to rise.”
The second major reason Edelman is now comfortable with more significant cryptocurrency exposure is that he believes that a lot of uncertainty about the future of the asset class has now been resolved.
