Ric Edelman, Founder, The Digital Assets Council Of Financial Professionals, explains why aggressive investors should allocate 40% of their portfolio to cryptocurrency.
00:00You've made a lot of headlines, Rick, about the percentage allocation you're recommending for crypto.
00:05Fill us in about how much of our portfolios should be in crypto at this point.
00:10I created a white paper that I released a couple of weeks ago that says that for conservative investors,
00:17you should have a 10% allocation.
00:19Moderate portfolios should be 25%.
00:23And aggressive investors should be 40% into crypto.
00:28This is astonishing.
00:29No one's ever said anything like this before.
00:31Most who are investing in Bitcoin would argue a low single digit, 2%, 3%, 4%.
00:37So this is a radical departure from that.
00:40And a radical departure from the 60-40 portfolio, which doesn't even include crypto.
00:47So in terms of that 40% for aggressive portfolios, what is that replacing?
00:53Replacing all bonds or what's in the other 60% then?
00:56Yeah, I don't agree with the 60-40 fundamentally.
01:00The 60-40 is dead and obsolete and should be replaced by 80-20.
01:04And the primary reason for that, Caroline, is longevity.
01:08We're living longer than ever before.
01:10Odds are very high.
01:11Most people alive today will live to age 100 or beyond.
01:15This is because of astonishing improvements in medical technology and innovation.
01:19And if you're going to live to age 100, having only a 60% allocation to equities makes no sense.
01:26You need to be able to have your money last as long as you.
01:29And that means an 80% allocation to equities.
01:32And if you're going to have 80% of your money in equities, I'm suggesting that 40%, half of it, for an aggressive investor should be in crypto.
01:40Okay, so 40% equities, 40% crypto, and then 20% bonds?
01:49Okay.
01:49Yeah, and I would argue that for an awful lot of people, the allocation of bonds ought to be zero.
01:56We're not going to see over the next 40 years the bond market return that we have seen over the past 40 years.
02:02Because interest rates are already now very low, and they don't have much lower to go.
02:08Not only because we're close to zero at a 4% treasury, but also because the economic environment doesn't support radically lower interest rates.
02:16So the big bull market we've enjoyed since 1982 in the bond market is really over.
02:22And we're not going to see that again.
02:24Which means on an after-tax, after-inflation basis, bonds in the future are likely going to be losers.
02:29Okay. So as I'm doing the math, and it's 40% crypto, 40% equities, what is the other 20% then, if you don't think investors should be investing in bonds at all?
02:41It should be for those who are only 40 and 40, as opposed to 100% in equities in crypto.
02:48If you're going to have 20% elsewhere, it ought to be in short-term cash.
02:52It's rainy day money.
02:53It's to tide you over in case you lose your job or run into a major medical expense or other financial need.
03:00You don't want to have to liquidate assets when they may be low due to a recent market decline.
03:04So short-term treasuries, money market account, T-bills, those kinds of assets for that other 20%.
