Gold and Bitcoin make a perfect portfolio combination.

  • It makes sense to have a diversified portfolio with both gold and Bitcoin as Bitcoin’s trading volume increases.
  • The stability of gold can help offset the volatility of Bitcoin.
  • This allows investors to potentially benefit from Bitcoin’s upward trend without compromising on risk management.

Portfolio management involves managing risk. It is not possible to avoid all risk, and a risk-averse investor may not want to take on no risk at all.

Instead, a risk-averse investor would prefer higher risk-adjusted returns. Naturally, the higher the potential return, the higher the risk.

Investors create portfolios consisting of different assets to achieve the best possible risk-adjusted returns. Ideally, the assets should have a negative correlation, providing diversification benefits to the investor.

However, it also makes sense to build a portfolio with correlated assets. Although such a portfolio is riskier, some asset properties may appeal to investors willing to take on more risk.

As Bitcoin’s average daily trading volume increases, a diversified portfolio may include both gold and Bitcoin.

Why add gold and Bitcoin to a portfolio?

Diversified portfolios spread risk across uncorrelated assets. The portfolio manager’s challenge is to find the optimal level of diversification beyond which further diversification brings no benefits.

Traditionally, gold provides stability to a portfolio. By adding Bitcoin to a portfolio, investors can potentially benefit from the cryptocurrency’s upward trend and mitigate the risk associated with its volatility by combining it with gold.

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