The violent fluctuations in the crypto market once again show that risky asset classes should only be added to the portfolio. How to set up your portfolio cleverly, but not have to do without promising investments.
Elon Musk has once again lived up to his reputation as a crypto whisperer. On Thursday night, the Tesla boss sent Bitcoin and other crypto currencies downhill via tweet – and destroyed 300 billion dollars in market value.
The reason: Tesla I no longer accept Bitcoin as a means of payment. Within a few minutes, the price of the most famous cryptocurrency plummeted by more than 15 percent to below 47,000 US dollars and swept other currencies with it.
As a reminder: Tesla announced at the beginning of February that it would accept Bitcoin to buy its electric cars and invest $ 1.5 billion in the currency. That started a rally. In mid-April, Bitcoin even hit its current record high of $ 64,863, almost 40 percent above the current rate.
With hypes, opportunities and risks are close together
This roller coaster ride is definitely not for the faint of heart. Cryptos may be extremely exciting, but they are also quite risky: What goes high can also go low.
Investors who had bet on the hype about hydrogen stocks also learned about this phenomenon painfully recently. Former high flyers like Power Cell lost between 30 and 45 percent , Nel Asa or Ballard Power since the beginning of the year.
As is well known, hype means exaggeration. Opportunity and risk are particularly close together. That is why such topics should only be added to your portfolio, with the best possible risk diversification.
A core around which many satellites are buzzing
You can achieve this relatively easily with exchange-traded index funds (ETFs). There is now a large selection of themed and industry ETFs. Megatrends such as digitization, demographics or future mobility, industries from A for alternative energies to Austria for oil and gas or special topics such as cannabis, gaming & sports and of course blockchain – there are actually no limits to the imagination.
The stock market expert
Jessica Schwarzer is a financial journalist, bestselling author and long-time observer of global stock markets. The German equity culture is a matter close to her heart. Her fifth book “So that she doesn’t have to fish for a millionaire …” was recently published. At t-online, she writes every two weeks about investments and financial trends that complement a broadly diversified basic investment. You can reach her on LinkedIn, Twitter, Facebook and Instagram.
But how do you best use them, how do you put together a depot with megatrends? I’m a big fan of the “core-satellite” strategy. To do this, imagine your depot like a planetary system:
In the middle is a relatively large planet, the “core”, around it are some smaller planets, the satellites. The core consists of basic investments, with the satellites it can be more creative, innovative and a little riskier. While the “core” is rather boring, the satellites provide excitement – and hopefully also a turbo in returns.
It all depends on the right weighting
This strategy is relatively easy to implement: For the sake of simplicity, let’s assume a pure equity portfolio. The core should make up at least 50, but better 60 or 70 percent of your portfolio. You could invest this share as widely as possible across the globe.
Investments in ETFs on the MSCI World and the MSCI Emerging Markets would be possible. But it is also conceivable to put some of the money on the dividend strategy or quality stocks.
The remaining capital – 50, 40 or 30 percent depending on the size of the core – you then distribute over several satellites. These could be five or ten percent “large”. But be careful: The weight of the individual satellites should not be too heavy with a view to risk diversification.
Blockchain stocks instead of cryptocurrencies
Conversely, however, you should also bear in mind: If there are too many smaller planets, then your depot will be quite confusing. But it can be five or six satellites. In the end, of course, it depends on your risk type, how big your core is and how many, especially which satellites you choose.
Which brings us back to Elon Musk and the cryptocurrencies: They too can of course be such a satellite. If the price capers of Bitcoin and Co. are too wild for you, but you find the topic fundamentally exciting, you could also consider investing in blockchain stocks.
The blockchain is the technology behind the bitcoin. This future technology can do a lot more than just “mine” Bitcoin and Co. Blockchain networks enable the use of autonomously running business agreements, so-called smart contracts, for a wide variety of purposes.
In addition to cryptos, there are numerous other megatrends
There is also the possibility of creating digital assets – not only alternative assets such as cryptocurrencies, but also through the tokenization of physical objects, events or concepts. Entire supply chains can be mapped using the blockchain.
There are many industries that will benefit from this technology: insurance, logistics, food, industry and of course banks. So far, however, only two special blockchain ETFs have been listed on the Frankfurt Stock Exchange: the Invesco Elwood Global Blockchain ETF and the VanEck Vectors Digital Assets Equity ETF . They offer access to global companies that participate in the blockchain ecosystem or that could participate in the future.
With all this, one thing is clear: Blockchain technology is certainly one of the megatrends of our time – keyword digitization. But there are plenty of other exciting future topics in which you are already investing with the help of ETFs: demographics or mobility of the future, infrastructure and smart cities, automation and robotics, cloud computing and cyber security, not to forget alternative energies.
These ETFs offer a wider risk diversification than investments in individual stocks, but less diversification than investments in the well-known MSCI indices on countries, continents or the whole world, for example. This is another reason why you should only mix in the sector and thematic funds. They are an exciting satellite, but too risky for a basic investment.
T-online and its authors and columnists prepare all articles with journalistic diligence. t-online points out that the texts are not a substitute for advice and, in particular, do not constitute investment advice or a recommendation to buy or sell securities.