Here are the takeaways:
- In any portfolio, in the long run, diversification matters. Money managers work hard to find diverse assets that will provide optimal return/risk ratio to their clients (me, you, us).
- Digital assets, such as cryptocurrencies (Bitcoin is ONE of them) represent a brand new investment opportunity that is uncorrelated to other asset classes. The important part is that it's uncorrelated – meaning it provides a return stream that enhances diversification.
- Looking at numbers from December 31, 2016 through May 31, 2018, it appears that small allocations to Bitcoin can significantly enhance the returns of traditional portfolios without materially increasing volatility.
- Looking at the same time frame, it seams that investment portfolios containing allocations to a mix of digital assets performed even better than those only including Bitcoin.
And here's the graph you need to see:
Note: 2016-2018 was a very particular period for digital assets. The whole space was booming. Fast – maybe a bit too fast. And depending on where you stand on the topic, you may want to consider that past performance is never a guarantee of future results.