Three Ways to Build a Winning Portfolio with Alternative AssetsPortfolios are personal, and ultimately only you and your investment advisor can aptly assess your financial situation and goals. That said, if you’re looking to build a portfolio that incorporates crypto and other alternative assets with the larger goal of minimizing risk and maximizing potential returns, here are a few helpful strategies to keep in mind.
Consider Gold/Digital Gold
Gold, which has been around for hundreds of years, has cultivated a reputation as a reliable alternative asset. A physical commodity in limited supply, gold cannot be printed endlessly like paper, making it a valuable hedge against inflation.
In addition, gold is a decentralized asset that is not tied to any governmental entity, making it a hedge against stock market fluctuations and global turmoil. If you look at the data, you will see that the price of gold has increased in the following many turbulent historical events, including the Brexit vote in 2016 and in the midst of tensions United States and North Korea in 2017.
It perhaps goes without saying that there is a lot of global turmoil happening now in 2018 as well, especially in light of the United States’ active trade war with China. Given all of the volatility in today’s economic and global landscape, adding reliable alternative assets such as gold to your portfolio, in my opinion, is a proactive move.
Furthermore, since gold in its traditional form can be difficult to hold, and the purchasing fees for a retirement account can be very high, Bitcoin IRA has created a solution called Digital Gold, which combines the stability of traditional gold with the speed and security of blockchain technology.
Diversify your portfolio
Everyone has heard the saying “don’t put all your eggs in one basket,” I believe this adage definitely applies to build a winning portfolio as well. Building a diversified portfolio is a noted hedge against risk and boosts the potential for a higher return on investment.
Two crucial components for portfolio diversification include investing in different securities within the same asset type and investing in assets that are not significantly correlated with one another. According to research compiled by ArkInvest and Coinbase, Bitcoin is the only asset class that maintains consistently low correlations with every other asset, which I think makes it a strong candidate for a diversified portfolio.
In his article “How to Avoid a Retirement Disaster,” author Barry Ritholtz suggests many people do not understand the value of having a broadly diversified portfolio because they are concerned it will show a lack of corporate loyalty to their employer. “But every worker who gets company stock also gets a salary from that same employer. That is a very intense concentration of financial risk. For these workers, diversifying their company stock into broad indexes is the prudent approach,” Ritholtz adds, and I am inclined to agree. In my opinion, a balanced, diversified portfolio with a variety of asset types that are not correlated to one another is the smartest long-term strategy for boosting returns and managing risk.
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Don’t put all your savings in crypto
This may seem intuitive, but it’s worth repeating. I believe Bitcoin and the blockchain technology powering it will continue to revolutionize retirement and the way businesses run today. That said, crypto is still very volatile, and I believe it is prudent to do extensive research beforehand and to never invest more than you could comfortably afford to lose.
2018 has marked a year of amazing regulatory progress and widespread mainstream acceptance of cryptocurrency. For those interested in building a portfolio with digital currencies as well as other alternative assets, I hope that my opinions provide additional clarity as to how to build a successful portfolio that mitigates risk and maximizes the potential for a strong ROI.
This article was written By Chris Kline, Co-founder, and COO at Bitcoin IRA