🪙 BlackRock's big bitcoin recommendation

Why you might treat crypto like tech stocks, why the UK is worried, and a pop star that's bigger than Taylor Swift |
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Hi Reader, here's what you need to know for December 14th in 3:04 minutes.

  1. BlackRock suggested adding a bit of bitcoin to your portfolio
  2. Three pros and three low-risk, high-reward portfolio ideas – Read Now
  3. The UK’s latest data has Brits worried about the possibility of a recession

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The 2% Club
The 2% Club

What’s going on here?

According to the world’s biggest investment manager, 2% of your portfolio is a “reasonable” amount to have in bitcoin.

What does this mean?

BlackRock says that allocating 1% to 2% of a balanced portfolio to bitcoin would give you a similar level of risk to investing in Magnificent Seven stocks. Any more, it warns, and the crypto could tilt your overall mix into a riskier spot. To be clear, it’s not that risks are a bad thing: savvy investors simply prefer to spread theirs around. And in many cases, when stocks drop, bitcoin doesn’t (since its “correlation” to stock markets tends to be low). That independence – or diversification – can help cushion a portfolio against drops. Similarly, bitcoin’s rises might give your returns a boost. You may see stomach-turning drops along the way, though: its price has plunged as much as 80% before.

Why should I care?

The bigger picture: Out of the goodness of its heartbottom line.

The World Economic Forum estimates that retail investors – not big-time investing houses – hold 52% of the world’s assets in their portfolios. So that’s at least $67 trillion in your hands. Now let’s say you all followed BlackRock’s suggestion and allocated 2% to bitcoin – that would be a combined $1.3 trillion. And say you opted to do so via BlackRock’s bitcoin exchange-traded fund, which charges investors 0.25% a year. Well, that’s some $3 billion in fees for the firm – over 16% of what it made in revenue last year. So even if only some of you pulled the trigger, BlackRock would still stand to make a mint. And that could be why the asset management company – during a historic bitcoin rally – decided to make a public declaration of love for the OG crypto.

You might also like: How to value bitcoin.

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TODAY'S INSIGHT

Three Low-Risk, High-Reward Investment Ideas

Three Low-Risk, High-Reward Investment Ideas

US stocks – which make up around 70% of global indexes – are expensive, with valuations that are way above their ten-year averages.

And that suggests that their future returns won’t be as sweet. Makes you wonder what to do then.

Sure, some cash accounts pay 5%, but keeping money on the sidelines isn’t a sensible move for long-term investors.

So I turned to a few fund managers to seek out some lower-risk investment ideas that could still lead to strong returns.

That’s today’s Insight: Three low-risk, high-reward investing ideas.

Read or listen to the Insight here

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Weak Tea
Weak Tea

What’s going on here?

The UK economy shrank slightly for a second month in October – the country’s first back-to-back fall since the early days of the pandemic.

What does this mean?

Economists expected the British economy to grow, albeit slightly, by 0.1% in the latest month. But that wasn’t to be: factory output proved exceptionally weak, falling by 0.6% – despite predictions of a 0.3% rise. Even the usually upbeat services industry was lackluster, flatlining from the month before. Clearly, trouble is brewing for the British economy. It’s only managed to grow in one of the past five months – and if things don’t start to perk up, there’s a very real chance that this could be the start of a recession.

Why should I care?

For markets: Stiff upper lip, indeed.

The news isn’t all bad: UK stocks are looking cheap. They’re trading at very low valuations because the country’s economic and political challenges have had investors turning up their noses. And while some of London’s better-looking opportunities have been snapped up by glossier rivals, with takeovers doubling this year to about $60 billion, there are still some small, well-priced jewels in Great Britain’s stock index crown. That must be why the blue-chip FTSE 100 just saw its first monthly inflow in five years.

The bigger picture: Location, location, location.

Fund flows are a major driver for share prices, and US stocks get the most. Makes sense: the country has the world’s buzziest companies. But there’s a side effect to all that glory: the money coming into the S&P 500 index lifts the prices of all its stocks – not just the “magnificent” ones. Meanwhile, valuations for similar firms in other countries tend to be cheaper. It’s no surprise, then, that firms have pulled up stakes from the UK and elsewhere to relist in the US, where investors are willing to pay more.

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QUOTE OF THE DAY

"You never really understand a person until you consider things from his point of view."

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🎯 On Our Radar

1. Retirement is a myth. David Letterman, on why he’s not done creating.

2. The good and the bad of how AI is transforming investing. Prospero and eToro unpack personalized strategies, ethical challenges, and more. Watch now.

3. Not everyone’s cup of tea. A convenience store in Japan now sells drinkable mayo.

4. Stocks and bonds will get you only so far. Victory Hill, 4Fi, and Rally Rd talk alternative assets – renewables, healthcare, and collectibles. Watch now.

5. Taylor Swift who. Colombian singer Karol G’s Vevo videos were the most streamed in 2024.

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