Despite the general trend of risk-taking among young and wealthy individuals, conservative investors are more prevalent in the crypto market.

You may have taken an investor version of the Myers-Briggs test if you've ever worked with an investment advisor, whether real or virtual.

If your portfolio experiences a significant decline, what would you do? When selecting investments, do you prioritize stability or growth potential?

Your risk tolerance can be determined by your willingness to endure substantial short-term fluctuations in exchange for potential higher returns in the future. If you are comfortable with this level of volatility, you are considered an "aggressive" investor. On the other hand, those who prioritize maintaining their wealth are classified as "conservative."

While aggressive investors invest in riskier assets like stocks, conservatives opt for the safety and predictability of bonds.

Although cryptocurrency is known for its volatility, it is not limited to aggressive investors. Instead, it is popular among the young and wealthy.

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According to a recent study from Bank of America Private Bank, among investors aged 21 to 43 with at least $3 million to invest, those who identify as aggressive hold an average of 14% of their portfolios in crypto, while their conservative counterparts hold an average of 17%.

Are young, wealthy investors altering the meanings of aggressive and conservative? Probably not.

"According to Stephane Ouellette, founder and CEO of digital asset firm FRNT Financial, the current market for digital assets lacks the aggressive, momentum-style investing that typically attracts such investors."

"Conducting the survey in 2021 would have likely resulted in very different answers."

The reasons behind the 'ironic' results

In recent years, as cryptocurrency and other digital assets soared, investors were eager to invest aggressively. However, when prices plummeted in 2022, many of them withdrew their investments. Today, the crypto market has recovered thanks to a new type of investor, according to Ouellette.

Bitcoin believers have been the driving force behind the recovery, viewing it as a hedge against the traditional financial system.

The true believers in crypto are holding on in the current placid environment, while more aggressive investors may jump back in if prices rise again, according to Ouellette.

Is it possible to classify a cryptocurrency as "conservative"? While traditional investments like stocks and bonds have risks but are backed by fundamentals, crypto investment is purely speculative, with prices determined solely by investor demand.

According to Brad Klontz, a financial planner and professor at Creighton University, the success of financial planning depends on one's perspective.

"Is it more conservative to own crypto? It seems illogical, but many crypto investors are more likely to be anti-establishment and have less trust in the systems and government. The irony is that they may feel safer with diversification out of dollars and stocks."

A small allocation to crypto can add significant risk to a portfolio, but it may also provide the potential for substantial returns, especially for young, wealthy investors.

If you already have a substantial amount of money, it may take a significant economic collapse to disrupt your investment portfolio. Cryptocurrency, as an alternative form of currency and a potential store of value, can provide comfort to certain investors. According to Mike Pelzar, head of investments for Bank of America Private Bank, some investors believe that if the U.S. dollar or broader economy eventually collapses, cryptocurrency will continue to grow while traditional investments falter.

He remarks that many young investors view crypto investments as safer.

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