Chamath Palihapitiya might have just turned the conventional asset allocation model on its head.
In a tweet, the Social Capital CEO challenged the traditional 60/40 retirement investment model, which represents allocations of 60% and 40% to stocks and bonds, respectively, targeting returns of 10% returns annually in past decades. This rule has been widely followed, but given the current economic environment coupled with a dovish Fed, bond returns are not what they used to be. This dynamic has thrust hard assets like bitcoin and gold into the spotlight.
Palihapitiya asks now that bonds are returning zero, if the “40 go to zero with it?” He suggests lifting one’s exposure to alternative assets — in which most people have a 0-5% allocation — as a possible solution, including “crypto, cars, art, baseball cards, etc.” On that note, investors might also incorporate tokenized art and collectibles to kill two birds with one stone, so to speak.
While the venture capitalist didn’t name any specific cryptocurrencies, he is known for being a bitcoin bull who considers his BTC bet his best wager yet. Not everyone was on board.
Yet, pension funds have been limping along this year while bitcoin has delivered double-digit percentage returns. Public pension plans for the year-ended in June delivered median annual returns of a paltry 3.2%, as per Wilshire Trust Universe Comparison Service dated cited by The Wall Street Journal. Those funds with access to equities performed better, in some cases more than doubling those returns. Meanwhile, bitcoin is outperforming the S&P 500 by a long shot year-to-date.
Bitcoin and gold have both been taking it on the chin of late, with both assets trading under pressure as technology stocks stage a recovery. Bitcoin’s returns have trounced gold’s so far in 2020.
Bitcoin and Retirement
A bitcoin ETF could go a long way to bolster bitcoin’s role in retirement portfolios. ETFs are popular in 401(k) retirement plans for their low cost and diversification, not to mention their technological superiority. The U.S. Securities and Exchange Commission, however, has so far blocked every attempt for a bitcoin ETF by the crypto community.
Some investors aren’t waiting around and have found other ways to incorporate cryptocurrencies into their retirement plans.