While cryptocurrency might be a different type of investment than others, it’s an investment nonetheless. However, there are many investors out there who have struggled with crypto or require a bit of assistance when it comes to understanding it as an investment.
Despite its differences, the traditional investing rules still apply. As such, it’s important to understand how you can invest in crypto successfully and to also diversify your portfolio to help mitigate the risks that come with an often volatile and unpredictable investment asset.
How is cryptocurrency different from other investment assets?
As far as crypto assets go, they are one of the most volatile of investments because the prices tend to swing incredibly from one major high to a major low within a short period of time. Sometimes, in the space of just a few seconds depending on the market.
With that being said when it comes to cryptocurrency as an investment asset, often buyers have their reservations. However, with that being said, there’s an appeal to crypto due to the digital asset that it is in comparison to other physical investments.
Some will buy crypto for the short-term but often enough the profit comes with playing the long game.
What does it mean to have a diverse crypto portfolio?
A diverse crypto portfolio is one that contains multiple types of cryptocurrency. From their use cases to how risky they are as a crypto coin. An investor should be allocating so much of their available funds to each cryptocurrency in order to balance out any potential risks present.
While one cryptocurrency behaves poorly on the market, another one could be flying on the market.
You should be making a conscious effort to expand your horizons further beyond the crypto portfolio itself. In order to have a diverse crypto portfolio, you want an overall investment portfolio that’s well-balanced. A general rule of thumb is to look at making cryptocurrency a 5-10% part of your overall portfolio.
You always want to look at selling off some of your investments so you don’t become what is known as too ‘crypto-heavy’. This often puts you at more risk if the market suddenly plummets for one or two of the currencies you’ve invested in.
How to build a diverse crypto portfolio in 5 ways
When building a diverse crypto portfolio, there are a number of ways you can do it successfully. Here are a few ways in which you can build a diverse crypto portfolio for yourself this year.
Invest in the market leaders
A great starting point when it comes to investing in crypto is to start with the current market leaders. There are lots of cryptocurrencies out there, which is why you want to invest in some of the top contenders currently and look to invest in the top ones whenever that list changes.
There’s often more stability with the larger cryptocurrencies, than those that don’t have much popularity just yet. Better to spend your money on the big ones, than put all of your money into the smaller cryptocurrencies, even if they are less to buy.
Keep in the loop on crypto investments and trends
To help find success with your crypto portfolio, it’s imperative that you stay in the loop with everything that’s going on.
You may find it helpful to sign up for the prolific resources online when it comes to investment trends in the area of crypto. Sign up to receive their newsletters and make it a part of your morning routine to check the trends and ‘hot’ crypto investments to spend your money on – or sell if the case may be.
Look at tracking software and tools
As an investor, the tools and software that you have at your fingertips can provide great help for those who need it.
Whether you need an ETH gas tracker or you just want to have all your digital investments in one place, it’s useful to explore what technology is out there. Within such a volatile investment asset, your decision-making and choices need to be made fast and often enough, which can be helped with the use of apps and tools that notify you quickly of a change in the market.
With these tools as an investor, you can track and identify potentially better-performing cryptocurrencies, as well as clear out the ones that are no longer providing any benefit to you.
Explore cryptocurrency stocks
Cryptocurrencies are the only investment out there when it comes to crypto. You also have the opportunity to invest in cryptocurrency stocks, which are made up of companies that operate in the industry. From the businesses behind the cryptocurrency itself to various blockchain technology softwares and organizations.
They can offer a great option and alternative for diversifying your portfolio further, particularly for your crypto portfolio specifically.
Look to realign and balance out your portfolio
Not every investor when it comes to their crypto portfolio, has the time to be glued to their apps or their phone in order to keep on top of market changes. Therefore, it’s useful to check in as and where you can for the purpose of realigning your portfolio.
As prices change, you’ll want to buy and sell certain cryptocurrencies to ensure your portfolio as a whole remains well-balanced. Some of your smaller investments may have recently increased in value, therefore should be the focus of your attention when selling crypto.
Don’t be afraid of building a diverse crypto portfolio
While many investors are apprehensive or have little interest in investing in crypto, there are certainly plenty who do and have made a pretty bitcoin from it or two. With that being said, always be open to investing in assets that aren’t always something you’d typically go for or know much about.
Learn about how cryptocurrency may be a worthwhile investment asset and don’t be afraid to diversify your crypto portfolio for the benefit of financial health and wealth in the future.