There’s a lot of bad crypto advice out there.
For every even-keeled crypto investor, there are five meme accounts imploring you to put all of your money into Bitcoin, and others trying to convince their followers that some new altcoin is the crypto of the future.
The reality is a bit more nuanced, experts say. “Optimal investing is very simple and boring,” says Jeremy Schneider, the creator behind Personal Finance Club on Instagram. “Today this crypto craze and meme stocks are making headline news, and for young investors, who [are new] to investing, they’re trying to figure out how to navigate that.”
Financial advisors and experts we’ve talked with about crypto investing warn people against allocating too much of their portfolio to crypto, or not understanding the risks. Make sure investing in cryptocurrency doesn’t hold you back from saving and maintaining an emergency fund, paying off credit card and other high-interest debt, and saving for retirement with a more conventional investment strategy.
For more good perspective, here’s what some of our favorite personal finance influencers are saying about crypto:
1. Jeremy Schneider, Personal Finance Club
Schneider has been familiar with Bitcoin since its inception.
“I remember the day in 2010 when I learned about Bitcoin. For about 30 minutes I pondered buying some Bitcoin and decided there was no way it could ever reach $1,” says Schneider. Bitcoin, of course, blew past $1 on its way to a high of more than $60,000 in April 2021; it currently sits just under $40,000 after a tumultuous May.
Still, Schneider warns against letting investing FOMO pressure you into making your decisions. Instead, Schneider constantly reminds his followers of two simple rules for building wealth: live below your means and invest early and often (preferably in index funds).
Schneider says his net worth is about $4.1 million. Of that, he has about $2,000 in cryptocurrencies — far less than even 1%. For those interested in playing around in the space, Schneider recommends making a similarly small investment compared to your net worth.
“At its core, I don’t see it as a productive asset. If you buy an index fund, or real estate, you get dividends or rental income, whereas if you get crypto you’re basically just hoping someone pays you more money for it in the future,” says Schneider. “I can imagine a world 30 years from now where crypto could go to zero, or a different coin emerges, whatever. But I can’t imagine a world in 30 years where index funds and real estate don’t make you very wealthy.”
2. Jully-Alma Taveras, Investing Latina
Jully-Alma Taveras, who goes by “Investing Latina” online, thinks there’s a great opportunity to diversify your holdings with a cryptocurrency asset.
“It’s something people should start learning more about, at the very least,” says Taveras. “It’s not something anyone should be putting all of their money or fortunes into, but I think it’s something that we should include in a diversified portfolio.”
As a new and uncertain new investment asset, Taveras recommends keeping your allocation to 1% of your total assets. She’s also sticking to the two largest cryptos for now.
“I have Bitcoin and Ethereum, and that’s as far as I’ve gone in my personal portfolio,” says Taveras.
Comparing crypto to the conventional stock market misses the mark, Taveras says. “It’s not the stock market. It’s a completely different world,” says Taveras. And the new world definitely comes with uncertainties. “The stock market has been around for over 100 years, and blockchain technology has only been around for a little over a decade.”
3. Kiana Danial, Invest Diva
Kiana Danial started tracking crypto markets in 2016, but didn’t actually start investing until the end of 2018. Danial, who runs an account called @InvestDiva on Instagram, recommends giving plenty of thought to your investing goals before buying cryptocurrency.
“Are you buying it because you want a lottery ticket to make a million dollars in a year?” Danial asks. If that’s the case, “then you might want to reconsider your investment strategy because some people have got lucky, but a majority of people have got burned,” Danial told us recently.
But if you’ve done your research and are OK with the risk, Danial says it might make sense for investors who still have a lot of time before retirement to allocate as much as 20% of their portfolio to crypto. But “please don’t invest in cryptocurrencies based on trends on Twitter.”
4. Marc Russell, Betterwallet
As the creator of @BetterWallet on Instagram, Marc Russell’s investing philosophy is to “stick to the basics,” he says. “Long-term, boring strategies that work every single time is really where I focus my attention.”
However, Russell acknowledges crypto may have a place in your longer-term strategy.
“I think a lot about asset allocation, and just making sure that you have the appropriate mix of stocks, bonds, and alternatives, which is where cryptocurrencies kind of fall under for the simple, long-term investor,” says Russell. For educated investors, Russell recommends allocating about 5% to cryptocurrency, but would caution going beyond 10%.
Like others, Russell warns of getting swept up in the headlines and emotional rush of getting in on crypto without doing proper diligence. “People don’t understand the other side of the spectrum, where you can make 50% on your investment, but you can also lose 50%. They think you’re either making 50% or you’re making 30%, and it doesn’t work that way,” says Russell.
But for those who are educated on the market, and know what’s at risk, “it’s an excellent diversifier because it’s not correlated to the [stock] market for the most part. And when you’re looking for something to diversify you, that’s essentially what you’re looking for,” says Russel.
5. Humphrey Yang, Humphrey Talks
Humphrey Yang’s personal finance advice has gone viral on TikTok and YouTube. He’s a strong believer in index funds, “but most people don’t want to do that because it’s too passive and not fun, it’s a little bit boring,” says Yang. “But that is honestly the best advice I can give any average investor, is just put your money in an index fund and check it once per year.”
As an experienced investor, Yang considers cryptocurrency a speculative investment. He likes to put between 5% and 15% of his total portfolio there, an amount he says limits his exposure on days when it’s falling.
He also sticks with two of the better-known cryptocurrencies out there.
“I don’t really believe in too many altcoins,” says Yang. “I do Bitcoin and Ethereum because they’re the two most stable ones and have the most history.”
6. Tori Dunlap, Her First 100K
Tori Dunlap has had her doubts about crypto.
“It still feels very speculative,” says Her First $100K creator Dunlap, who saved her first $100,000 by age 25 and shares personal finance advice on TikTok and Instagram. But she also recognizes the big interest in crypto investing, “even if it’s just a small amount of money.”
But when people ask her about it, she recommends following the 5% rule. “You don’t want to contribute more than 5% of your portfolio toward these things that haven’t been proven over time,” says Dunlap. “If you are investing a certain amount of money, you should maybe be OK losing that amount of money.”
7. A’Shira Nelson, Savvy Girl Money
A’Shira Nelson of Savvy Girl Money on Instagram is the ultimate retirement-minded investor.
“My strategy is to max out my retirement accounts. For the most part, I only invest in low-cost index funds,” says Nelson. “I know that I can see history on that. I can read books on that.”
That’s one of the biggest deterrents for her from investing in cryptocurrency — a lack of history and study on the space. But she’s quick to remind her followers that there are many other types of investments you can make outside of the stock market and cryptocurrency, if you want diversification.
“I do a lot of real estate investing,” says Nelson. “My husband helped me spice up my portfolio with real estate, and it’s an easy way to have fun with it, too.”