Charles Schwab advises investors to keep crypto allocations modest, saying Bitcoin and Ether can materially alter portfolio risk even at low weights. In an April 6 note, Schwab laid out two allocation frameworks: a traditional approach based on expected return, volatility, and correlation, and a risk-budgeting approach that begins with how much portfolio risk an investor is willing to assign to crypto.
Schwab does not prescribe a single correct allocation, noting the choice is personal and depends on investment horizon, loss tolerance, familiarity with digital assets, and whether the investor seeks exposure to specific tokens or broader crypto markets.
The firm’s 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%—substantially higher than U.S. large-cap equities, core fixed income, or cash. That elevated volatility means small crypto positions can have outsized effects on portfolio behavior.
Under the traditional framework, implied allocations vary sharply with assumed returns. Assuming a 15% annual return, Schwab’s estimates imply Bitcoin allocations of about 1.0% in a conservative portfolio, 6.6% in a moderate portfolio, and 8.8% in an aggressive portfolio. For Ether at the same return assumption, the implied allocations are roughly 0.1%, 2.0%, and 2.5%, respectively. Schwab adds that if expected returns fall below 10%, neither asset appears to offer sufficient risk-adjusted return to justify allocations even for aggressive investors.
The risk-budgeting method focuses on limiting crypto’s share of total portfolio volatility. Schwab modeled caps on crypto’s volatility contribution at 5%, 10%, and 15%; because of Bitcoin and Ether’s historical volatility, the resulting weights are small. For a 10% crypto risk contribution, a conservative portfolio would need about 1.2% in Bitcoin or 0.9% in Ether; moderate and aggressive portfolios would require roughly 2.8% and 4.0% in Bitcoin, and 2.0% and 2.9% in Ether, respectively.
Schwab published the note as it expands its crypto offerings and remains on track to launch spot Bitcoin and Ether trading in the first half of 2026, adding direct access alongside existing ETFs and futures-related products.
Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.
