Worried about rising volatility in this year’s stock market? Perhaps consider adding cryptocurrency to your portfolio…seriously.

Bitcoin has long been regarded as a fringe asset class, and its price can have dizzying swings. But recent studies suggest that Bitcoin also can be an effective portfolio diversifier, boosting long-term returns without adding too much risk. Over the past decade, a mix of 60% global stocks and 40% bonds had an annualized return of 5.04%, according to research by asset-­management investment firm WisdomTree. But combining a 5% allocation to Bitcoin with 55% in global stocks and 40% in bonds raised the average annual 10-year return to 8.26%, an increase of 3.22 percentage points…and over that same period, the overall portfolio’s volatility rose less than one percentage point. What you need to know now…

Bitcoin is a diversifier because it doesn’t move in sync with other major asset classes such as stocks and bonds. Example: The limited supply of bitcoin (there will only ever be 21 million, and there now are fewer) helps it thrive in certain environments when other assets don’t, such as when there is high inflation and the dollar is losing its value.

The key is to invest a small amount in bitcoin, then rebalance regularly to your original allocations. That forces you to buy low and sell high, instead of speculating. A low-single-digit allocation to Bitcoin from 2% to 5% is the sweet spot between risk and reward.

The SEC’s decision to allow Bitcoin exchange-traded funds such as iShares Bitcoin Trust ETF (IBIT) and Fidelity Wise Origin Bitcoin ETF (FBTC) enhances the appeal of the cryptocurrency as a diversifier. Not only did it help legitimize Bitcoin, but it’s now much easier for IRA holders to gain exposure.

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