By Abigail Almonte
Invest. Save. Invest. From a young age, individuals are encouraged to plan their futures in order to grow and manage their wealth over the course of their life. In today’s day and age, we are exposed to a whole new asset class: digital assets. Although they have numerous capabilities, there are many people who remain unaware of the power of investing in digital assets. It’s no surprise that passive income is just as necessary as active income in terms of accumulating wealth. Active income is an amount you are compensated for working, while passive income is the money your assets can make you in your sleep. Making money while sleeping? What’s better than that! While investment portfolios are a fantastic way to plan accordingly for retirement and savings, modern-day finance has introduced a valuable new asset class through the ownership of digital assets. These 21st-century digital assets have leveled the playing field for investing and have shown strong returns over time. Read more to learn why you should add digital assets to your portfolio.
What are digital assets?
Digital assets and cryptocurrency knowledge usually start with some general knowledge of Bitcoin. Bitcoin first came to the market in 2009 and has since skyrocketed in value, reaching record highs of over $60,000. With the cryptocurrency market now being valued at over $2 trillion dollars as a whole, digital asset growth has grown greater than anyone could have imagined. While it’s great to be familiar with cryptocurrencies such as Bitcoin and Ethereum, there is a multitude of other digital assets that can be of great value such as Litecoin, Decentraland, Algorand, and more. Digital assets could also be something as simple as a website domain or a social media account. With the NFT market on the rise and the value behind blockchain technology continually improving, investments in this field are hotter than ever, and there has never been a better time to invest.
Why are they important?
Digital assets prove to be unique as they offer an entirely new strategy to diversify one’s portfolio while making investing accessible to all people with an internet connection. Diversification is an essential part of providing security and safety to your portfolio as resource allocation across various investments provides overall stability. These assets do not require third-party validation to buy, sell or transfer. The inclusive and innovative technology that powers digital assets is appealing due to blockchain’s efficiency and capabilities to secure and expedite the investment process for all.
Another great reason why adding cryptocurrencies to your portfolio is important is because they are providing the opportunity for never-before-seen yields. Your Sharpe ratio will likely improve dramatically, even with a smaller allocation, as digital assets see high returns. According to CoinTelegraph, “Bitcoin has produced an average annualized return of 230% — more than 10 times higher than the second-ranked asset class.” Although the future is uncertain, average annual returns this high are promising as universal adoption has only just begun.
Institutional Approval of Digital Assets
Traditionally, investors were apprehensive to buy crypto due to the intangibility of the asset. Recent events have seen both individuals and institutions more comfortable and interested in the power of cryptocurrencies. Wall Street firms such as Goldman Sachs, Morgan Stanley, JP Morgan, and more are realizing that their clients’ focus has largely shifted to digital assets and have adjusted their investment offerings in support of the rising need. As of April 2021, Mary Rich, Goldman Sachs head of Digital Assets, said “the bank ultimately hopes to offer a “full-spectrum” of digital asset investments, including tokens themselves, as well as derivatives and traditional investment vehicles.”
How to Get Started
As time progresses, adoption will likely only grow stronger and more normalized. The time to invest is now. Whether you’re an accredited investor looking to get started on adding digital assets to your portfolio, or a financial advisor looking to learn more about the space to better serve your clients, please visit www.sarsonfunds.com to learn more, or follow us on Twitter @SarsonFunds to stay up to date on all things crypto.