Charles Schwab recommends that investors limit crypto exposure and size positions carefully because even small holdings of Bitcoin or Ether can materially change portfolio risk. In an April 6 note, Schwab set out two ways to think about allocations: a traditional framework that weights expected return, volatility, and correlation, and a risk-budgeting approach that begins by capping how much portfolio risk an investor is willing to assign to crypto.
Schwab does not offer a single correct allocation. The firm says the right choice depends on an investor’s time horizon, tolerance for loss, experience with digital assets, and whether the goal is exposure to individual tokens or broad crypto markets.
The primary caution is volatility. Using data through October 31, 2025, Schwab reported Bitcoin’s annualized volatility at 72.1% with a maximum drawdown of 73.4%, and Ether’s annualized volatility at 98.3% with a maximum drawdown of 87.8%. Those figures are far higher than typical U.S. large-cap equities, core bonds, or cash, so even modest crypto weights can have outsized effects on portfolio behavior.
Under the traditional, mean-variance-style framework, implied allocations depend greatly on assumed returns. With a 15% assumed annual return, Schwab’s estimates produce Bitcoin allocations of roughly 1.0% for a conservative portfolio, 6.6% for a moderate portfolio, and 8.8% for an aggressive portfolio. For Ether at the same return assumption, the implied allocations are about 0.1% (conservative), 2.0% (moderate), and 2.5% (aggressive). Schwab adds that if expected returns fall below about 10% per year, neither Bitcoin nor Ether appears to offer attractive risk-adjusted returns even for aggressive investors.
The risk-budgeting approach targets crypto’s share of total portfolio volatility. Schwab modeled caps at 5%, 10%, and 15% of portfolio volatility contributed by crypto; because of the assets’ historical volatility, the resulting weights are small. For a 10% crypto risk contribution, a conservative portfolio would require roughly 1.2% in Bitcoin or 0.9% in Ether. Moderate and aggressive portfolios would need about 2.8% and 4.0% in Bitcoin, or about 2.0% and 2.9% in Ether, respectively.
Schwab published the note as it expands crypto services and remains on track to offer spot Bitcoin and Ether trading in the first half of 2026, adding direct trading access to its existing ETFs and futures-related products.
Edited by Estefano Gomez. For more on content creation and review, see our Editorial Policy.