Cryptocurrency: New Trend of Asset Allocation


Asset allocation is the first step of money management. In simple terms, it means to allocate funds between stocks, bonds, realties and cash and realize revenue maximization in a certain level of risk.

The benefit of money management actually most determined by asset allocation but not products or timing. According to the report of Roger Ibbotson from Yale, More than 91.5% of change in investment return because of asset allocation. Target choice and band operation are not as significant as others think.

Take stock investment for example, 90% of people lacks ability of get a stable income in the long term. Of course choice and timing is important, but people who trade frequently are destined to fail in the stock market.

Nowadays, limitation of traditional asset allocation emerges. Especially in China since the trade conflict between China and America.

On 23th March, Trump announced that United States will slap tariffs on Chinese 50 billion dollars exports. And three months later, a announcement from US said that the quota may rise to 200 billion dollars. The conflict keep rising, which make investors nervous. As a result of this, almost a thousand stocks of A-share hit the limit down.

(Green means dump in Chinese stock market)

Although Central Bank of China took some actions to relief listed company, the macroeconomic situation did not change and the conflict is far from end. Bull news couldn’t save the market, and the screen is still red.

Because of the worry about trade war between China and US, investors prefer to escape from high-risk assets to safer ones. At the old times, investor usually choose to buy gold as hedge. However, crypto currency like Bitcoin could be another good choice.

Compared to real gold, Bitcoin has better negotiability and security and there is no storage fees. And cryptocurrency couldn’t be extra issued easily, which means there is no risk of inflation.

With the development of economic, people have more idle money but the kinds of investment has not increased. Appearance of cryptocurrency like Bitcoin offset the lack of investment products and become a investment people worth to think about.

According to the latest “The Wealth Report” from Knight Frank, which is a yearly investigation for wealth consultant and private banker, about 21% of interviewees said that they add investment of cryptocurrency for their customers last year.

However, people should be noted that in market of cryptocurrency, the market volume is low and it is mainly in the retail, so that there exist many interference factors and no history data for reference. In this case, we advise people to learn about cryptocurrency and its underlying technology ---- blockchain. People won’t be effected by shortly swings only if they know what they are investing

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