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

Bitcoin is ‘additive to a portfolio’ with outsized returns relative to risk: Strategist
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ShoreHaven Wealth co-founder Michael Dorso joined forces with Julie Hyman and Brian Suzy of Yahoo Finance Live to discuss financial planning, the pros and cons of cryptocurrency, and how inflation is here to stay.

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Brian Suzy: After a 27% return for the S&P 500 last year, stocks are starting to look a bit shaky as traders prepare for a Fed rate hike later this year. So what should you ask your financial advisor now?

Michael Dorso is the co-founder of ShoreHaven Wealth Partners and joins us now. Michael, nice to see you. Thanks for jumping on. What is the first question that an investor needs to ask his financial advisor at this moment?

Michael Dorso: That’s a great question, Brian. I think the biggest question we ask and the first question I’m going to ask my financial advisor is, how do you deal with the volatility that we’re currently seeing in the markets? I think that is the number one concern now.

Julie Hyman: How do you deal with it, I think, is the question then? Since volatility seems to be – everyone has warned volatility is not going anywhere, especially with the Federal Reserve raising interest rates this year. So are people really worried about some kind of mitigating that as the year goes on? And how do they do it?

Michael Dorso: That’s a great question, Julie. I think a lot of that goes back to portfolio fundamentals. I think building a diversified portfolio, making sure you balance your winners and losers, looking at different segments of the market may not have done well in the last 12-18 months, whether it’s value stocks or maybe adding some commodities to the portfolio, definitely something we’ve seen spike in volatility. .

And a lot of it has been created in that technology space, where a lot of growth names have been created. So I think constantly creating a diversified portfolio, and making sure you’re looking for the long haul will help you monitor and compromise some portfolio during this volatility.

Brian Suzy: Yes, speaking of volatility, bitcoin continues to fall, under pressure again today. Should Bitcoin be a part of your holdings here?

Michael Dorso: indeed. I know we’ve talked about Bitcoin once in the past. I think if crypto-currency fits in from a risk tolerance standpoint to what you do as a client, then I think there is a place in a wallet for Bitcoin or Ethereum, a small portion, anywhere from 1% to 3% of your net investable wealth.

And what we’ve found is that historically, having it in a portfolio has a disproportionate risk to it. So obviously, if it’s 1% of your portfolio, the most you can lose will be 1%. But with the huge returns we’ve seen in Bitcoin over the years, it’s just adding to the wallet.

I think another benefit of adding Bitcoin to your wallet is that we believe inflation is here to stay. Obviously, we’ve seen inflation go up. Thus Bitcoin could certainly protect the wallet from some of this inflation returning to the markets. We believe it is here to stay.

Julie Hyman: I was going to ask about technology. But I’m curious, based on what I just said, I mean, can we still consider bitcoin as an inflation hedge, given that lately, it seems like when everything else is far from risk, bitcoin also sells?

Michael Dorso: that’s fair. And I definitely think we’re seeing a little bit of that. I think when you look a little at the long-term, Bitcoin will probably take on some of these properties of gold as a store of value in a wallet. It was clearly volatile in the short term. But I think when you distill it a little bit and look at some long-term numbers, it’s clear that Bitcoin has been around for about 13 years now.

The numbers you look at, which probably go back to 2015 or 2016, give you more clarity on how to protect the wallet. But I think it still works as an inflation hedge and in addition to having stocks in your portfolio, it’s obviously important as well. Bonds have taken a really bad hit over the past month, too.

Brian Suzy: Michael Dorso, co-founder of ShoreHaven Wealth Partners. Nice to see you. We will check with you soon.

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