In the latest report published by the US-based financial company Schwab, important findings were shared regarding the place of cryptocurrencies in portfolios and risk management. It was stated that when investing in digital assets, the level of risk taken rather than the expectation of profit is decisive.
Volatility and portfolio impact in cryptocurrencies
The report stated that Bitcoin and Ethereum are assets with high volatility, so their weight in the portfolio can quickly change the overall risk outlook. It was stated that both coins have experienced value losses exceeding 70 percent in the past, and this rate is at levels above many classical investment instruments.
It was emphasized that due to such high volatility, holding crypto assets even at low rates in the portfolio can have a significant impact on the total risk. In the research, it was determined that portfolios containing 1-3 percent of crypto money could give different results than expected during market turbulence.
Schwab also stated that adding crypto assets, even in small amounts, could lead to a significant increase in portfolio risk.
Risk and personal preferences come to the fore in portfolio structure
According to the report, two approaches stand out in investing in digital assets. According to classical portfolio theory, investors determine rates by looking at expected returns, volatility and correlations. However, Schwab emphasized that there are great differences among investors regarding the returns to be obtained from crypto, and therefore suggested rates can vary considerably depending on personal estimates.
In the relevant part of the report, “If the expected return from cryptocurrencies is below 10 percent, it may not seem reasonable to allocate a meaningful proportion to the portfolio, in which case even small changes can seriously affect the recommended distribution.” statements were included.
The other approach emphasizes risk. In this method, it is decided what level of risk you want to take and the crypto share in the portfolio is adjusted accordingly. Schwab underlined that even with this method, crypto assets may pose higher risks than expected.
Schwab, who did not recommend a standard rate in the conclusion, stated that the decision could be shaped according to personal risk threshold and would depend on the maturity, level of knowledge and loss absorbing capacity of the investment.
The company also stated that cryptocurrencies are still a speculative asset and pointed out the risks on the subject.
At the end of the report, it is stated that “Cryptocurrencies and products related to this field may not be suitable for every investor”; Focused on liquidity problems, fraud and theft risks.
It was also emphasized that cryptocurrencies can provide diversity in the portfolio and in some cases offer higher returns, but they should be seen as a high-risk subsidiary asset rather than a core investment.
