[Definitive Guide] Why are investment trusts alone not enough? The clear reasons to incorporate 'Gold' and 'Crypto Assets' into your portfolio
“Since I am investing in ‘All Country (Global Stocks)’ or ‘S&P 500’ through Tsumitate NISA, my future preparations are perfect!”
Are you feeling secure thinking that?
Of course, long-term accumulation of investment trusts centered on stocks is the royal road to asset formation and is extremely excellent. However, when looking at recent global inflation, increasing geopolitical risks, and the decline in the value of various currencies (such as the historic yen depreciation), it is also a fact that there are more moments where one feels anxious, wondering, “Can I really protect my assets with just stock-based investment trusts?”
To conclude, to compensate for the risk of building a portfolio solely with traditional assets (stocks and bonds), diversified investment in “Gold” and “Crypto Assets (Bitcoin, etc.)” is now being considered truly important.
In this article, we will thoroughly explain everything from the concerns of relying solely on investment trusts to the clear logic of combining gold and crypto assets, and even the ideal portfolio ratio that even beginners can imitate.
1. The 3 traps lurking in “Investment trusts (stocks) only”
Investment trusts (especially global stocks or US stocks) are excellent diversified investment destinations, but there are inherent risks in relying on “100% stocks”.
Trap 1: You cannot escape a “crash” of the entire stock market
No matter how many stocks you diversify into (e.g., about 3,000 stocks in All Country), when a global financial shock like the Lehman Shock or the Corona Shock occurs, stocks will almost all be wiped out (a total decline). This is because while you have achieved “diversification of stocks,” you have not achieved “diversification of asset classes.”
Trap 2: Decline in the value of fiat currency (inflation/yen depreciation)
Stocks are considered to be strong against inflation in the long term, but in the short to medium term, there are phases where corporate performance is squeezed by high raw material costs and sluggish consumption. Also, when viewed in Japanese yen, if the value of your own currency falls (yen depreciation/high prices), there is a risk that the growth of stocks alone will not be enough to protect your actual standard of living.
Trap 3: Decline in the function of bonds as “safe assets”
In traditional royal road theory (such as the traditional 60/40 portfolio), it was common sense to “compensate for stock risk with bonds.” However, in the recent global high-interest rate and inflationary environment, phases where “both stocks and bonds fall at the same time” occur frequently, and it is no longer possible to suppress risk with just the traditional “stocks + bonds” approach.
2. What are “alternative assets” that complement traditional assets?
To compensate for the weaknesses of traditional assets (traditional assets) such as stocks and bonds, institutional investors and wealthy individuals around the world are incorporating “alternative assets”.
The prime examples are “Gold” and “Crypto Assets (Bitcoin, etc.).”
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Stocks (Investment Trusts) | [Role] Asset “Expansion”
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Gold | [Role] Asset “Protection”
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Strengths: Value does not go to zero, strong against inflation and emergencies
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Weaknesses: Does not generate interest or dividends
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Crypto Assets (Bitcoin, etc.) | [Role] Explosive “Propulsion”
These three assets each have completely different “personalities.” By combining assets with different characteristics, it becomes possible to “increase assets while significantly reducing the risk of a market crash.”
3. Why incorporate “Gold”? [The Ultimate Defense]
The clear reason for including gold in your portfolio is as “asset insurance.”
Reason 1: “Non-correlation” that is resilient to stock market declines (shock markets)
Gold tends to have “non-correlation to negative correlation” with the stock market, meaning it may move in the opposite direction or rise while stocks crash (the “lone winner” effect). When global conditions become unstable, investors move their money into gold, which is a “safe physical asset” (buying gold in times of crisis), thereby covering losses in stocks.
Reason 2: Value proven by approximately 5,000 years of history (it will not become worthless)
Stocks carry a slight risk of becoming worthless due to corporate bankruptcy. However, gold is a “physical substance” with limited reserves on Earth. It carries an overwhelming sense of trust, having maintained its value for thousands of years.
Reason 3: “Preservation of real value” against inflation and currency depreciation
As central banks around the world print more paper money, the value of fiat currencies (yen, dollar) continues to decline relatively. Since gold is a physical asset, its value rises in tandem with the increase in currency supply, making it the strongest barrier for protecting purchasing power.
4. Why incorporate “Crypto Assets (Bitcoin)”? [Next-Generation Explosive Power]
On the other hand, the reason for including crypto assets (Bitcoin), which may seem high-risk, in your portfolio is for “efficiency improvement through high returns”and “scarcity as digital gold.”
Reason 1: “Overwhelming scarcity” with a issuance cap of 21 million coins
Bitcoin’s issuance cap is strictly set at “21 million coins” by its program. Unlike fiat currency, which can be printed at the convenience of central banks, it maintains “absolute scarcity value” in the digital world. Because of this property, it is called “digital gold.”
Reason 2: Improving the “Sharpe ratio (investment efficiency)” of the entire portfolio
By incorporating even a small amount (e.g., about 1-5% of the portfolio) of crypto assets, you can boost the returns of the entire portfolio. Although crypto assets have high volatility (price fluctuations),if you keep the allocation ratio extremely low, you can maximize the benefits of returns while limiting risk.
Reason 3: “Inflow of institutional investor funds” due to ETF conversion
Starting with the approval of Bitcoin spot ETFs in the U.S. in 2024, crypto assets have evolved from mere “gambling or speculation” into a “public investment target (asset class).” Global asset management firms (such as BlackRock) and pension funds have begun purchasing them, and long-term tightening of supply and demand is expected.
5. An “ideal portfolio allocation” that beginners can copy
For those wondering, “What specific ratio should I buy at?”, we will introduce recommended allocation examples based on risk tolerance.
Key point: ‘Start small and grow big’ with crypto assets
Because crypto assets have high volatility, the basic technique is to keep them to about 1–5% of your portfolio (at most within 10%). Even if the value of your crypto assets were to halve, the impact on your total portfolio would only be a few percent, but if they were to increase tenfold, they would significantly drive the growth of your entire portfolio.
6. How to buy? Concrete practical steps
Nowadays, you can easily purchase ‘Gold’ and ‘Crypto Assets’ with just a smartphone, without the hassle of the past.
How to buy Gold
Since physical gold investment incurs storage costs, I recommend ‘Gold ETFs’ or ‘Investment trusts that invest in gold’ for beginners.
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You can set up recurring purchases at securities companies (such as Rakuten Securities or SBI Securities) just like you would for stocks or all-country funds (e.g., GLDM, Gold Trust, etc.).
How to buy Crypto Assets (Bitcoin)
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Open an account at a major domestic crypto asset exchange (Coincheck, bitFlyer, SBI VC Trade, etc.).
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At first, ‘Bitcoin (BTC)’ is the only choice you need.
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It is best to utilize an automatic recurring purchase feature, such as 1,000 to 5,000 yen per month.
Summary: A ‘Trinity’ portfolio to protect and grow your assets
Finally, here is a summary of the points in this article.
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Investment trusts (100% stocks) alone carry the risk of being unable to fully cope with financial shocks, rapid currency depreciation, or inflation.
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Including ‘Gold’ acts as a ‘powerful shield (insurance)’ during stock market downturns or emergencies.
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Adding a small amount (1–5%) of ‘Crypto Assets (Bitcoin)’ can boost the overall growth potential with limited risk.
The ‘growth power’ of investment trusts (stocks), the ‘protective power’ of gold, and the ‘breakout power’ of crypto assets.
By combining these three, you can complete a ‘truly robust portfolio’ that will not waver regardless of the era or market environment.
Why not try diversifying into gold or crypto assets starting with a portion of your monthly savings (a few thousand yen or more)?
Junji