Financial advisors say that investors should allocate to Bitcoin what they can afford to lose.
Grow Your Business,
Not Your Inbox
Stay informed and join our daily newsletter now!
April
27, 2021
2 min read
Opinions expressed by Entrepreneur contributors are their own.
Bitcoin rose by over 9%, reaching a total worth of $50,000, CoinDesk reported on Monday, but financial experts are advising against investing heavily in the cryptocurrency.
Because Bitcoin is risky due to its price volatility, financial advisors say that it should make up less than 10% of an investor’s portfolio, according to Investor’s Business Daily. For Empyrion Wealth Management Kimberly Foss, however, crypto should make no more than 3% to 5% of assets.
“I am not actively recommending cryptocurrency,” she told the publication. “At this point, the market is too unproven, too unregulated and too prone to manipulation, both by actors with potentially nefarious motives and also by other forces that are at present not well understood.”
Related: Tax Rules for Buying and Selling Bitcoin and Other Crypto
While Bitcoin and cryptocurrency Ethereum are not experiencing massive drops in value at the moment because of crypto popularity, they typically drop by over 10% in a single day and up to 80% in around a year, according to Terry Sawchuk, CEO of Sawchuk Wealth.
Unlike others, Sawchuk is more optimistic about cryptocurrency because large institutions are investing in Bitcoin and Ethereum and creating a “stabilizing force” as a result.
Still, others urged a level of caution. Ron Brown, president of R.L. Brown Wealth Management, for example, recommended that people invest a maximum of 2% of assets in Bitcoin.
“I personally think 2% is the maximum I’m going with for clients until the dust settles and we figure out which coins are going to survive,” he told Investor’s Business Daily.
On the other hand, Paul Schatz, president of Heritage Capital and treasurer of the National Association of Active Investment Managers, said that the amount allocated to Bitcoin should be between zero percent and 10% based on an investor’s risk tolerance.