At a time when the crypto market is melting down, it might sound foolhardy to recommend cryptocurrencies to buy and hold for the long term. But if you're serious about building long-term wealth, there's simply no better way to possibly boost your annual returns than by adding a smidgen of crypto to your portfolio.
Of course, you'll want to go with the safest, most reputable cryptocurrencies. That means no meme coins and no speculative altcoin dreck. Focus on the cryptocurrencies that have mainstream adoption and the support of big institutional investors. Here are four of the best.
1. Bitcoin
No crypto portfolio would be complete without Bitcoin (BTC +0.04%). It still accounts for a whopping 60% of the total market cap of the crypto market.
Consider allocating at least 60% of your $500 crypto portfolio to Bitcoin, or approximately $300. The easiest way to do that is by picking up six shares of iShares Bitcoin Trust (IBIT +1.70%), which is currently trading around $50.
That $300 investment in the iShares Bitcoin Trust may be the best investment you ever make. Bitcoin has a spectacular track record of success. In eight of the past 10 years, it has been the top-performing asset in the world. In many of those years, Bitcoin posted triple-digit returns.
CRYPTO: BTC
Key Data Points
While there are still naysayers who claim that Bitcoin is nothing more than a Ponzi scheme, the proof is in the pudding. Bitcoin is up a remarkable 135,000,000% since 2010.
It's still not too late to invest in Bitcoin. Many people believe that Bitcoin will hit a price of $1 million by 2030. The implied assumption here is that Bitcoin will continue to grow at a compound annual growth rate (CAGR) of 50% or higher. That's a lot to ask of any asset, but Bitcoin has shown the ability to double in value year after year.
2. Ethereum
Next up is Ethereum (ETH +0.60%), which accounts for approximately 10% of the market cap of the crypto market. With the goal of diversifying your crypto portfolio as much as possible, consider allocating at least 10% of your $500 crypto portfolio, or $50, to Ethereum. One way to do that is by picking up two shares of Fidelity Ethereum Fund ETF (FETH +0.02%), which is currently trading around $25.
Image source: Getty Images.
Ethereum has become the preferred blockchain of Wall Street, as well as the centerpiece of new efforts to fuse the worlds of traditional finance and blockchain finance. That gives Ethereum a strong value proposition. Ten years after its launch, Ethereum remains far and away the leader in decentralized finance (DeFi) and one of the most trusted names among institutional investors.
3. Solana
Solana (SOL 1.48%) is a smart contract blockchain network, just like Ethereum. What makes Solana particularly attractive is that it is much faster and cheaper to use than Ethereum. As a result, a number of top Wall Street analysts -- including Cathie Wood of Ark Invest -- have suggested that Solana might one day topple Ethereum. Indeed, ever since Solana launched in 2020, it has been touted as a potential "Ethereum killer."
Currently, Solana accounts for just 2.5% of the total market cap of the crypto market, so it shouldn't be a primary component of your overall portfolio. But here's the thing: It has the potential to boost your results. In 2023, for example, Solana soared more than 900% in value.
The good news is that it has never been easier to pick up some Solana, even if you don't have a cryptocurrency trading account. New Solana ETFs are now launching, giving investors a fresh way to get access to the spot price of Solana.
4. USDC
Finally, there's USDC (USDC +0.01%), a stablecoin (meaning it's pegged 1:1 to the value of the U.S. dollar). It now accounts for approximately 2.5% of the value of the overall crypto market.
Many investors refer to stablecoins as "digital dollars," and that's exactly what they are. Stablecoins are not traditional investments, so they won't go up or down in value. They always trade for $1. Decades from now, USDC should still be trading for $1.
But there's nothing wrong with that. You can still earn yield on USDC, just as you can earn yield on physical dollars stashed in a bank account. Moreover, stablecoins make it easy to transfer value between the real world and the blockchain world, opening up all kinds of new trading and investment opportunities.
The building blocks of a diversified portfolio
Bitcoin and Ethereum should be the primary building blocks of any well-diversified crypto portfolio. You can then sprinkle in other high-upside cryptocurrencies, to maximize overall portfolio performance.
My favorite high-upside pick right now is Solana, but you could just as easily go for another top smart-contract blockchain network that you think is capable of toppling Ethereum one day.
Using new spot crypto ETFs, it should be no problem getting the exact allocation mix that you want to build long-term wealth, all at a very modest cost of just $500.
