Portfolio Allocation in Layman’s Terms

By Papa Lou | Educational Papa | 25 Apr 2021


I believe there is some misunderstanding when it comes to simple portfolio allocations.

Many investors who arrive at the crypto space are young and new to investing in general.

They may understand that long-term plays revolving around dollar-cost averaging and holding for 3-5+ years are the key to less stressed overall gains but may not understand how to allocate those funds.

That said, it can be easy to assume that everyone here invests 100% into cryptocurrency, so you should too. But this is not the case.

A sample of over 150 people was taken on the CryptoCurrency subreddit several times, and the average investor there has about 50% of their portfolio in crypto.

The breakdown was usually as follows:

1. 50% Cryptocurrencies
2. 50% Stocks

For some of the older investors there, their portfolio looked something like this:

1. 50% Real Estate
2. 25% Crypto
3. 25% Stocks

Now, within those categories, is more diversification based on the market capitalization of the asset.

Essentially, the market cap is framed by this example; a company with 10 million shares selling for $100 each would have a market cap of $1 billion. The investment community uses this figure to determine a company's size, as opposed to using sales or total asset figures.

There are:

Large Cap

Medium Cap

Small-Cap

Micro Cap


These cap sizes apply to both stocks and cryptocurrencies.

So within each category, an aggressive investor with a long time horizon may have a portfolio that looks like this:

1. 35% Large Cap Crypto
2. 35% Large-Cap Stocks
3. 10% Medium Cap Crypto
4. 10% Medium Cap Stocks
5. 5% Small/Micro Cap Crypto
6. 5% Small/Micro Cap Stocks

Here’s an example of how to identify each category when looking at Coin Market Cap .com for example:

Micro-cap companies:
Less than $300 million


Small-cap companies:
$300 million to $2 billion


Mid-cap companies:
$2 billion to $10 billion


Large-cap companies:
$10 billion to $200 billion+


So when you look at your investments, make sure you consider your entire portfolio and rebalance that portfolio based on your time horizon, your financial goals, and your risk tolerance.

Good luck, and remember, when in doubt, DCA and HODL.

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Educational Papa
Educational Papa

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