Cryptocurrencies often get a bad rap for being risky, and many are. Still, most well-diversified portfolios have a tiny allocation, sometimes just 1%, that’s devoted to risky or speculative assets, with the idea being that a small bet could pay off huge if it works out, and only sting a little bit if it doesn’t.
With that in mind, let’s take a look at three cryptocurrencies you’ve definitely heard of and take a minute to appreciate why it’s worth placing at least a sliver of your portfolio’s value into them as a group.
As a trio, Bitcoin, (CRYPTO: BTC)Dogecoin, (CRYPTO: DOGE), and Solana (CRYPTO: SOL) offer a useful mixture of risk that walks the line between making an aggressive yet measured set of investments, and swinging for the fences with reckless abandon. You can think of them as a mini-portfolio that provides exposure to a few of the key and enduring areas within the cryptocurrency sector, which is something that a fully diversified portfolio needs in 2025.
As the established leader of the cryptocurrency market, Bitcoin is the safest of the three. With talk of the U.S. government investing heavily in Bitcoin through a strategic Bitcoin reserve, it’s clear that this asset is no longer on the fringe, but rather in an increasingly central position within the global financial system. Though you shouldn’t be counting on it to retain all of its value in the event of a catastrophe or a major downturn, at this point it’s an asset that’s so widely held that the chances of it going to zero are very, very slim. Furthermore, its property of being a hedge against monetary inflation is something that most investors need, both right now and for the long term.
Solana is another major cryptocurrency, but it isn’t as firmly established as Bitcoin. At the same time, its protocol is in active development, and there’s a large ecosystem of projects with tokens on its blockchain to drive investors to buy the main coin. Price appreciation is likely to be a gradual grind as the chain gains adoption and more users. That positions it as riskier than Bitcoin, but still significantly less risky than the many meme coins and small projects hosted on its chain.
Today, among many other purposes, it’s being used as a platform to mint non-fungible tokens (NFTs), and its gas fees (user fees) are lower than competing blockchains like Ethereum. One thesis for an investment is that its ease of use and low fees will continue to attract new inflows of money from investors seeking a place to bet on innovations in decentralized financial (DeFi) services and meme tokens.
Finally, if you don’t hold any Dogecoin, it might be worth buying some. The rationale for investing in this meme token is quite different than the other two cryptocurrencies we’ve discussed.
Quite simply, Dogecoin has a tendency to go up very sharply every once in a great while. The reasons for those spikes are less important than the fact that they happen. If you buy it just after a tremendous crash, it’s likely a matter of a few years before you’ll have a juicy opportunity to sell when another speculative mania comes along.
The hard part is convincing yourself to press the buy button on a coin that just lost most of its value — but that emotional effort is what creates the opportunity for the gain later on, so try to power through.
Spreading 1% of your portfolio across these three cryptocurrencies isn’t a magic trick that delivers wealth. You’ll need to hold on to them for at least a few years to see significant gains, assuming they perform well at all.
On that front, it’s highly advisable to invest in them precisely when there isn’t much media or investor attention on their price, like two years ago, or perhaps two years from now. Another thing to appreciate is that even with Bitcoin, these coins are going to be volatile from day to day. If seeing price swings of 10% in the span of a day or two sounds nauseating, you can either choose not to look at your portfolio, or invest in something else.
But if you can tolerate that volatility, and hold for long enough, the odds are in your favor. If you’re concerned about buying in at a bad time, just set up dollar-cost averaging, which is one of the best ways to overcome price fluctuations while you’re building your position for the first time.
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Alex Carchidi has positions in Bitcoin, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.
If You’re Not Allocating 1% of Your Portfolio to This Group of Cryptocurrencies in 2025, Strongly Consider It was originally published by The Motley Fool
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