Prahasaurus wrote: ↑Mon May 10, 2021 1:22 am
Just did some analysis on my crypto portfolio. Currently, it can be split as follows:
27% Small cap crypto projects (e.g. AAVE, REN, UNI, etc.).
My main takeaway is that - had I only been interested in risk adjusted return
- I would have been better off putting 100% of my money in ETH from the beginning.
Yes, some tokens like UNI have done better than ETH. Some tokens have more or less equaled ETH. Some have done slightly worse. But I could have simplified my life immensely had I just invested in ETH only.
However, the main benefit to me was participating in DeFi through these tokens, as I have not left them in my wallet collecting dust. I have put them to work within DeFi, staked, provided liquidity, loaned, ran nodes, etc. It has been a fantastic learning experience, a huge intangible benefit! There is no way I could even begin to process what is happening in crypto in general, and DeFi specifically, without participating
in DeFi. That was my main benefit.
However, if you only want to gain exposure to crypto and do not want to deal with wallets and MetaMask and could care less about synthetic assets or collateral ratios, then my recommendation is as follows:
Yes, even a few months ago I would have probably reversed these percentages. But my thinking on BTC has evolved significantly, and I'm no longer bullish as before. I still believe BTC has a bright future, just its relative performance will not match ETH longer term, in my opinion. But I still think you need exposure to BTC long term. I will definitely keep BTC in my portfolio.
So for the "crypto curious" Boglehead who wants exposure to this space, but does not want to think too much about crypto, my recommendation is to purchase ETH and BTC. And predominantly ETH.
I would also recommend locking your ETH in validator nodes (staking). If you buy at Coinbase, you can do it there. 6% return may not sound like much, but it's 6% paid in ETH
, an asset that should appreciate significantly over the coming decade.
If you are curious about DeFi and want to experiment, then perhaps modify to 80% ETH, 15% BTC, 5% DeFi projects. Learn to use MetaMask, get a hardware wallet like Trezor, and enjoy!
As to what % crypto should be within your total portfolio, I have always said keep it small, around 5% or so. Nothing has changed there. But that really varies by risk profile, etc. I would also not rebalance, unless that 5% grows to something that becomes too stressful for you. Again, varies by person.
I do believe avoiding this asset class entirely is a mistake for long term investors. While we don't know how this will all develop, and it's going to be a very bumpy road, I do believe portfolios that include a small % of crypto will outperform your standard 60-40 or 80-20 Boglehead portfolio, long term.
We can revisit this thread in 10 years and see!