Schwab says Bitcoin and Ether belong in portfolios only with careful sizing

Charles Schwab is advising investors to maintain modest allocations for digital assets like Bitcoin and Ether within broader portfolios, citing their potential to significantly alter portfolio risk even at low weights. The firm suggests two allocation frameworks: a traditional one based on expected returns, volatility, and correlation, and a risk budgeting approach focused on an investor's risk tolerance. Schwab stresses that there's no one-size-fits-all crypto weight, with decisions depending on individual factors like investment horizon, loss tolerance, and familiarity with digital assets. The primary concern highlighted is the high volatility of Bitcoin and Ether, which have significantly higher annualized volatility and maximum drawdowns compared to traditional assets. Schwab's analysis shows that even small crypto positions can disproportionately impact portfolio behavior. For instance, a 15% expected annual return for Bitcoin could imply allocations ranging from 1.0% in conservative portfolios to 8.8% in aggressive ones, with Ether requiring even smaller allocations due to its higher historical volatility. If expected returns fall below 10%, Schwab suggests neither asset may justify an allocation. The risk budgeting approach, which caps crypto's contribution to total portfolio volatility, also results in low suggested weights, with allocations like 1.2% for Bitcoin or 0.9% for Ether needed to reach a 10% risk contribution in conservative portfolios. This guidance comes as Schwab prepares to launch spot Bitcoin and Ether trading in the first half of 2026.

(Source：Crypto Briefing)