Edelman Advises 40% Crypto Allocation Amid 60/40 Model Shift

Financial advisor Ric Edelman, the founder of Edelman Financial Engines, has advised investors to allocate between 40% and 10% of their portfolio to cryptocurrency. This recommendation was made in a recent whitepaper for the Digital Assets Council of Financial Professionals (DACFP).

Edelman, who is also the founder of DACFP, argued that the traditional investment model of a 60/40 allocation to stocks and bonds is no longer effective. He attributed this shift to significant technological advancements that have led to increased longevity rates. Instead, he suggested that investors should consider putting their money into cryptocurrency, with the percentage allocated based on their risk profiles. According to Edelman, aggressive investors should have 40% of their portfolio in crypto, while conservative investors should have 10%.

Edelman, with 39 years of experience in the financial sector, noted that investing in cryptocurrency is no longer a speculative trade. He pointed out that a passive market-weighted index of all asset classes would have 3% allocated to crypto, indicating the sector's substantial growth. He emphasized that ignoring the crypto sector is akin to shorting it.

Edelman made a strong case for investors to allocate up to 40% of their portfolio to cryptocurrency, highlighting that the asset class has outperformed the rest of the market for 15 consecutive years. He cited high-performing crypto assets and sectors, including the stablecoin sector, noting that Tether’s $13 billion profits last year exceeded the earnings of several major US companies.

Edelman also believes that President Donald Trump’s potential win in 2024 could further boost crypto’s fortunes. He noted that pro-crypto moves from the Trump administration and policy reversals from individuals and institutions are signs that crypto is now a derisked investment. Edelman is particularly bullish on Bitcoin, predicting it could reach $500,000 based on demand and supply dynamics. He explained that institutions’ massive accumulation of assets will continue to drive up prices, stating that a mere 1% allocation from global assets would cause $7.5 trillion to flow into Bitcoin, resulting in a price of approximately $500,000 per Bitcoin.

Edelman’s whitepaper also advises financial advisors to allocate part of their portfolio to cryptocurrency, addressing common objections and criticizing advisors who do not recommend crypto to their clients. The whitepaper has sparked a mixed but mostly positive reaction from experts, with some highlighting Edelman’s influential status in the financial advisory community. Others suggested that Edelman should have specified Bitcoin as the primary asset to invest in, although most acknowledge that Bitcoin is the leading investment asset in the crypto sector.

Some experts, such as Bitwise European head of research, do not agree that technological advancements have rendered the 60/40 model obsolete. Instead, they attribute its ineffectiveness to rising inflation, noting that stocks and bonds underperform once inflation rises above 5%. However, they also recommend diversifying into hard assets such as Gold and Bitcoin.