kayanco wrote: ↑
Thu Sep 07, 2017 12:36 pm
Over time I've come to respect and value your collective knowledge and willingness to discuss and help each other understand stuff.
Based on my poor (and likely flawed) understanding of the actual reasons behind the 3-fund portfolio or index investing in general, I want to discuss if Bitcoin can/should be included in a broad indexed portfolio.
Points of discussion:
I believe one of the reasons for including bonds and international is that they are supposed to have low correlation with each other (at least in theory). I've read that Bitcoin has low correlation with stocks and bonds. So would this be a reason to include Bitcoin in a portfolio?
(To be clear, I'm not asserting that Bitcoin has a low correlation. It's just something I came across. My question in other words is, assuming that it has a low correlation, would it then be a good idea to include it?
Another feature/benefit of a total market index that I've read about, is that is gives you some exposure to a future blockbuster company. Let's say there's a low priced company today that goes big in the future. Holding an index would ensure some share of that. And the reverse. If a single company goes bust, the loss would be limited.
So does this line of reasoning imply holding bitcoin? If it becomes even bigger (as speculated), holding some % of it in a portfolio would give some portion of that bounty. But if it turns out to be a digital Tulip, the loss wouldn't be catastrophic.
Nassim Taleb's barbell concept.
Where I believe he recommends some 90% investment in sometime safe, and 10% risky.
Can Bitcoin/crypot-currency be in that 10%? That is, 90% of portfolio = 3-fund portfolio, and 10% = Crypto-currency (or any other risky combination, e.g. 5% Crypto, 5% Biotech, etc, etc.). Would this be an implementation of his barbell concept? If not, please explain why.
Please share your thoughts/critique.
My aim is not to say that this is a good idea. If it's a bad idea, I'd like to understand why.