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Why This Legendary Billionaire Investor Is All In On Crypto

The Motley Fool
The Motley Fool
 2022-01-21

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Cryptocurrency is, to put it lightly, a divisive topic among the investing elite. Many major investors are staunchly anti-crypto, with Warren Buffett being the most prominent example. On the other end of the spectrum, there's fund manager Bill Miller, who believes so much in Bitcoin (BTC) and crypto they make up half his personal assets.

Miller is a value investor , but he has always taken an unorthodox approach and been more open to risk. In perhaps his most unorthodox move, he became a self-proclaimed Bitcoin bull. And after a year where Bitcoin beat all equities , he has recommended it to all investors.

A remarkable investing career and early adoption of Bitcoin

For well over a decade, Bill Miller was the investing world's version of a rock star. He was the fund manager for Legg Mason, and his portfolio beat the S&P 500 for 15 consecutive years, from 1991 through 2005.

That's no small feat. Beating the market for even a single year is impressive. Most years, 80% of large-cap funds don't manage to do it. Beating it for 15 years in a row would be unheard of, if it wasn't for Miller.

All that success came to an end with the financial crisis. His portfolio suffered massive losses, and he hung on to losing investments after many of his peers had abandoned them. If you've seen the movie "The Big Short," you might remember a scene depicting one of Miller's lowest moments. This version of him was a character named Bruce Miller, a stereotypical Wall Street blowhard who proclaims he fully believes in Bear Stearns even as the bank's value plummets.

Miller may not have seen the writing on the wall during the financial crisis, but he did understand the value of crypto before most of Wall Street. He says he started to buy Bitcoin for his personal portfolio in 2014 when it cost around $200. The hedge fund he manages was investing in Bitcoin in 2017, at a time when many financial executives called the cryptocurrency a stupid investment. And he started buying it again for himself in the spring of 2021 during a price dip.

In addition to Bitcoin, Miller is also heavily invested in Amazon, which he started buying shortly after it went public. Those two assets now make up the bulk of his portfolio. According to Miller, they've also made him a billionaire.

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In a recent interview, WealthTrack asked Miller the No. 1 investment he recommends for a long-term portfolio. His response was Bitcoin.

He suggests investors put 1% of their portfolios in Bitcoin. The logic behind this is even in the unlikely event Bitcoin loses all its value, you've only lost 1% of your portfolio.

Why does Miller believe Bitcoin is a good investment ? He has given multiple reasons:

  • There's a limited supply, as there will only be 21 million Bitcoin. He believes demand will outstrip supply and continue driving up the price.
  • It's superior to gold as a store of value. While gold is bulky and hard to divide, Bitcoin is digital, highly divisible, and can be sent anywhere in the world with ease.
  • It protects people against a government monopoly over money and banking. He has called Bitcoin insurance against a financial catastrophe.
  • It's underpenetrated. Bitcoin hasn't reached widespread adoption yet, which gives it plenty of room to grow.
  • It offers extremely high potential returns. Miller has suggested Bitcoin is the rare asset that can increase 10- to 50-fold in price.

Should you follow Miller's advice and buy Bitcoin?

Bitcoin can be a good addition to your portfolio, but I wouldn't go so far as to say everyone should invest. Those who are new to it should learn about how cryptocurrency works first before deciding whether to get involved. And if you're not keen on volatility, crypto likely isn't the best choice.

For investors who want to diversify, crypto is definitely worth looking into because of the potential returns. Bitcoin is a popular choice, especially when you're starting out with crypto, since it's the biggest one. However, there are also cryptos that could grow faster than Bitcoin , so it's worth researching other crypto investments, as well.

If you're going to buy crypto, the strategy Miller suggests is a smart one. Only put a small portion of your portfolio in crypto so the volatility can't wipe you out. Miller mentioned 1%, but that depends on your risk tolerance. For most investors, a solid rule of thumb is to devote no more than 5% to 10% of your portfolio to these types of high-risk assets.

Lyle Daly owns Bitcoin. The Motley Fool owns shares of and recommends Bitcoin.

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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lyle Daly owns Bitcoin. The Motley Fool owns and recommends Amazon and Bitcoin. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy .

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