In this week's byte size insight into all things investing in cryptocurrencies, we asked Crypto Entrepreneur, Earle Loxton, about 'how much is enough when investing in cryptocurrencies?' If you are familiar with the Lou Bega's Mambo No 5 hit song, then you already know the answer to our question: Earle was quick to respond "just a little bit"
Perhaps a surprising response from a self-confessed Crypto Bull, but when you consider the portfolio impact just a little bit of crypto can have on your portfolio then perhaps that’s exactly right.
Earle is not alone in encouraging investors to “get off zero” and start investing in cryptocurrencies through the DCX10 and adds that Michael Jordaan, former FNB CEO and venture capitalist, has also been publicly quoted saying that “It would be wise for investors to allocate a small part of their portfolio (even if less than 1%) to cryptoassets.”
So what is the impact of just a little bit?
Well let’s look at the performance impact of adding just 1% and 5% of the DCX10 to an equally weighted portfolio of the top 5 ETFs held on the EasyEquities platform since January 2019.
From this illustration it is abundantly clear that a small amount of DCX10 in a portfolio can make an enormous difference in the outcome, with limited downside. We dropped the portfolio into Riskalyze, our multi-award winning partner risk assessment tool to see what the impact would be on this portfolios risk score. To understand more about this tool and what its about click here.
Here are the results of the Riskalyze Risk Score for Portfolio 1 (0% DCX10) vs Portfolio 3 (5% DCX10) highlighting again that the increase in potential returns may just be worth the small additional risk.
Finally we asked Riskalyze to optimise this Portfolio, on a risk return basis using 10 years of historic return data, in this instance we substituted DCX10 for Bitcoin as we don’t have 10 years of data on DCX10, for a client with a risk score of 70 (this being the average risk score of all EasyEquities clients).
We placed one constraint on the portfolio optimisation tool, being that none of the included instruments must make up less than 5% of the portfolio in the outcome. You may find the results highlighted below, but click here for a detailed and insightful breakdown.