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Why cryptos should be a part of your financial plan

Cryptocurrencies are safer, more accessible and should be taken seriously as an asset class.
Image: Bloomberg

Cryptocurrency assets are here to stay. Bitcoin, Ethereum, Dogecoin, Litecoin, Ripple …. There are several thousand options currently available, with new ones being launched almost daily. They are not a fad, nor are they a Ponzi scheme – if selected wisely.

The reality is that crypto assets are real, and they deserve a place in your financial plan.

The invention of blockchain technology in 2009 began a cycle of innovation that will continue to revolutionise financial services – and other industries – for many years to come. It’s quite hard to wrap your head around what exactly a blockchain is and what it does, but it’s basically a decentralised online database, where each data point is arranged chronologically, linked to the block that came before and to the block ahead in the chain. In simplistic terms, cryptocurrencies like Bitcoin use blockchain technology to record a ledger of transactions and thereby keep the asset secure.

It’s all quite technical, but the take-home message is that cryptocurrencies have become safer and more accessible than ever before. It’s time to take them seriously as an asset class.

It’s all about the asset class

Financial wealth is represented by the assets you own. This can be your house, a business, retirement savings …. Each asset has intrinsic value, and each counts towards your net worth. But not all assets are equal, which is why you need to categorise them. In doing so, you will be able to objectively manage the risk and return on each asset category.

A well-structured financial plan generally allocates wealth into four broad asset categories, the total of which represents your net worth. These categories are:

  • Business assets: Investments that generate a source of income, like an actively-managed business; a rental property; or your profession, which earns you a salary.
  • Lifestyle assets: Investments we use to enjoy the life we choose to live; like our homes, cars and furniture.
  • Lifetime assets: Investments like your retirement portfolio, which funds your lifestyle when you are no longer able to earn an income.
  • Legacy assets: Investments that you don’t have to rely on to fund your lifestyle or your retirement – assets you’re likely to leave to your beneficiaries.

It’s usually quite easy to decide which category an asset falls into. Take your primary residence, for example. It certainly has value, and it may well appreciate over time, but it’s more important as a place of safety and security for you and your family, which is why it’s classified as a lifestyle asset.

But it’s not so simple when it comes to crypto assets – the new kid on the block. You could call crypto an “investment” and leave it at that, but that would be a cop-out. Remember, all wealth needs to be categorised to have meaning and purpose. So, which asset category does crypto fall into?

  • Business asset? Are you mining Bitcoin? Is this a business that you’re actively managing, which is generating an income? For a very small minority of people, this might be the case. If your crypto investment falls into this category, you should have a business plan for capital investment, operations and budgeted returns, and for how you’ll manage risk like fraud and business continuity.
  • Lifestyle asset? Many people are dabbling in cryptocurrency trading – they’re the ones who like to discuss Ripple vs Ethereum around the braai. If you think of your crypto investment as a status symbol, it should be categorised as a lifestyle asset, like a car – not something you rely on to generate an income or contribute to your retirement plan. If this is the case for you, make sure you set a reasonable limit on how much you plan to invest.
  • Lifetime asset? If crypto is a part of your retirement plan, how much should you allocate to your total portfolio – 1%, 10%, more? You need to factor in the price volatility and the unpredictable valuation of crypto assets. Remember, your lifetime assets are your safety net – the bucket of capital that you can draw on when you no longer earn an income. Lifetime assets should therefore be a safe bet, the get-rich-slowly type of asset that is predictable and won’t throw any surprises your way. We would highly recommend consulting with a Certified Financial Planner® to provide you with professional advice in this regard.
  • Legacy asset? If your cryptocurrency investment doesn’t fit into any of the first three categories, then this is likely where it will fall. The legacy category is a catch-all asset class: the investments you’re not counting on to fund your lifestyle or your retirement; something to have a little fun with. If you’re lucky, you might leave something for your beneficiaries, and if not, that’s also okay. Most crypto investors fall into this category.

Be bold, but also be careful

With the rise of crypto featuring so prominently in the media, it’s difficult to sit on the side-line and not be part of the action. You don’t have to either, so long as you’re clear about where your crypto investment fits into your wealth creation plan.

In the long run, cryptocurrency will be a core component of any diversified portfolio, but we haven’t quite reached that point yet. All crypto platforms are currently unregulated in South Africa and financial planners are not allowed to give specific advice about how to invest.

What we can advise is cautious experimentation. Don’t cash out your retirement annuity to buy Bitcoin.

But if you do have some spare cash lying around and crypto is your legacy asset, then give it a try. The more you know about the asset class of the future, the better.

Ricardo Teixeira CFP® is chief operating officer at BDO Wealth Advisers


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Bitcoin not crypto.

Zero reason to speculate in unregulated venture capital which is essentially everything else. Quick easy way to raise liquidity, little else.

“The legacy category is a catch-all asset class: the investments you’re not counting on to fund your lifestyle or your retirement; something to have a little fun with. If you’re lucky, you might…”

So there you have it, a punt for people with more money than sense. Keep it with the lottery tickets and bookmakers’ slips.

How he gets from there, two paragraphs later, to “in the long run, cryptocurrency will be a core component of any diversified portfolio” is a mystery. “Featuring in the media” is hardly a justification.

Some of those people have very little money.

Thus even little sense.

I wont touch crypto.

As always, the biggest pundits of it are the brokers.

Crypto is a really bad “asset class”:

1. Uses a ton of electricity. Bad for the environment.
2. It has raised the prices of graphics cards to ludicrous levels.
3. It is not easier to use than cash.
4. It is insanely risky as we have seen with all the bitcoin theft, etc.
5. It is not stable and fluctuates like my GFs moods.
6. It is a pyramid/gambling scheme.
7. No inherent value and does not generate any value.
8. Does not pay any interest/coupon/rental.

There are numerous masters and PHD thesis’s on the internet that proves mathematically that it makes sense to have a small portion in crypto in a diversified portfolio.

Search and you shall find.

Indeed, that is why I have 3 tulip plants in my back yard for just in case.


I consider my self a man of normal intelligence and average IQ. Whatever that is.

I fail to be able to even grasp the concept of crypto or even Bitcoin. Earlier in life when I had that problem I left it alone, served me well did that judgement call.

Bitcoin, and all cryptocurrencies, are nothing more than a farce, a Ponzi scheme waiting to collapse. It has no value other than the belief that people place in it having value. Once that belief collapses so will the value of Bitcoin and people will lose a lot of money. How can something that can be created out of ‘thin air’ (Bitcoin mining) have any value, other than a perceived value by people falling prey to other people mining Bitcoin and continuing to sell their scam? Once people realize the scam that underlies all cryptocurrencies their values will drop to zero and there will be many depressed people left ‘holding the bag’. It is only a matter of time before Bitcoin drops to zero, like all other cryptocurrencies.

At least with a fiat currency you have the backing of the national government that issues the currency. Sure, with the USA printing trillions and trillions of dollars out of thin air, inflation is a risk. But at least those dollars are backed by the faith in the US Government and their tax base, whereas cryptocurrencies are backed by nothing other than a Ponzi scheme of people selling other people a dream based on a farce.

I have zero faith in cryptocurrencies and will be staying far away, not even risking one dollar of my investment capital. I hope that when the Ponzi scheme collapses, as it will, that the people left holding the bag can afford the losses they will suffer.

I predict that we will look back in 20 years’ time and realize just how big a scheme this was, starting off small and then gaining popularity, only for the creators of cryptocurrencies to laugh all the way to the bank as their Ponzi scheme collapses and they walk away with the riches, while those suckers who placed their funds into cryptocurrencies are left on the sidelines. People will wonder how they could have been so stupid and not seen this coming.

I know that it is always the messenger who gets shot. That is what happens when intelligent and informed people point out the insanity inherent in pyramid schemes and scams. I expect that those who have fallen for the cryptocurrency scams will ‘talk their book’ so as to try and boost their investments, and sell at a higher price to another sucker, but ultimately sanity will prevail and many millions of people will lose their money. In the meantime, the ignorant ‘investors’ (suckers) will get defensive and angry when intelligent and informed people challenge their assertions regarding their decisions and will start to hurl insults, being the only means by which they can try to justify their poor investment decisions.

Mark My Words – Bitcoin is going to ZERO!!

End of comments.



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