The Single Asset Portfolio: Only in Crypto?

Global stocks… up 132% over the last 5 years (MSCI ACWI). Global bonds… down 7% (Bloomberg Global Agg). Why own anything but stocks?

US stocks… up 135% over the last 5 years (S&P 500). Global stocks… up 82% (MSCI ACWI ex US). Why own anything but US stocks?

US energy stocks… up 317% over the last 5 years - more than 120% ahead of even Tech stocks. Why own anything but US energy stocks?

Targa Resources… up 2728% over the last 5 years - more than 600% ahead of the next best performer (Supermicro). Why own anything but TRGP?

This sort of analysis in portfolio construction seems obviously reductive. Not many serious investors would decide on their allocations like this. Clearly, diversification is needed.

And yet, there seems to be a common approach to digital assets that looks at the performance and/or volatility of Bitcoin over the last few years vs other digital assets and concludes that Bitcoin alone makes for a satisfactory digital assets allocation.

Bitcoin is certainly an interesting asset and should probably be in any digital asset portfolio. But, exposure to Bitcoin is exposure to a relatively narrow use case of blockchain technology - it is a bet on a new global store of value and, to a much lesser extent, global payments system.

Meanwhile, blockchain-based projects with tokens are challenging traditional business models across sectors - innovating not just better solutions to existing problems, but creating entirely new products and services. At its core, an investment in digital assets is an investment in the secular change of money, value, ownership, and business structures over the coming decades. To truly seize this opportunity, investors should diversify their exposure across different projects, sectors, and use-cases.

Lessons learned through decades of investment management in traditional financial products should not be discarded as investors get involved with the nascent market that is digital assets. Diversification can not only reduce risk - it can maximize opportunity.

*The information herein is for general information purposes only, is not investment advice, and should not be used in the evaluation of any investment decision. Such information should not be relied upon for investment advice. You should consult your own advisers, including your own counsel, for accounting, legal, tax, business, investment or other relevant advice. An investment involves a high degree of risk. Past performance is no guarantee of future results.