How Much Bitcoin Should Be in Your Portfolio?
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Until this year, the conventional wisdom was that Bitcoin (BTC 0. 60%) should account for no more than 1% of your portfolio. Maybe as high as 3% if you are...
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cryptocurrency
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July 8, 2025
07:15 AM
The Motley Fool
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Until this year, the conventional wisdom was that Bitcoin (BTC 0. 60%) should account for no more than 1% of your portfolio
Maybe as high as 3% if you are very aggressive or have a very long time to go until retirement
But one top financial advisor, Ric Edelman, is now telling people that it's time to boost that Bitcoin allocation to at least 10% and perhaps even as high as 40%
Edelman is in the Barron's Financial Advisors Hall of Fame, so he obviously knows a thing or two
So what's causing him to ratchet up his suggested Bitcoin allocation
Bitcoin and the 60/40 portfolio One fundamental point Edelman makes is that the standard 60/40 portfolio (60% stocks and 40% bonds) may no longer be appriate for most people
People are simply living too long these days, and allocating 40% of your portfolio to bonds won't get you there
As Edelman points out, average life expectancy in America could rise as high as 100 during the next few decades thanks to nological and medical advances
The modern 60/40 portfolio dates back to the 1950s when life expectancies were much lower
As a result, investors had much shorter time horizons, and a 60/40 portfolio made sense. "If you're a financial advisor and you had a 30-year-old client who was saving for their long-term future, you would tell them to put 100% of their money in stocks, because they have 50 years to go," Edelman recently told CNBC. "Today's 60-year-old is kind of yesterday's 30-year-old. " Image source: Getty Images
And that's where Bitcoin comes into the picture
During the past decade, Bitcoin has consistently been one of the top-performing asset
In fact, in most years, Bitcoin has been the top-performing asset
No other asset even comes close, not even high-flying stocks
Those extraordinary returns are important because you need to build your portfolio to keep up with rising life expectancies
Is a 10% allocation too high
In theory, all of this makes sense
Adding even a tiny allocation of Bitcoin to your portfolio can help to turbo-charge its returns, thereby ensuring that you'll have enough money for retirement
After all, that's 10 times higher than the 1% that's currently
Last year, BlackRock Inc. 56%) -- the company behind the is Bitcoin Trust (IBIT -1. 19%) exchange-traded fund (ETF) -- released a report called "Sizing Bitcoin in Portfolios. " It used modern portfolio theory to examine the impact of adding gressively more Bitcoin to a conventional 60/40 portfolio
In other words, it took into account not just the additional returns made possible by Bitcoin but also the additional risk that Bitcoin introduces to the portfolio
Keep in mind that Bitcoin is a historically volatile and risky asset, ne to enormous market corrections and significant declines
In 2022, for example, Bitcoin fell 65%, and investors with heavy allocations to Bitcoin took a beating
So, if you're a rational investor, you need to take into account the additional risk posed by Bitcoin
What BlackRock found is that the optimal allocation for Bitcoin is still just 1% to 2%
Once you boost your Bitcoin allocation to the 4% mark, really strange things start to happen to your portfolio
It suddenly starts to perform in ways that you might not expect, given the dramatic ups and downs that Bitcoin has historically seen
At a 4% allocation, Bitcoin does not account for 4% of the risk in your portfolio; it now accounts for 14% of the risk
So imagine what would happen if you allocated 10%, 20%, or 30% of your portfolio to Bitcoin
At some point, it wouldn't matter what other elements of your portfolio were doing
All that would matter is what Bitcoin is doing
The rebuttal to this, of course, is that Bitcoin is a remarkably powerful portfolio diversifier
As BlackRock has shown, Bitcoin is completely uncorrelated with any major asset class
It doesn't move in sync with stocks, bonds, gold, or commodities
So adding a risky asset Bitcoin to your portfolio can actually make your overall portfolio less not more risky
In of the optimal Bitcoin allocation Bitcoin is a risky and volatile asset, and should only be added to a portfolio if you are comfortable with its overall risk-reward file
We now have over a decade's worth of performance data to suggest that Bitcoin should indeed be added to a portfolio
And we now have the tools -- the new spot Bitcoin ETFs -- to make it possible for investors to achieve precisely the portfolio allocation they desire
For most investors, a 1% allocation may be optimal
But to me, that seems a bit low
As BlackRock suggests, ramping that up to at least 2% makes sense
But before you go higher than that, make sure you understand exactly what Bitcoin is doing to your portfolio, both in terms of risk and reward
Dominic Basulto has positions in Bitcoin
The Motley Fool has positions in and recommends Bitcoin
The Motley Fool has a disclosure policy.
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