Analyze This: Portfolio Diversification and Unbalancing

If an investor has firmly decided on their desire to invest in cryptocurrencies and has studied the whole spectrum of interesting coins, it is time to think about the structure of the future investment portfolio.

An investment portfolio is a collection of crypto assets collected to achieve one goal in the form of profit. The thing is, market behavior sometimes dictates such conditions, in which the preservation of existing assets is already a big victory. Therefore, when forming a portfolio, it is necessary to pay attention not only to the potential of a particular coin, but also to the ways of earning that the crypto market offers. And, of course, the last thing is to do is put all your money in one single coin in the hope that it will make you a crypto millionaire.

Fast and Scary vs. Long and Easy

Conventionally, investment strategies can be divided into two parts. Long-term investments are chosen by conservative investors, who are ready to sacrifice quick profits (frankly speaking, we love the crypto market for that). More gambling market participants rely on aggressive short-term trading, promising lightning-fast income along with a high risk of losing everything at once.

The investment portfolio can be formed on the basis of these two strategies, dividing the whole array of cryptocurrencies into long-term and short-term ones. It is worth remembering, however, that if long-lasting, reliable coins can simply be purchased and waited out for their price to break records, then for short-term investments, in any case, it will be necessary to dive into the fundamentals of trading, learn the rules and traditions of the market, the fundamentals of technical analysis, and tirelessly monitor the news background of the crypto market.

Do not also lose sight of the fact that even a seemingly reliable coin can behave in an inappropriate manner and abruptly dive into the depths of prices. People who bought Bitcoin for $19,000 hardly now consider it a reliable investment. The market is the market, and long-term investments require Spartan patience and a reinforced concrete nervous system. Not to lose sanity and not to sell all available assets at a minimum price is the main task of an investor who has entered the market for the long run.

Between Bears and Bulls

One of the most ambiguous ways of diversifying risks is to take a position between bulls and bears, dividing the assets in such a way that it has something to do with both the bullish and the bearish trends. There is a high risk of jerking between one and the other because you have to decide whether you want to join the smart or the handsome. In addition, few people manage to switch their brains between expectations of the rise and the fall of a crypto asset. As a rule, having fallen in love with an asset, I want to believe that all the difficulties are temporary, the graphs are hiding something, and the coin is about to burst candles upwards.

This imbalance will be suitable for cold-blooded investors who have long lost faith in miracles, clearly understand the signals of the market, and are able to predict the behavior of both the bull and bear lobby.

No Shame in Plagiarism

You will be able to avoid many mistakes if before investing you learn the experience of those who have long been in the market. Fortunately, there are a lot of open resources, where investors publish information about their crypto portfolios every day. Look for that blog or Telegram channel, which you find more interesting. Pay attention to the stability of the portfolio, the criteria by which coins are added to it, and the behavior of the investor in case of stagnation of the market. Form your portfolio by analogy with that portfolio and, if necessary, follow the investor’s recommendations regarding the purchase of new assets.

The second option not involving turning on brains is blindly following the recommendations of brokers. To date, there are several tens of crypto bots, which in daily mode give signals to buy or sell a particular crypto asset, indicating the proportion of the total portfolio, following which will minimize risks. Another question is that it is unknown as to what qualifications the traders behind the applications actually have, no one will protect you from being involved in mass pumps and dumps, and in the event of a failure, you can only blame the application on your phone.

Instrument Unbalancing

Returning to the opportunities for earnings, which the crypto market provides, one of the most appropriate options for unbalancing the portfolio is the distribution of assets by investment instruments. This is how professional investment funds work.

This kind of portfolio might look something like this:

 25% leading coins for long-term investment (BTC, ETH, XRP);

 25% medium-term trade in top altcoins;

 10% robotized arbitration;

 10% trading robots and algorithmic trading;

 10% trading on the news (tracking Gainers and Losers);

 10% investments in promising ICOs;

 10% high-risk crypto assets.

The percentage of shares in such a portfolio will depend on how well-versed you are in a certain investment strategy and how appropriate it is for today’s situation on the crypto market.

A crypto portfolio can be formed and based on the regions of investment as a daily changing agenda in terms of legal regulation of the cryptocurrency in the world can significantly influence the rates. You can trust part of the portfolio to the fund manager, however, in this case, you will have to pay a percentage of the profits received.

In any case, once formed, the crypto portfolio will not serve you all your life. It will need to be reviewed and “shaken” with market changes, with the appearance of new promising and stable coins, and, finally, with the stagnation of the market, when even the most trusted crypto assets cause a desire to sell everything and shove fiat money up the stocking.

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