Bitcoin is ‘additive to a portfolio’ with outsized returns relative to risk: Strategist

ShoreHaven Wealth Founding Partner Michael Durso joins Yahoo Finance Live’s Julie Hyman and Brian Sozzi to discuss financial planning, the pros and cons of cryptocurrency, and how inflation is here to stay.

Video Transcript


BRIAN SOZZI: After a 27% return for the S&P 500 last year, stocks are starting to look a wee bit shaky as traders prepare for Fed rate hikes later this year. So what should you be asking your financial advisor right now?

Michael Durso is the co-founder of ShoreHaven Wealth Partners and joins us now. Michael, nice to see you. Thanks for hopping on. What is the number one question an investor needs to ask their financial advisor at this moment?

MICHAEL DURSO: It's a great question, Brian. I think the biggest question that we're getting and the number one question I'd be asking my financial advisor is, how are you handling the volatility that we're currently seeing in the markets? I think that's the number one concern right now out there.

JULIE HYMAN: And so how do you handle it, I guess, is then the question? Since it seems like the volatility is-- everybody's been warning that the volatility is not going anywhere, especially with the Fed raising rates this year. So are people really concerned about sort of smoothing that out as the year goes on? And how do they go about doing it?

MICHAEL DURSO: That's a great question, Julie. I think that a lot of it comes down to portfolio fundamentals. I think building a diversified portfolio, making sure that you're balancing out your winners and losers, looking to different sectors of the market that maybe haven't performed as well over the past 12 to 18 months, whether it's value stocks or maybe adding some commodities to the portfolio, definitely something where we've seen that volatility pick up.

And a lot of it has been generated in that tech space, where a lot of the growth names have been. So I think that continually building out a diversified portfolio, making sure that you're looking for the long term will help you monitor and waver some of the portfolio during that volatility.

BRIAN SOZZI: Yeah, speaking of volatility, Bitcoin, it just continues to tank, under pressure yet again today. Should Bitcoin be part of your holdings here?

MICHAEL DURSO: Yeah. I know we spoke about Bitcoin once in the past. I think that if cryptocurrencies fit from a risk tolerance standpoint into what you're doing as a client, I do think that there is a place in a portfolio for Bitcoin or potentially Ethereum, a small portion, anywhere from 1% to 3% of your investable net worth.

And what we found is that historically, having it in a portfolio has an asymmetric risk to it. So obviously, if it's 1% of your portfolio, the most you could possibly lose would be 1%. But with the outsized returns that we've seen in Bitcoin over the years, it is additive to a portfolio.

I think another benefit to potentially adding Bitcoin to your portfolio is we think inflation is here to stay. We've obviously seen inflation tick up. And so Bitcoin can definitely protect a portfolio from some of that inflation that has ticked back into the markets. And we do think it's here to stay.

JULIE HYMAN: I was going to ask about tech. But I am curious, based on what you just said, I mean, can we still view Bitcoin as an inflation hedge, given that lately, it seems like when everything else is risk off, Bitcoin just sells off too?

MICHAEL DURSO: That's fair. And I definitely think that we're seeing a little bit of that. I think when you look at a little bit of a longer-term has Bitcoin potentially taking on some of those gold characteristics as a store of value in the portfolio. Obviously, it has been choppy over the short term. But I think when you draw it out a little bit and you look at some of the longer-term numbers, obviously Bitcoin's been around for about 13 years now.

The numbers that you look at, probably going back to 2015 or 2016, give you a little bit more clarity into how it protects a portfolio. But I think it still would work as an inflation hedge in addition to having equities in your portfolio, obviously are important as well. Bonds have gotten hit pretty bad over the past month as well.

BRIAN SOZZI: Michael Durso, co-founder of ShoreHaven Wealth Partners. Good to see you. We'll check back with you soon.

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