I’m not sure what Bob Dylan is up to these days. One thing is true, though: the times they are a’changin’.
At least when it comes to cryptocurrencies. In fact, in many ways, big banks and brokers have made a complete turnaround.
Previously, they had been skeptical, advising investors to avoid crypto because of the risk. But now? Some household names are changing their tunes and are advising people to take a different strategy towards cryptocurrencies.
What’s the latest on crypto diversification?
We’ll start with one that I didn’t expect to be telling you about. David Hollerith, a senior reporter for yahoo!Finance tells us that Bank of America is now recommending crypto exposure.
Previously, Bank of America’s wealthy clients had access to the products only upon request, meaning the bank’s network of over 15,000 wealth advisers could not recommend crypto exposure, and many retail investors were left needing to look elsewhere for access.
Not anymore…
Bank of America’s CIO office outlined a model portfolio including a crypto allocation of up to 4%.
Now, you might not be aware of this, but Bank of America is the second largest bank in the U.S. (second only to JPMorgan Chase). They’ve gone from prohibiting customers from owning crypto to actually recommending crypto diversification.
That’s a shocking turnaround – and BofA isn’t alone…
The household names now recommending crypto diversification
Morgan Stanley (6th largest bank in the U.S.) is advising customers that “2%-4% of their portfolio should be in crypto.”
BlackRock, the world’s largest asset manager, says 1-2% crypto is better for most people.
Fidelity, the world’s #3 biggest asset manager, has a more aggressive recommendation: 2%-5% generally (and 7.5% for investors 30 and younger).
You’re probably thinking what about #2? Well, just this week Bloomberg reported that Vanguard, the world’s #2 largest asset manager, announced they were opening up cryptocurrency diversification to their customers. Not direct crypto ownership, unfortunately – but indirect ownership, which I personally believe isn’t optimal for most people.
JP Morgan Chase, Charles Schwab and BNY Mellon already allowed their customers to diversify with cryptocurrency.
Well, when the biggest name banks and brokers go from calling crypto “rat poison” to actually recommending ownership? Something major has changed. Crypto, as an asset class, is no longer on the fringe. It’s mainstream. There’s no denying it.
What’s truly interesting about this wave of news is the timing.
Why now, just days after bitcoin took such a big hit?
Crypto for the long haul
Hal Bundrick, CFP with yahoo!Finance, interviewed Amy C. Arnott (Morningstar portfolio strategist) to get an answer to our question. Here’s what she said:
…the investment community is giving bitcoin and its family of cryptocurrencies more attention because of the huge value gain over the long term – despite the volatility.
“Huge value gain over the long term” isn’t an exaggeration! Bitcoin has, for example, outpaced virtually every financial asset since 2016. We’re talking about something like 10,000% growth. I dare you to name another asset that’s done that.
Arnott goes on to hedge a bit, calling cryptocurrency “speculative” before recommending a 2% allocation. But not without hesitation:
“You should definitely be willing to live with huge performance swings and be willing to hold on, even if you see a decline of 50% or more.”
That’s a huge amount of growth, so it makes sense for advisors to recommend putting a portion of an investment portfolio into cryptocurrency for the potential upside potential. But as we’ve talked about before, to take advantage of this type of growth, you have to be willing to buy and, then, HODL (hold on for dear life).
Cryptocurrencies are not for everyone.
If you watch the price on a daily, weekly, or maybe even monthly basis? You can give yourself an ulcer. You have to be willing to hold for the long term, through huge swings up and down.
For many families, diversifying with a high-volatility asset could just lead to stress and sleepless nights…
But if you can do your due diligence, then take a dollar cost averaging strategy towards your crypto allocation and letting it grow without selling? With regular rebalancing and discipline, crypto offers growth potential that’s simply unmatched among other financial assets.
Let me say that again: Unmatched growth potential.
Again, crypto isn’t for everyone. I strongly recommend you begin your due diligence by requesting your free guide to Digital IRAs. If you’re up to the challenge, you can open your Digital IRA anytime, day or night, in less than 10 minutes. And if you have any questions, or Digital Currency Specialists are standing by to help.
Those 10 minutes it takes to open your account could be the difference between an early retirement and 10 more years of working for a paycheck… So you owe it to yourself to learn more.
