My response to an unconvincing argument.Speculation is not an all or nothing proposition: it comes in degrees. So, something being a speculative asset doesn’t by itself mean there’s no utility full-stop. In a sense, all investments have at least some degree of speculation, because nobody knows with certainty what the future holds.¹Also, something being speculative doesn’t mean you shouldn’t invest a small amount of money into it. If you think something is risky, that doesn’t mean you don’t put any money into it. It means you don’t make foolish decisions like putting your all your life savings into it, particularly if you don’t know anything about what you’re investing in.It’s not a competition. A portfolio should have a little bit of money in super speculative assets. People want to talk about risk, but risk is tied to reward. In addition, you want to hold multiple assets that are uncorrelated with other assets.You can have your retirement portfolio be totally made up of index funds. But you can ALSO have another portfolio that is more actively managed and includes some speculative asset like cryptocurrencies, or more risky products like actively managed mutual funds or single stocks.So, at bottom, these crypto skeptics are asking us to accept a false choice: either put all/most of your money into crypto or don’t put anything into it. Hardly an appropriate objection, especially in light of modern portfolio theory and diversification considerations.²Footnotes¹ It’s not just that we don’t know the future with certainty. But often times, we can’t assign probabilities at all, so we are totally in the dark. ² I’m not a financial advisor. My purposes are entertainment.Photo by M. B. M. on Unsplash