Cryptocurrency offers some amazing opportunities, but let’s be honest, it’s a volatile, risky investment. If you’re not careful, you can easily lose 40% or more of your portfolio in a matter of weeks. Here’s what to understand about the risks before deciding whether crypto belongs in your portfolio.
Be Prepared for Cryptocurrency’s Ups and Downs
One thing is for certain when it comes to cryptocurrency: it’s volatile. A single tweet from Elon Musk can send the price of Bitcoin or Dogecoin skyrocketing or plummeting within hours. If you can’t stomach the volatility, crypto is not for you. If you do invest, be prepared for significant swings in value, including the possibility of large losses.
Should You Own Crypto in Your 401(k)?
Depending on your risk tolerance, cash flow, current portfolio allocation and age, crypto may be a viable investment option. Regardless, you should proceed with caution. In 2022, Fidelity began offering a bitcoin option through its 401(k) platform, available only if an employer chooses to add it. In May 2025, the Department of Labor withdrew its 2022 guidance that had cautioned employers against offering crypto in 401(k) plans, leaving that decision to plan fiduciaries. Many plans still do not offer crypto. But I wouldn’t recommend rushing in without understanding the risks. Remember, if you’re close to retirement, having crypto in your 401(k) might not be the best move due to its high volatility.
If you choose to invest in crypto, many investors limit it to a small portion of their overall portfolio. The right amount, if any, depends on your goals and risk tolerance.
The Importance of a Long-Term Strategy with Crypto Investments
This isn’t about buying low and selling high in a matter of weeks. The best way to approach crypto is with a long-term strategy. Don’t get emotional and panic when the market drops 40%. As I always tell my clients, buy low, sell high, but only if you have a long-term outlook and the stomach for the rollercoaster ride.
Investing in Crypto, Be Wise & Stay Informed
Crypto is still an emerging asset class, and it’s not for everyone. If you decide to take the plunge, make sure to do your research, set realistic expectations, and most importantly, don’t invest more than you can afford to lose. Whether crypto has a place in your portfolio depends on your goals, time horizon, and risk tolerance.
Disclosure
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice.
Please consult legal or tax professionals for specific information regarding your individual situation.
The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
