Liz Young, Head of Investment Strategy at SoFi, gave some advice in a recent podcast on when and how to decide which asset classes to allocate to your portfolio. According to the exec,

“The first rule in portfolio construction is to have asset classes that are not correlated with each other.”

However, given the resurgent inflation due to a lack of alternatives, can bitcoin and other crypto assets be a salvation? After all, “cash is not really an asset in any way, shape, or form.”

Well, the manager believes that a portfolio should have “growth, income and maintenance” components.

“If you believe that crypto is an asset class that will grow over time … it acts as a growth aspect or part of the growth basket in your portfolio.”

’60 / 40 portfolio allocation is dead ‘

In contrast, cash is technically about “losing money” to inflation. Young argued that the traditional method of allocating 60-40 to stocks and bonds may not be suitable for “preservation” either. This is where crypto comes in, with 60-40 likely needing a “third component”.

In order for crypto to become a growth component for their own portfolio, however, young investors have to hold it “with the intention of holding it for the long term”.

“When you in and negotiate Bitcoin or in and out of crypto. It’s not necessarily a component of growth. “

Oddly enough, these views are based on those of Paul Tudor Jones. He recently raised concerns about inflation, adding that “a 60/40 portfolio” is dead. He said,

“You don’t want to have a steady income.”

Instead, he suggested delving into assets like crypto or real estate. Young agreed that “inflation has traditionally been bad for bonds” and also affirmed the need for commodities. She said,

“You could put crypto in this category …”

Ark Invest CEO Cathie Wood had also previously commented that the fund’s future exposure to cryptocurrencies would follow the 60-40 allotment for Bitcoin and Ether.

However, Young believes that crypto may not be considered for “conservation” during the introductory phase. She said,

“Preservation is usually something with very little volatility that doesn’t have much movement in price as of today. Obviously, crypto is not that asset class, there will be volatility. “

“Don’t do everything at once”

Young advised the first-time crypto investor,

“I don’t think you have to be all-in or all-out, I think you can start dipping your toes in the water.”

Instead, she recommended crypto for investors with a long-term horizon in mind and willing to endure volatility along with a bucket of traditional assets.

For the same reason, Young recommended considering large-cap crypto like Bitcoin for new investors. Besides, she said

“… You can buy the ETFs that are diversified with smaller amounts of money, you can buy small cryptocurrencies at the same time. And for a new investor, that’s a really important option. “

To smooth out some of the risks associated with asset classes like crypto, Young also suggested dollar cost averaging.

“I would say probably get in faster, but once on Monday, once every other Monday and just deposit the same amount on the same day.”

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