Why Alternative Assets Like Gold and Bitcoin Matter for Your Portfolio
Everywhere you look, governments are piling on debt. Not just the U.S. — plenty of other countries too. Debt levels are hitting record highs compared to the size of their economies. And readers have heard me talk a lot about this in this blog and Linkedin posts. If you are a new reader, let me be clear – I am not a fan and very concerned.
And here’s the catch: when debt grows faster than the economy, something has to give. Governments can raise taxes (never popular), cut spending (also unpopular), or they can let inflation quietly eat away at the problem. That’s what people mean when they say currency debasement.
Think of it this way: if the economy produces $100 worth of goods and there’s $100 in circulation, each dollar buys 1% of the pie. But if the money supply grows to $120 while the economy is still only producing $100 of goods, you suddenly have more dollars chasing the same amount of stuff. And when demand rises faster than supply, prices go up. That’s inflation.
For governments, it’s handy. They get to repay their debt in “cheaper” money. For savers, not so great — your cash buys less and less over time.
So what do you do as an investor?
If you’re young and building wealth, the answer is usually simple: lean into stocks. Equities are still the best long-term growth engine. But once you’ve built up some wealth, or you’re closer to protecting what you already have, the conversation shifts. It’s not just about growth anymore. It’s about protection.
That’s where alternatives come in — assets that don’t move in the same direction as stocks and bonds. Historically, gold has played that role. Recently, bitcoin has entered the conversation.
Let’s look at both.
A Quick Side Note – My view on some of these assets as Speculative Assets
Before we get into gold and bitcoin, here’s how I personally think about these kinds of assets.
If something doesn’t generate income — no dividends, no interest, no rent — I consider it a speculative investment. With stocks, bonds, or rental real estate, you’re getting cash flow along the way. With gold, raw land, art, or bitcoin, you’re not. The only way you make money is if someone else down the road is willing to pay more.
That doesn’t mean you shouldn’t own them. It just means they play a different role in a portfolio. Some readers may disagree with me on this, but I think it’s an important distinction to keep in mind.
Gold as a Hedge Against Inflation and Market Risk
Gold has been trusted for thousands of years. Before central banks, before stock markets, people used gold to store value. That hasn’t changed. Even today, central banks keep buying it. If the folks who literally print money still want gold, that should tell you something.
Why do people keep turning to it?
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It shines in a crisis. Inflation spikes, currencies wobble, wars break out — gold tends to hold up.
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It’s nobody’s liability. A bond depends on a government. A stock depends on a company. Gold just is. It doesn’t default.
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It’s universal. Anywhere you go, gold has value.
Of course, gold has its downsides:
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It doesn’t pay you anything — no dividends, no interest.
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It can sit flat for years. After the 1980 peak, gold basically went nowhere for decades.
That’s why I see gold as insurance, not an investment. You don’t buy it to get rich. You buy it so when the world wobbles, you’ve got something solid in your portfolio.
The Wall Street Journal recently pointed out that gold’s strength is its broad base of demand — central banks, investors, jewelry buyers. That demand is what gives it staying power.
How to Buy Gold
If you’re interested, here are the main ways:
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Physical gold. Coins or bars — yes, even Costco sells gold bars now. The upside: you hold it. The downside: storage and security.
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Gold ETFs. The easiest route for most. Funds like GLD or IAU track gold prices and trade in your brokerage account.
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Mining stocks. You can buy shares in gold mining companies, but these act more like regular stocks. They’re tied to company performance, not just gold prices. Not my favorite for pure gold exposure.
For most investors, a simple gold ETF is the cleanest, most practical way.
Bitcoin as “Digital Gold” — Promise and Pitfalls
If gold is the classic hedge, bitcoin is the rebel. Born in 2009, right after the financial crisis, it was designed to be money that no one — no government, no central bank — could control. There will only ever be 21 million coins.
That’s the big draw: unlike dollars or euros, bitcoin can’t be inflated away. No one can just print more.
Enthusiasts love this. Chamath Palihapitiya once called bitcoin “schmuck insurance” against government mistakes. Michael Saylor calls it “a bank in cyberspace, run by incorruptible software.”
And it’s not just talk anymore. Bitcoin has gone mainstream:
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Spot bitcoin ETFs now let you buy it easily in a brokerage account.
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Companies like MicroStrategy and Tesla hold it on their balance sheets.
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Politicians are even pushing pro-crypto policies.
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The price recently crossed $113,000 — another all-time high.
But here’s the rub:
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Bitcoin often moves with the stock market. There is now plenty of research showing its correlation with equities has strengthened as more institutions and ETFs have piled in. In plain English: when markets fall, bitcoin usually falls too — which makes it less reliable as a hedge.
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A few companies (like MicroStrategy) hold huge chunks. If they sell, watch out.
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The swings are brutal. Double-digit moves in a day are normal.
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And let’s not forget: it doesn’t generate income. No dividends, no rent, no interest. By my definition, that makes it speculative.
If you’ve been following my writing for a while, you know this isn’t the first time I’ve wrestled with this question. A few years ago, I wrote Does Cryptocurrency Have a Place in My Investment Portfolio?. My conclusion then was cautious — and while bitcoin has grown enormously since, I still remain skeptical of its role as a true hedge.
Now — not everyone will agree with me. And that’s fine. In fact, to balance this out, I’m inviting my brother — a hardcore crypto enthusiast — to write a guest post here. He’ll share why he thinks bitcoin belongs front and center in your portfolio. Should be fun.
Bitcoin vs. Gold: Side-by-Side Comparison for Investors
Gold
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Centuries of trust as a store of value.
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Works in inflation and crisis.
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Held by central banks.
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Doesn’t produce income.
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Demand is global and diverse.
Bitcoin
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Supply capped at 21M coins.
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Immune to government money-printing.
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Seen as “digital gold” by fans.
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Still volatile, tied to stocks, and untested long-term.
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Doesn’t produce income.
Both are scarce. Both sit outside government control. One is proven. The other is still being tested.
How Much Gold or Bitcoin Should Be in Your Portfolio?
Here’s my take:
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In your accumulation years (when you’re focused on growth): Keep alternatives like gold and bitcoin to 5%–10% of your portfolio. The bulk should stay in equities (and some bonds if that fits your plan).
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In your protection years (when the focus shifts to preserving wealth): You could stretch that to 10%–20%, depending on your risk tolerance.
This matches some of the thinking from investors like Frank Vasquez, who created the Golden Ratio Portfolio. His model spreads risk across multiple assets and gives gold a much bigger slice (~16%) than traditional 60/40 portfolios. The point isn’t to maximize returns, but to smooth the ride and make a portfolio more resilient.
It’s worth noting that the big institutional players — Fidelity, BlackRock, Vanguard — are all studying bitcoin and alternatives. They stop short of making formal percentage recommendations for crypto, though Fidelity has modeled allocations in the 1–5% range. For gold and other commodities, guidance is more established: allocations of 5–15% are often cited in institutional research and model portfolios as a reasonable range for diversification.
Closing Comments
You don’t need to pick sides. You can hold a little of both. Gold as insurance. Bitcoin as a speculative option bet. Just know why you’re holding each, and keep them a slice of the pie — not the whole pie. Thank you for reading and I wish you luck in your personal finance journey!
Disclaimer: I am not a financial advisor and all the information in my articles are from my personal experience and are for informational and educational purposes only. Please consult with a financial advisor or CPA for professional advice.
