Is Mark Cuban Wrong to Put 80% of His Portfolio Into Crypto?

Make sure crypto is part of a diversified mix of investments.

Mark Cuban told The Problem With Jon Stewart podcast recently that outside of Shark Tank, the majority of his investments are in cryptocurrency. The billionaire investor is an outspoken cryptocurrency enthusiast and believes crypto will drive significant changes in the future.

"The investments I'm making now are not in traditional businesses," he said. "80% of the investments I make that are non-Shark Tank are in and around cryptocurrencies." Cuban compared crypto to the early days of the internet, explaining they have the potential to disrupt the way traditional companies operate.

What's powerful for Cuban is the idea of decentralized decision making, which is made possible by certain aspects of crypto. "Banking is going to change," he said. "Insurance is going to change. The book industry is going to change."

READ MORE: Top Cryptocurrency Apps and Exchanges

Should you follow Mark Cuban's example?

First, it's worth pointing out that Cuban isn't all in on crypto. Sure, he's focusing 80% of his new investments on cryptocurrencies, but he already has an existing portfolio of other assets. The main takeaway from his comments is this industry could present a tremendous opportunity. And the comparison with the early days of the internet is apt: Some of those companies succeeded, but many did not.

Cryptocurrency is a high-risk investment. As we saw last year, it has the potential to generate eye-watering returns. But it's also a relatively new and unregulated asset that could collapse completely. Specifically, we don't know which individual projects will succeed or fail. And we don't know the impact increased regulation will have when it arrives.

This is why the general advice is to only invest a small percentage of your overall holdings in a high-risk asset like cryptocurrency. That way, you can mitigate the risks involved. If crypto is a small part of a wider diversified portfolio, you'll reap rewards if prices increase but also limit the damage it might do if it crashes. If, on the other hand, you invest too heavily in crypto or put in money you need for other purposes, a crypto crash could be devastating.

Like many things in life, there's no right or wrong answer. The amount you invest in crypto depends on your personal situation, knowledge of the crypto world, tolerance for risk, and investment goals. But unless you are a billionaire like Mark Cuban who has spent most of their time in the past few years living and breathing crypto, it isn't advisable to put 80% of your new investments into crypto.

What cryptocurrencies does Cuban own?

Cuban told the podcast that he's particularly interested in the way decentralized autonomous organizations (DAOs) can shake up traditional business models. "A decentralized autonomous organization basically says that there is no centralized organization, it's all decentralized and trustless," he explained. "And that we mean by trustless is that there's not a management group or board of directors or a CEO making decisions."

The structure of a DAO means people who own tokens can vote and set the direction of the network, and Cuban says this is the type of structure he's looking to invest in. But DAOs aren't his only crypto holdings. Cuban doesn't speak often about the specifics of his crypto portfolio, but we know from previous interviews that he holds the following:

• Bitcoin (BTC). Cuban sees the granddaddy of cryptos as a form of digital gold that can work as a long-term store of value. Check out some of the best places to buy Bitcoin.
• Ethereum (ETH). Cuban says smart contracts are a game-changer and Ethereum continues to be a dominant force in this sector, in spite of its network congestion issues.
• Polygon (MATIC). Polygon offers various layer 2 solutions for Ethereum, which sit on top of the existing blockchain to improve performance and reduce fees. Cuban thinks Polygon is well structured and easy to use.
• Dogecoin (DOGE). Cuban holds a small amount of the popular meme coin, mostly because he thinks it's fun.

Don't buy these cryptos just because Mark Cuban holds them. Do your own research and make sure you are comfortable with what the project does, how its tokens are issued, and how it is run. There's a lot we can learn from successful investors like Cuban, but what's right for him is not necessarily right for every investor.