How Much of Your Portfolio Should Be In Crypto?
When a new crypto enthusiast starts to trade, one word may be new to them: portfolio. What is it exactly? How important is it to have a crypto portfolio? How much do I need to invest into crypto?
This article is not financial advice but as a guide to crypto enthusiasts. Do due diligence in researching cryptocurrencies before making investments.
What is a Crypto Portfolio?
For investors and traders, the word portfolio is not new. This is where they can observe the investments they have like mutual funds, real estate, securities, and more. The same with crypto portfolio, it shows the crypto investors and traders the crypto investments they have and how much coins they have. Crypto portfolio contains different kinds of coins, like Bitcoin, tokens, and non-fungible tokens (NFTs).
Concentrated Versus Diversified Crypto Portfolios
There are pros and cons to having a very diverse crypto portfolio and at the same time for concentrated ones. It really is up to the investors and traders’ preference on how well they are knowledgeable of the assets they are investing in.
When enthusiasts have a properly allocated and diverse crypto portfolio, there are tendencies that one or a few assets would decrease in value while other cryptocurrencies would remain (especially for stablecoins) or even increase in value. This evens out the losses for those coins that decrease in value because the other coins did increase.
If the portfolio is composed of different cryptocurrencies, there is a tendency for the owner to need more than one crypto wallet to cater to other assets. For instance, Solana, Tezos, and Cardano have their own crypto wallets. Having a diverse portfolio also requires more time to be able to observe the market and the status of each asset.
How to Build a Well-Balanced Crypto Portfolio?
There are some general rules worth considering in building a well-balanced crypto portfolio:
- Do due diligence in doing one’s research. Do not rely on social media influencers or friends for advice on which cryptocurrency to invest in. Listen to financial advisors because money is used to invest in cryptocurrencies. Avoid scams as well.
- Only invest what you can afford to lose. If the loss stresses out an investor then it may not be the best investment. Only use the right amount that will give peace even if there is a huge loss.
- Split the crypto portfolio between high, medium, and low-risk investments and give appropriate weightings. Having too many high-risk assets has its pros and cons. It may give huge gains and it can also give huge losses. Better balance the portfolio to lessen any potential loss.
- Consider having stablecoins. Stablecoins can provide liquidity to the portfolio. The gain made can be converted easily into stablecoins.
- Rebalance the portfolio if needed. Due to the volatility of the market, decisions should change depending on the situation.
- Avoid greed. If one asset made huge gains, better allocate new capital strategically to avoid putting much weight on one area of the crypto portfolio.
Crypto Portfolio Trackers
A portfolio tracker is a program or service that allows crypto enthusiasts to trace the movements of their holdings. This tool can be used to see the progress of the investment and plan for long-term investments. Examples of this are CoinGecko and CoinMarketcap.
Crypto portfolios can aid crypto enthusiasts in monitoring their own assets. It requires a lot of research on which coin to invest in. And as they journey further, they can monitor their assets through their portfolio to make sound decisions on what they can do with their asset, whether to keep holding, re-investing or transfer some allocation to another cryptocurrency to build a better crypto portfolio.
This article is published on BitPinas: How Much of Your Portfolio Should Be In Crypto?
Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.