Charles Schwab is telling investors to keep crypto sizing 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 a new April 6 note, Schwab outlined two main frameworks for crypto allocation: a traditional approach based on expected returns, volatility, and correlation, and a risk budgeting approach that starts with how much overall portfolio risk an investor is willing to assign to crypto.
The report stops short of endorsing any standard allocation. Instead, Schwab says there is no correct crypto weight and that the decision is largely personal. The firm framed the issue around investment horizon, loss tolerance, familiarity with digital assets, and whether the investor wants exposure to a specific token or broader crypto exposure.
Schwab’s main warning is volatility. Using data through October 31, 2025, the firm said bitcoin posted annualized volatility of 72.1% and a maximum drawdown of 73.4%, while ether showed annualized volatility of 98.3% and a maximum drawdown of 87.8%. Those figures were materially higher than traditional assets such as US large-cap equities, core fixed income, or cash, reinforcing the argument that even small crypto positions can have an outsized effect on portfolio behavior.
Under Schwab’s traditional allocation framework, portfolio weights can swing dramatically depending on the investor’s assumed return. The firm said a 15% expected annual return for Bitcoin would imply a 1.0% allocation in a conservative portfolio, 6.6% in a moderate portfolio, and 8.8% in an aggressive portfolio.
For Ether, which Schwab describes as historically more volatile, the same 15% return assumption would imply 0.1%, 2.0%, and 2.5% allocations across those three portfolio types. Schwab added that if expected returns fall below 10%, neither Bitcoin nor Ether appears to offer enough risk-adjusted return to justify an allocation even for aggressive investors.
The second method focuses less on forecasting performance and more on limiting risk contribution. In that framework, Schwab modeled how much Bitcoin or Ether could be added while capping crypto’s share of total portfolio volatility at 5%, 10%, or 15%. Because of the assets’ historical volatility, the suggested weights stayed low.
Schwab said a conservative portfolio would need only a 1.2% Bitcoin allocation or a 0.9% Ether allocation to reach a 10% crypto risk contribution. In moderate and aggressive portfolios, the Bitcoin allocations needed to hit that same threshold rose to 2.8% and 4.0%, while Ether allocations were 2.0% and 2.9%.
Schwab published the piece as the brokerage continues to expand its own crypto push. The firm has said it remains on track to launch spot Bitcoin and Ether trading in the first half of 2026, adding direct access to an offering set that already includes ETFs and futures-related products.
Source: https://cryptobriefing.com/schwab-crypto-portfolio-volatility-warning/
