1 or 2 Percent Allocation

I have experience answering questions newcomers ask about Bitcoin that are far more in-depth than required to make an initial investment in Bitcoin. Oftentimes, these questions are far more intricate and invasive than what these people would have asked for any other part of their investment portfolio.

For example: If you are asking about settlement time for Bitcoin transactions and why you would opt to use or not use Bitcoin for selling a house, I would hope you are combing the financial records and newsfeeds of Tesla or any other company you are interested in. If you aren’t, then quite frankly that deep-level question you may have of Bitcoin is hypocritical because you are holding your lack of Bitcoin investment to a much higher standard than you are any other investment in your portfolio.

This is not to demean deep conversation about Bitcoin. It is truly a rabbit hole of perspectives, theories, and ideas that are infinite. It is meant to demean the idea that you must know every, single, little intricate detail about Bitcoin before you opt to make a 1 or 2 percent portfolio allocation. I believe that is crazy and is not a standard that is commonly held for other parts of many investment portfolios.

I would argue you only need to know a few main points:

1. One of Bitcoin’s key value propositions lies in its strict scarcity of 21 million coins.

2. Bitcoin reached a 1 trillion dollar market cap faster than any company in the world.

3. For Bitcoin to pass gold’s market cap, it is still a 10-12x from today’s dollars.

If you can understand these 3 points and decide that Bitcoin is not for you, that is your choice. But, I would speculate that if you understand these 3 points, you potentially know more about Bitcoin than other parts of your portfolio. If that is a true statement, I urge you to reevaluate your stance.

However, I do not know a single person who has understood these 3 points and chosen to not invest at least a small portion of their portfolio. This is now where the conversation of a 1 or 2 percent allocation comes into play. Blackrock recommends holding a 1 or 2 percent allocation and if the world’s largest asset manager can recommend this, that is meaningful. Opting for a 1 or 2 percent allocation in most people’s portfolios is not earth-shattering however it does mean you are moved off of a 0 percent allocation.

That is the meaningful move.

You are in the game.

What typically happens as people move off a zero percent allocation to have at least 1 or 2 percent of their portfolio is they then choose to learn more about Bitcoin. As they learn more about Bitcoin, they tend to increase their allocation. If they don’t actively increase their allocation, holding Bitcoin for long enough naturally will outpace the rest of your portfolio (historically) and will increase its share in your portfolio on its own.

Either of these outcomes is a fairly natural progression for a portfolio that has included Bitcoin.

Learning about Bitcoin is so important because once you sit down and learn about Bitcoin, your 1 percent or 2 percent of Bitcoin tends to feel insignificant and you aim to rectify that. The reason for this is if you have a 2 percent allocation of Bitcoin and you have equal contributions elsewhere, that is like saying there are 49 other better or equal investment opportunities (49 other 2 percent allocations). I firmly believe there are not 49 better investment opportunities than Bitcoin and chances are as you learn more about it, you will feel the same way. If you have a 1 percent allocation, that is like saying there are 99 better investment opportunities, again, just flat out is not true.

To get started, the overall message is simple:

1. Understand the basics and quit holding Bitcoin to a much higher standard than other aspects of your portfolio.

2. Get off a 0% allocation and get in the game.

3. Learn more and reevaluate where you stand.

Stack SATs.

The views and opinions expressed here are for entertainment purposes only and should, in no way, be interpreted as financial or investment advice. Always conduct your own research when making an investment or trading decision, as each such move involves risk. I am not a financial advisor and do not claim to be qualified to convey information or advice that a registered financial advisor would convey to clients as guidance. Nothing contained in this e-mail/article constitutes, or shall be construed as, an offering of financial instruments, investment advice, or recommendations of an investment strategy. If you are seeking financial advice, find a professional who is right for you.