As cryptocurrency prices continue to climb and the popularity of crypto exchange-traded funds grows, retirement investors may be tempted to add digital assets to their retirement portfolios.
One factor driving crypto prices higher is increased attention from institutional investors. In a recent regulatory filing, JPMorgan Chase disclosed an investment of about $1.7 billion in bitcoin ETFs, a significant increase over previous quarters.
Not to be outdone, Goldman Sachs boosted its holdings in BlackRock’s iShares Bitcoin Trust (ticker: IBIT), also a large position in JPMorgan’s portfolio. IBIT has taken off like a rocket, reaching $50 billion in assets within 11 months of its launch. As of now, it has $63.26 billion in assets under management.
Whether you’re crypto curious or you think digital coins may replace more traditional currencies, there are some factors you should consider before including them in your retirement plan.
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Weighing Crypto Allocation Strategies
Financial planners generally advise workers to build their portfolios using a mix of stocks and bonds, often adding alternative assets like real estate, commodities or precious metals for further diversification.
But now, advisors say interest in cryptocurrency is growing among clients, even though it’s not part of a traditional retirement allocation.
“If a client expresses interest in owning crypto, I try to understand what specifically they are interested in,” said Mike Hunsberger, owner of Next Mission Financial Planning in St. Charles, Missouri, in an email.
“Is it Bitcoin because they’ve just heard about it from someone? Or are they in some way involved in crypto and looking to own specific coins? In any case, I recommend they keep the percentage (allocated to cryptocurrency) of their overall net worth small,” he added, noting that he suggests limiting their crypto allocation to about 3% to 5% of their total portfolios.
Michael Reynolds, principal at Elevation Financial in Westfield, Indiana, recommends allocating 1% to crypto for interested clients.
“If someone is younger and is very interested in crypto, we might increase that allocation slightly,” he said in an email. “I prefer using funds and ETFs for crypto exposure rather than directly holding the assets. This is because my philosophy on crypto is that I am mainly focused on price exposure rather than utility.”
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Different Approaches to Crypto Investing
For some retirement investors, capitalizing on a rising new asset class can be an exciting proposition, often due to FOMO, or fear of missing out.
Others are drawn to crypto because they view it as an investment opportunity and a potential alternative to traditional currency.
Reynolds said he’s familiar with both of those viewpoints.
“One school of thought is centered around crypto truly being an alternative currency that is meant to someday replace the dollar, or people might see it as a way to hedge assets outside of the current financial system,” he said, adding that these investors tend to have an inherent distrust of the financial system. This group sees crypto as a way to provide insurance against extreme economic or political events.
“The other school of thought centers around investment performance related to the price of crypto,” he added. “I am more in line with the second approach and consider crypto as an asset class versus a currency.”
The Convenience of Crypto ETFs
Because they can be easily integrated into a portfolio, Reynolds sees mutual funds and ETFs as the most convenient way for retirement investors to gain exposure to crypto.
Hunsberger said his recommendations to clients interested in crypto may depend on their knowledge of digital currencies or what they expect from an investment.
“If they’re just interested in having some exposure, I do recommend they use a crypto ETF,” he said.
Investors can buy cryptocurrencies directly through exchanges like Coinbase or Kraken, using digital wallets to store assets securely. This involves managing private keys and potentially facing complex tax and security considerations.
Owning ETFs such as IBIT, the Fidelity Wise Origin Bitcoin Fund Currency ETF (ticker: FBTC) or the Grayscale Bitcoin Trust ETF (ticker: GBTC), is an easier way to gain access to the asset class.
“If they want broader exposure and they invest in individual stock, I may recommend they invest in companies that are exposed to the crypto industry,” Hunsberger said.
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Following the Crypto Trends
For investors looking to own crypto without the potential hassles of direct coin purchases, trend-following strategies can offer a more disciplined, risk-managed approach, said Nate Byers, lead advisor and founder at Calculated Wealth in Madison, Wisconsin.
Instead of buying and holding digital assets indefinitely, he said in an email, trend following allows investors to participate when momentum is strong and step away when it turns negative.
“You don’t have to feel a strong commitment to the asset,” he said. “You own it when the trend is positive and sell it when it turns negative.”
Byers typically implements this strategy using ETFs, which are easy to use in qualified retirement accounts.
Trend following can also help minimize emotional decision-making and reduce the likelihood of jumping in at the wrong time due to FOMO, Byers added.
“Choosing to buy and sell any asset based on your emotions or big brain is a recipe for disaster,” he said.
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How to Include Crypto in Your Retirement Portfolio originally appeared on usnews.com
Update 06/03/25: This story was published at an earlier date and has been updated with new information.
