Charles Schwab tells investors to keep crypto volume modest if they decide to add digital assets to a broader portfolio, arguing that Bitcoin and Ether can quickly reshape portfolio risk even at low weights.
In new Note April 6Schwab explained two main frameworks for allocating cryptocurrencies: the traditional approach based on expected returns, volatility, and correlation, and the risk budget approach that starts with how much overall portfolio risk an investor is willing to allocate to cryptocurrencies.
The report stops short of endorsing any standard allocation. Instead, Schwab says there is no correct weighting for cryptocurrencies and that the decision is largely personal. The company framed the issue around investment horizon, loss tolerance, familiarity with digital assets, and whether the investor wants exposure to a specific token or broader exposure to cryptocurrencies.
The main caveat to Schwab is volatility. Using data up to October 31, 2025, the company said bitcoin recorded an annual volatility of 72.1% and a maximum drawdown of 73.4%, while ether showed an annual volatility of 98.3% and a maximum withdrawal of 87.8%. These numbers were materially higher than traditional assets such as US large-cap stocks, basic fixed income, or cash, strengthening the argument that even small cryptocurrency positions can have a significant impact on portfolio behavior.
Under Schwab’s traditional allocation framework, portfolio weights can fluctuate significantly depending on the investor’s assumed return. The company said that an expected annual return of 15% for Bitcoin would mean allocating 1.0% in a conservative portfolio, 6.6% in a moderate portfolio, and 8.8% in an aggressive portfolio.
For Ethereum, which Schwab described as historically more volatile, the same 15% return assumption would mean allocating 0.1%, 2.0%, and 2.5% across these three portfolio types. Schwab added that if expected returns fall below 10%, neither Bitcoin nor Ether appear to offer a sufficient risk-adjusted return to justify an allocation for even aggressive investors.
The second method focuses less on predicting performance and more on reducing the contribution to risk. In this framework, Schwab models the amount of Bitcoin or Ether that can be added, setting the share of cryptocurrencies in the total portfolio volatility at 5%, 10%, or 15%. Due to the historical volatility of the assets, the suggested weights have remained low.
A conservative portfolio would only need a 1.2% Bitcoin allocation or a 0.9% Ethereum allocation to reach a 10% cryptocurrency risk contribution, Schwab said. In Moderate and Aggressive portfolios, Bitcoin allocations needed to reach the same threshold rose to 2.8% and 4.0%, while Ethereum allocations were 2.0% and 2.9%.
Schwab published the article as the brokerage continues to expand its cryptocurrency payment range. The company said it remains on track to launch spot trading for Bitcoin and Ethereum in the first half of 2026, adding direct access to a suite of offerings that already includes ETFs and futures-related products.
