How should crypto play into your retirement plan?

Cryptocurrency can be a potentially lucrative investment. And with the right strategy, it can help fill your retirement savings.

But it can also be incredibly risky. Even if you do everything right, there’s still a chance you could lose more than you make—making it a potentially dangerous option when saving for retirement.

How Much Should You Rely on Crypto to Fund Your Retirement? Or should it even be part of your retirement plan? It depends on three factors.

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1. Your age

Younger investors with decades left to prepare for retirement can afford to take more risk. If you buy crypto and your investment doesn’t pan out, there’s still plenty of time to make up your savings.

If you are closer to retirement, however, you need to be a little more careful. This doesn’t mean you can’t invest in crypto at an older age, but you won’t have as much time to recover if your investment goes south and you lose money.

2. Your tolerance for risk

Regardless of age, your risk tolerance as an investor will also help determine whether crypto is a smart fit for your portfolio.

Crypto is a notoriously volatile investment, and it’s not uncommon for even the “safest” cryptocurrencies to see wild price swings. Ethereumfor example, lost almost 95% of its value throughout 2018. And Bitcoin have seen the price drop by at least 80% on several occasions over the years.

If you can withstand these short-term ups and downs and hold your investment for the long term, you can potentially make a lot of money. But if you know you’ll lose sleep over this kind of turbulence — especially as you approach retirement — crypto may not be the best fit.

3. The rest of your portfolio

If you choose to invest in cryptocurrency, the rest of your portfolio should be well diversified and filled with strong long-term stocks. This will help limit your risk and keep your retirement fund safer if your crypto investments take a turn for the worse.

Most experts recommend owning at least 25 to 30 stocks from a variety of industries. This will create enough diversification that if one or two of your investments fail, it won’t sink your entire portfolio.

If you invest in crypto, proper diversification is even more critical. All cryptocurrencies are still speculative right now, and even the strongest investments may not succeed over time. When your overall portfolio is healthy and filled with strong stocks, your savings won’t be hit as hard if your crypto investment doesn’t pan out.

Keep your savings safe

Despite its inherent risks, crypto can be part of your retirement plan — if you have the right strategy.

Before you buy, make sure you’ve done your research and only invest in cryptocurrencies with real utility and potential for long-term growth. Short-term investments can be a tempting way to get rich overnight, but they are far more risky – and there is a much greater chance that you will lose a lot of money.

Also, no matter where you invest, it’s wise to only allocate a relatively small portion of your portfolio to crypto. Even if you strongly believe that a certain cryptocurrency will succeed in the long term, going all-in on any investment can be a recipe for disaster.

Cryptocurrency is risky, but can also potentially be lucrative. If you have a higher tolerance for risk and are comfortable with the volatility and uncertainty crypto brings, it may be worth adding this investment to your portfolio. The right strategy can keep your money as safe as possible.