What is the right crypto allocation for your portfolio?

Unless the plan is Lambo or food stamps, we’d advise against it. Figuring out the right amount can be tricky — and the answer varies depending on whom you ask and your circumstances.

How Mr. Wonderful invests in crypto

Investor and entrepreneur Kevin O’Leary of Shark Tank — shares his views on how he invests in the sector (Insider):

• Limits his crypto portfolio to 20% of his entire portfolio, and no single asset takes up more than 5% of his crypto portfolio.
• He holds 32 crypto positions — including Solana ($SOL), Bitcoin ($BTC) and Polygon ($MATIC).

He takes a startup investment approach — where one or two positions can make up for all the losers — even if the other positions go to zero.

His advice: Heavy diversification — “because you have no idea what’s going to work.” He looks at whether the project is solving a problem for any crypto investment and if that problem can generate economic value.

Long-term crypto portfolio

Ryan Allis, Managing Partner of crypto hedge fund HeartRithm — shares his top 30 long-term crypto portfolio picks in his newsletter each week.

• 30% in Ethereum Layer 1/Layer 2s — i.e., Ethereum ($ETH) or Polygon ($MATIC)
• 20% in Ethereum competitors — i.e., Avalanche ($AVAX), Terra ($LUNA), Polkadot ($DOT), Solana ($SOL), Cosmos ($ATOM) and Fantom ($FTM)
• 15% in decentralized finance protocols — i.e, Uniswap ($UNI), SushiSwap ($SUSHI), Aave ($AAVE)
• 10% in core technology — i.e., Chainlink ($LINK), THORChain ($RUNE)

The remaining 25% is distributed 5% each in the gaming/NFT, crypto exchanges, money transfer, centralized lending and wireless tech sectors.

Allis also recommends dollar-cost averaging into holdings — and keeping a 5-10 year time horizon.

Investors: Long-term game

20% of their total allocation may be too large of a percentage for many investors. But deciding on the right amount can be tricky.

Financial advisors advise max allocations between 2-5% of the total portfolio, with younger investors able to invest a more considerable amount.

Per Alex Doll of Anfield Wealth Management — allocations also depend on how investors react to volatile swings.

• How would you react if your crypto portfolio fell 50%? — a common occurrence in crypto.
• Even Bitcoin — the most blue-chip crypto of them all — has fallen nearly 50% twice in the past year.

Crypto starter pack: How to start investing in crypto