Charles Schwab: Allocating only 1%–3% of your portfolio to BTC or ETH can significantly impact overall risk characteristics

ME News report, April 7 (UTC+8), Charles Schwab’s latest research shows that even if a portfolio allocates only 1%–3% to Bitcoin (BTC) or Ethereum (ETH), it can significantly affect overall risk characteristics. The study notes that both Bitcoin and Ethereum have historically seen drawdowns of more than 70%, far higher than the volatility levels of stocks or bonds, so even small allocations can have a noticeable impact during periods of market volatility. Charles Schwab proposes two methods for allocating to crypto assets: 1. Traditional portfolio theory approach: allocate based on expected returns, volatility, and correlation, but since the return assumptions vary greatly, if the expected return is below 10%, even aggressive investors will find it difficult to support large allocations. 2. Risk budgeting approach: determine the proportion of crypto assets based on the amount of risk the investor is willing to take, shifting the focus from returns to risk-taking capacity, but crypto asset volatility may still exceed expectations. Charles Schwab emphasizes that crypto assets are highly volatile and are not suitable for all investors; investors need to make allocations cautiously based on their risk tolerance, investment horizon, and familiarity with the assets, while also paying attention to risks such as liquidity, theft, and fraud. (Source: ChainCatcher)