a guide to building a balanced crypto portfolio
Crypto, How to, Knowledge

A Guide to Building a Balanced Crypto Portfolio

You may be aware of the ideal percentage of crypto that must appear in your investment portfolio, that is, 5%. However, how should you invest that 5% of your money in cryptocurrencies to build a balanced crypto portfolio. Should you invest all of the money in one coin? If not, then which coins should you choose? If you know the coins that you are interested in, how much capital should you put into them? What if your portfolio is going through a negative graph? Should you sit idle and wait for your assets to achieve their original value or should you reallocate capital? So many questions to deal with, right? Don’t worry as here is your step-wise guide to building an ideal crypto portfolio. 

Spend Time Learning the Basics of Crypto

As a newbie in crypto investments, the first step is to educate yourself about the types of cryptocurrencies and how to invest in them. Since tens of crypto exchanges allow you to buy, sell, and trade cryptocurrencies, you need to choose the one that offers minimum trading fees and a maximum number of trading options. Refer to this guide to the best crypto exchange apps that you should consider using to invest in crypto. 

Once you have chosen the best exchange for yourself, it is time for you to explore the range of cryptocurrencies that you can invest in. Spend time learning about the price graphs and how to read candlesticks. This will help you to identify the most promising crypto projects that you can invest in. Candlesticks are symbols used to represent the market sentiments and allow you to pick the right time to buy or sell your assets. 

Pick a Diverse Range of Assets: Building a Balanced Crypto Portfolio

Now that you have learned the basics of crypto and know how to read the price charts, you should begin picking the coins that you would like to invest in. Make sure that you don’t stick to just one project and invest all of your 5% capital in one project only. Doing so can create very high chances for you to lose all of your money. Therefore, you must pick a range of assets to invest in, depending on the risks, returns, and the future potential of the project. Divide your capital among three different types of projects, high, medium, and low-risk investments. While choosing the crypto projects, consider the things given below.

  • The risk profile of the project
  • The price volatility
  • The team behind the project
  • Future potential 
  • Practical use cases of the project outside the crypto world

Allocate Capital to Your Assets

Once you are done choosing the projects that you are interested in, start allocating capital to the projects. Dedicate minimum capital to high-risk projects whereas maximum capital to low-risk projects. This helps to ensure a balanced crypto portfolio that offers maximum returns against minimum risks. Screen your portfolio to see if the portfolio is getting overweight at one or the other point. 

Keep a Track of Your Gains: Building a Balanced Crypto Portfolio

When you finish building your balanced crypto portfolio, keep track of your gains and losses. This is essential to identify any wrong asset additions to your portfolio that may not have any future potential. Also, it helps you in reinvesting your money depending upon the performance of your assets towards the profits generated in your portfolio. 

Tips to Build a Balanced Crypto Portfolio

As a beginner in the world of cryptocurrencies which is itself, somewhat new to the world, can be stressful. The volatile nature of cryptocurrencies and unpredictable market sentiments can lead to the value of some coins skyrocketing whereas values of other coins fall badly. However, such drastic changes in the prices do not last long. If you are a long-term investor and have invested in the right cryptocurrencies having multiple practical use cases, your portfolio will surely reap some significant gains. On that note, here are some other tips that investors can follow to build a balanced crypto portfolio.  

  • While choosing the crypto projects, make sure you do your due research to know about the team, the genuineness of the project, the actual utility, and the community related to the project.
  • You are likely to feel greedy after witnessing the high gains that crypto markets are known for. However, you should never give in to greed and invest more money than you should in a given project.
  • Stick to the 5% capital allocation rule while investing in cryptocurrencies. Never invest the money that is meant for fulfilling your living expenses or your safety cushion money. 
  • Design a proper, well-researched strategy to invest in crypto while considering the volatility and newness of the crypto market. 
  • Invest in projects that have an active community following them. This ensures that you will find a sufficient number of buyers in case you decide to sell your assets related to that project.
  • Consider investing in stablecoins. They do not only protect your portfolio against significant price fluctuations but also, help you in achieving liquidity in the crypto market. 

Conclusion

While building a crypto portfolio or starting crypto investments from scratch, investors must spend a good amount of time learning the basics of crypto investments. You can take a free or paid course to learn about cryptocurrencies. In addition to this, you should always invest only the excess amount of money that you are not scared of losing to the volatile crypto market. In the beginning, you can start by investing in cheap cryptocurrencies. This will not only help you in gaining exposure to the crypto market but also allow you to make some starter profits. 

One thought on “A Guide to Building a Balanced Crypto Portfolio

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