Fidelity report: 3% BTC position in past 5yrs would have increased performance of a 60/40 portfolio

[Deleted User]

Fidelity Investments Inc. reports, that 3% percent of Bitcoin in standard 60/40 portfolio could have increased returns from 6.8% to 10.2%. That's including the boom and bust most recent Bitcoin bubble in 2017-18, despite all volatility.

That's very interesting.

https://www.btctimes.com/news/fidelity-report-small-bitcoin-allocation-boosts-portfolios

Some institutional investors and public trading companies are already following this trend, with over $500 million of Bitcoin added to publicly traded companies portfolios in last two months - it was MicroStrategy Inc (MSTR.US), Stoneridge Inc (SRI.US) and Square Inc (SQ.US).

bowlhead99

pioruns said:

Fidelity Investments Inc. reports, that 3% percent of Bitcoin in standard 60/40 portfolio could have increased returns from 6.8% to 10.2%. That's including the boom and bust most recent Bitcoin bubble in 2017-18, despite all volatility.

That's very interesting.

Stop the press!! Can this be true?! Putting 3% of a portfolio in BTC at two hundred dollars and maintaining the allocation as the price of that asset grew to eleven thousand dollars, would have increased returns, compared to not doing that? Well, blow me down!

People with only a passing interest in crypto may not be aware that Fidelity even had a 'digital assets' division, although anyone with knowledge of the financial services market might expect them to have done something in that area given they have over $3 trillion in overall client assets under management.

But given they do have such a department, it's not too surprising that they are producing 'research' showing that you've gotta be in it to win it, or a 'study' showing that a "Growing number of institutional investors believe that digital assets should be a part of their investment portfolios..."

Call me a cynic...  

FWIW, the bitcoins I had in 2015 were worth something like a third less than what I'd paid for them in 2014, and a lot less than 3% of my portfolio. Of course with hindsight I should have sold fewer of them for 50-100% profit in 2016 and left left more to sell in the last couple of years! After a few opportunistic trades earlier this year I have only a fraction of a coin left, but I put a few thousand pounds into an ETC in my pension  in case it grows by another 50x in the next 5 years.

Really I suppose if any crypto asset is going to grow by 50x in the next 5 years it won't be one for which mainstream investment products are already available, just as they weren't available for BTC at $200-250.

kinger101

The information is about as useful as yesterday's racing results.

Malthusian

Almost nobody puts 3% of a 60/40 portfolio in BitCoin. Either you want to get rich quick or you don't. 3% of your free assets in BitCoin isn't going to change your wealth level even if there is another pump, you're just going to regret not putting in more.

The risk profile for a 60/40 portfolio is incompatible with an investment in BitCoin and suggests irrational compartmentalisation. If you are risk-seeking enough to be gambling on zero-sum games then why isn't your retirement / long-term fund 100% equities at the very least?

[Deleted User]

bowlhead99 said:

I put a few thousand pounds into an ETC in my pension  in case it grows by another 50x in the next 5 years.

@bowlhead99 put few thousand pounds into alternative cryptocurrency, for retirement?!! Hell has officially frozen over!

[Deleted User]

Malthusian said:

Almost nobody puts 3% of a 60/40 portfolio in BitCoin. Either you want to get rich quick or you don't. 3% of your free assets in BitCoin isn't going to change your wealth level even if there is another pump, you're just going to regret not putting in more.

The risk profile for a 60/40 portfolio is incompatible with an investment in BitCoin and suggests irrational compartmentalisation. If you are risk-seeking enough to be gambling on zero-sum games then why isn't your retirement / long-term fund 100% equities at the very least?

Not sure to who you talking to here. Fidelity took a most popular portfolio combination and run the numbers. I wish they gave an example with 80/20 and 100/0 portfolio too. That would be more useful to me. But 60/04 is being used a lot in fact. Quick look at Vanguard LifeStrategy shows that it's most popular among LS products with £8.4 Billion invested, while other combinations from 20% up to 100% have from £1.8 Billion up to £5.7 Billion.

"The risk profile for a 60/40 portfolio is incompatible with an investment in BitCoin and suggests irrational compartmentalisation."

Fidelity report clearly showed that it is compatible and it improves performance. Not sure what is so hard to understand here.

But anyway, that's your opinion, that's your right to have one. Unfortunately, you don't have $3 Trillion of assets under management. (oops)

bowlhead99

pioruns said:

Malthusian said:

The risk profile for a 60/40 portfolio is incompatible with an investment in BitCoin and suggests irrational compartmentalisation. If you are risk-seeking enough to be gambling on zero-sum games then why isn't your retirement / long-term fund 100% equities at the very least? 

Fidelity report clearly showed that it is compatible and it improves performance. Not sure what is so hard to understand here.

"...showed that it improves performance"?!?

I think you mean "...that it improved performance" as a past tense event for a highly speculative asset in those particular market conditions, with hindsight.

Malthusian's sensible point is that if you are the sort of investor seeking a real terms return of a modest 3-4% a year without too much volatility, and have structured a 60:40 portfolio to meet that aim accordingly,  it's not particularly likely that you would be willing to take 3% of your portfolio (an entire year's expected return) and gamble it on a speculative new asset class, knowing the outcome could be anything from, "I've basically thrown three percent of my portfolio in the bin" to "oh look, it's only been half a decade and already that part of my portfolio has gone up five thousand percent"

But anyway, that's your opinion, that's your right to have one. Unfortunately, you don't have $3 Trillion of assets under management. (oops) 

As he doesn't already have $3tn of AUM, and isn't facing a client base who have already exhausted the limits of what money they're willing to place with him and his rival conventional asset managers, he hasn't needed to create marketing documents implying that ever more esoteric investment opportunities are the route to investment nirvana.

So he can simply speak his mind without needing to spin a yarn about how crypto gave a good return over a particular time period so should be relied upon to explode upwards again next rather than implode.

pioruns said:

bowlhead99 said:

I put a few thousand pounds into an ETC in my pension  in case it grows by another 50x in the next 5 years.

@bowlhead99 put few thousand pounds into alternative cryptocurrency, for retirement?!! Hell has officially frozen over!

Most of my investing is done in my pension simply because that's where most of my investible capital is, for tax reasons. It doesn't necessarily mean I will be holding a particular asset into my late 50s or 90s.

As a side effect, it's certainly easier for my next of kin to receive my pension pot in the event of my untimely demise - rather than receiving an explanation of what crypto coins are, together with the password to a memory stick containing half a bitcoin in an ewallet with directions on how to register with a crypto exchange to convert it into pounds.