Crypto Asset Allocation
Coindesk did me a disservice with this blog post:
— CoinDesk (@coindesk) September 26, 2017
It made it seem like I was predicting an imminent crash which I was not.
But just as bad, it has led to a lot of tweets like this one suggesting that I also said that people should have 10-20% of their net worth in crypto:
— Jean-Michel Pailhon (@jmpailhon) October 14, 2017
What I did say is that “true believers” in crypto might want to have 10-20% of their net worth in crypto assets. For many of these true believers that would be down from 80-100%.
So, what do I think is a reasonable asset allocation to crypto for the average investor?
Well to start, as I mentioned in that blog post, The Gotham Gal and I have about 5% of our net worth in crypto assets, across a number of vehicles; direct holdings, USV funds, token funds, etc. We have a fairly diversified crypto portfolio, likely much more diversified than most folks could do on their own.
I think that’s likely at the high end of what the average person should have, but I also think its not a ridiculous number for the average person to have.
Many endowments, pension funds, etc allocate 3-5% of their portfolio to venture capital. They know its a risky asset but it has the potential for outsized returns. The largest allocation I have seen to venture capital from a big endowment or pension fund is 10%. So that gives you a sense of what sophisticated investors do with risky asset classes.
If you had to pin me down on a number, here is where I would end up:
- young, aggressive risk taker – 10% of net worth in crypto
- sophisticated investor seeking a high performing portfolio – 5% of net worth in crypto
- average investor, slightly conservative, but with some appetite for risk – 3% of net worth in crypto
- retiree seeking to preserve portfolio value and generate income – 0% of net worth in crypto
Hopefully this will set the record straight. It makes me very nervous when I see folks tweeting out “advice” that I did not give.