Hopefully, the Crypto Investing 101 Series (101, 102, 103, 104, 105) has made you more comfortable with the idea of adding crypto to your investment portfolio.
However, crypto is not at the point where it needs to be your largest holding or primary source of income. Today, I want to discuss how crypto can play into your overall investing goals.
What’s a portfolio? Your portfolio is a collection of tools, resources, or assets that you use to achieve your retirement and estate goals.
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At the highest level, the first question you have to ask yourself is, what do I want from life? What am I trying to achieve?
Most people desire some sort of family success and a level of financial freedom to do whatever they want. These are your retirement requirements. Please refer to the Retirement Planning at Any Age series (20s, 30s, 40s, 50s, 60s, 70s).
Moving down, you’ll need an overall passive income portfolio to get you to your retirement goals. This huge asset collection includes 401Ks, dividends, real estate, royalties, businesses, and cryptocurrencies.
Read my Happy Cash Flow Retirement Series (part 1, part 2, part 6, part 7) for more on this stage of investing.
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Finally, inside the paper assets slice of your portfolio, you will have bonds, stocks, and cryptocurrencies.
How do cryptocurrencies factor into my portfolio? I took the long way from the top of the mountain to the bottom for one reason—scope.
Inside your overall portfolio, crypto is a small allocation of your wealth-building pie. Please work on obtaining everything else before diving head first into crypto.
I wrote an article titled “Rich & Free: Build an Investment Portfolio in 8 Steps” to help you understand how to structure your paper assets and emergency fund.
Once you have your high-yield emergency fund, bonds, index funds, dividend growth, and income portfolios, crypto should be your next option.
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Why is crypto last? Crypto is still a massive speculation play. Crypto is unregulated by the Securities and Exchange Commission or SEC.
This means that the gains can be enormous, but more likely your losses will be catastrophic. You’ll probably lose money if you aren’t spending 3-4 hours a day reading about crypto.
I am not trying to scare you away from crypto; just ensure you understand its role in your portfolio. You don’t need to have crypto as 50% of your paper assets to have it make a huge difference.
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Crypto should be about 2-5% of your paper assets. Thus overall, it will be under 1% of your total investment portfolio, including real estate, royalties, business, and dividends.
A quick example. I will use general numbers from my portfolio to drive home this point. Our paper assets total roughly $220,000. Of that, approximately $10,000 is in crypto. This puts our crypto allocation at around 4.5%.
Currently, crypto markets are struggling, and that’s okay. It’s not having a significant impact on my portfolio. I will invest more into Bitcoin and Ethereum while prices are low.
If the crypto markets recover quickly, crypto will still have an outsized portion of my portfolio. There is no need to over-speculate at the current time.
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Why is your speculation budget so crucial to your financial health? You don’t want to “guess” or “wish” with your money. It’s good to have some money in speculation, but you don’t need to go crazy.
In the article “Multi-Generational Investing,” I wrote that the things that made tons of millionaires (dividends, royalties, and real estate) are still the keys to wealth.
However, it’s still good to look towards the future of real estate tokenization, the metaverse, and decentralized finance. We should invest some time and money into these projects.
The amount may be small, but the return on your investment may be massive. That’s how speculation plays work best.
The Passive Income Grind
A similar conundrum in real estate. After the pandemic, office REITs struggled to regain their hold in the market. I personally feel that this market will repurpose and refit itself to the changing times.
I am bullish (positive) on the outlook of office spaces; however, there is not a clear-cut winner (or new idea) yet out in the open. So, I want to put some money into office REIT space but not overdo it.
Therefore, I keep a few Office REITs in my paper asset portfolio and add some cash to them from time to time. If they take off, it will be unique; if not, no worries from me.
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The crypto future. Crypto, DeFi, and the Metaverse are the future of commerce. However, we don’t know the timeframe until the ultimate switch from Traditional Finance (TradFi).
It could take 20 years for the switch to occur. So, even if you only have 1% of paper assets in crypto, you’ll still make some good money as the future becomes more evident.
It’s akin to holding one share of Amazon in 2002. Amazon wasn’t the clear winner then, but just keeping Amazon as a speculation play would pay off over the long run.
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Conclusion. I wrote this article because we will begin to talk about specific coins moving forward in the series. I have a plan to cover Bitcoin, Ethereum, and Altcoins.
I don’t want everyone to run out and buy massive amounts of these coins. Remember your overall passive income portfolio (real estate, dividends, business, royalties, and crypto holdings) must act TOGETHER to make your retirement special.
When you factor in everything you have, your overall speculation budget may only be $2,000-$5,000. And that is okay, as long as you understand how it fits into your future success. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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