Portfolio Allocation: How Much Should You Put in a Crypto Index?

Portfolio Allocation: How Much Should You Put in a Crypto Index?

Byline: Token Metrics Team • Updated October 2025 • ~6 min read

The Allocation Question Everyone Asks (And Nobody Answers Well)

"Should I put 10% of my portfolio in crypto? 50%? Everything?"

Honest answer: It depends on your risk tolerance, time horizon, financial situation, and about a dozen other personal factors.

Unhelpful answer: "Only invest what you can afford to lose."

Let's do better. Here's a framework for sizing your crypto index allocation intelligently.

Step 1: Define Your Investment Buckets

Most investors should segment their portfolio into tiers:

Tier 1: Foundation (60-80% of investable assets)

• Emergency fund (3-6 months expenses)
• Stable income-generating assets (bonds, dividend stocks, REITs)
• Low-volatility core holdings

Goal: Preservation and steady income

Tier 2: Growth (15-30%)

• Growth stocks
• Diversified equity exposure
• Real estate beyond primary residence

Goal: Long-term capital appreciation with moderate risk

Tier 3: Speculation (5-10%)

• High-risk, high-reward bets
• Early-stage ventures
• Crypto, commodities, alternatives

Goal: Asymmetric upside, accepting downside risk

TM Global 100 belongs in Tier 3 for most investors. It's not your emergency fund. It's your "let's capture crypto upside if this becomes the next major asset class" allocation.

Step 2: Assess Your Risk Tolerance

Conservative (Low Risk Tolerance):

• You lose sleep when your portfolio drops 10%
• You're within 5 years of retirement
• You need portfolio stability for near-term goals

Allocation: 2-5% in crypto index

Moderate (Medium Risk Tolerance):

• You can handle 20-30% drawdowns without panic
• You have 10+ year time horizon
• You're comfortable with volatility if upside is compelling

Allocation: 5-10% in crypto index

Aggressive (High Risk Tolerance):

• You're unfazed by 40-50% drawdowns
• You have 15+ year time horizon
• You're willing to take concentrated bets

Allocation: 10-20% in crypto index

Step 3: Consider Your Existing Crypto Exposure

If you already hold Bitcoin or Ethereum directly:
Add your existing crypto holdings to your total crypto allocation. Don't accidentally over-allocate by treating an index as separate from your existing positions.

Example:

• Total portfolio: $100,000
• Existing crypto: $5,000 (5%)
• Target crypto allocation: 10%
• Available for TM Global 100: $5,000 (to reach 10% total)

If you hold individual altcoins:
Consider whether TM Global 100 overlaps or diversifies. If you hold 10 tokens and they're all in the top 100, the index adds diversification. If they're niche tokens outside the top 100, the index doesn't add coverage—but it adds systematic discipline.

Step 4: Factor in Regime Switching

Standard crypto index (no regime switching):

• Full crypto exposure at all times
• You ride the full cycle, up and down

TM Global 100 (with regime switching):

• Crypto exposure during bull regimes
• Stablecoin exposure during bear regimes
• Lower effective risk than buy-and-hold

Practical implication:
You might size TM Global 100 slightly larger than a passive index because it aims to reduce drawdown duration and depth. A 10% allocation to a regime-switching index might have similar realized volatility to a 7% allocation to a passive index.

Not a guarantee—but a consideration.

Step 5: Allocation by Life Stage

Young professional (20s-30s):

• Long time horizon
• High risk capacity
• Can recover from setbacks

Allocation: 10-20% in crypto index (if risk tolerance aligns)

Mid-career (40s-50s):

• Moderate time horizon
• Balanced priorities (growth + stability)
• Some near-term goals (kids' college, etc.)

Allocation: 5-10% in crypto index

Pre-retirement (60+):

• Short time horizon
• Low risk capacity
• Need portfolio stability

Allocation: 0-5% in crypto index (only if high risk tolerance)

The "Core + Satellite" Approach

Core (80-90% of portfolio):

• Traditional diversified assets
• Stable, predictable returns
• Low-maintenance

Satellite (10-20%):

• High-conviction bets
• Tactical allocations
• Active strategies

TM Global 100 as a satellite:

• Replaces 5-15% satellite allocation
• Provides crypto exposure without micromanagement
• Regime switching adds discipline to a speculative position

Common Allocation Mistakes

Mistake 1: All-or-nothing thinking
"Crypto will either go to zero or the moon, so I'll bet big."

Better: Size for the probability-weighted outcome. Even if you're bullish, don't bet the farm.

Mistake 2: Static allocation
"I set 10% in 2023 and never adjusted."

Better: Rebalance annually (or semi-annually). If crypto runs to 20% of your portfolio, trim. If it drops to 3%, consider adding.

Mistake 3: Ignoring correlation
"I'll put 10% in Bitcoin, 10% in an altcoin fund, and 10% in TM Global 100."

Better: Recognize overlap. Those allocations are highly correlated—you're not diversifying, you're concentrating.

Mistake 4: Emotional sizing
"The market is pumping, I'll go to 30%." → "The market crashed, I'm out entirely."

Better: Set allocation when you're calm and rational. Stick to it through volatility.

How to Rebalance

Quarterly or semi-annually:

1. Calculate current crypto allocation (as % of portfolio)
2. Compare to target allocation
3. If off by >5 percentage points, rebalance

Example:

• Target: 10%
• Current: 15% (crypto ran)
• Action: Sell 5% worth, move to Tier 1 or 2

Why not rebalance more frequently?
Tax events, transaction costs, and emotional churn. Let it run a bit before trimming.

The Tax Consideration

In a taxable account:

• Rebalancing triggers capital gains tax
• Frequent trades = short-term rates (higher)
• Regime switching within the index may generate internal taxable events

In a tax-advantaged account (IRA, Roth):

• No tax on rebalancing
• No tax on internal index switches
• Better structure for active strategies

Implication:
If you're allocating 10%+ to crypto and plan to hold long-term, consider using tax-advantaged space if available.

Decision Framework (Summary)

Profile	Allocation
Conservative, short horizon	0-3%
Moderate, medium horizon	5-10%
Aggressive, long horizon	10-20%
Speculator, willing to lose it all	20-30%

Note: These are starting points, not rules. Adjust for personal circumstances.

Next Step

If you've decided crypto belongs in your portfolio, TM Global 100 offers a rules-based, transparent way to gain exposure. Join the waitlist for early access.

→ Join the waitlist

Related reads:

• Regime Switching in Crypto: Complete Guide
• Bear Market Survival Guide

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Disclosure: This is educational content, not financial advice. Allocation decisions should reflect your individual risk tolerance and financial situation. Crypto is volatile and can lose value.