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February 11 2023 Cryptocurrency

Building the ideal investment portfolio

If you want to invest your money in cryptocurrencies, it is very important that your investments form a well-diversified portfolio that will work well over the long term. This article will help you put together an investment portfolio.

What is an investment portfolio anyway?

In trading, a portfolio is a collection of different investment instruments. In the case of cryptocurrency portfolios, we mean a combination of different altcoins and a certain proportion of Bitcoin. This portfolio must be managed once it has been constructed.

This can be done manually, but there are also automated trading solutions. These automatisms can be very useful for long-term investors, but for short-term intraday trading, these automated trading bots are now almost indispensable. The more assets you have in your portfolio, the more difficult it is to manually review and manage.

What is diversification?

Diversification means spreading your investments across asset types or asset classes. This is useful because it allows us to minimise our risk exposure. 

If we invest only in cryptocurrencies, it is true that we use only one asset class, but we can also spread our risks within that class. For example, some tokens may lose value for nothing, but if others rise, they can mitigate or even outweigh our losses. A good strategy might be to put some of your money in Bitcoin, but also to buy various altcoins. For example stablecoins, NFTs or other smaller emerging assets.

Disadvantages of a diversified portfolio

Diversification is perhaps the most accepted advice in the world of cryptocurrency investing. It is an effective way to reduce your risks. However, using it not only fragments our risks, but also means that we are less able to profit from the rise of individual coins than if we were to use a concentrated portfolio of a few investments.

This is how a harmonious investment portfolio is constructed

Each investor has individual attitudes. We have different preferences and different risk tolerances, but by following a few rules of thumb, we can all build a portfolio that suits us. Let's look at what they are:

Only invest what you can afford to lose at any one time, and only invest what you can afford to lose, with no disastrous consequences for your financial situation!

The cryptocurrency market is highly volatile. This means that you should always adjust your investments to the current market situation.

Related to the above, it is worth re-balancing your portfolio at certain intervals. Never consider it as a constant!

We should also split our investments into smaller co-investments, which carry a higher risk but also a higher upside potential, and more stable assets. 

We should also not allow our portfolio to swing in either direction when we buy assets later on.

We should neither be greedy nor panic when making new purchases. A calm attitude is the basis for profitable investment over the long term.

Although the crypto market is moving in tandem with the largest currency, Bitcoin, it is still worth considering a well-diversified, well-considered portfolio. It will help us maintain profitability over the longer term and minimise losses.

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The content of any communication by the Service Provider is based on a subjective opinion and is intended only for general, non-personalized information, strategy, orientation and educational purposes. The Service Provider is not considered an investment firm under section 4 paragraph (2) point 10 of Act CXXXVIII of 2007 on investment firms and commodity dealers hereinafter referred to as the Investment Services Act. and the Service Provider's activities are not regarded as investment analysis under section 4 paragraph (2) point 8 of the lnvestment Services Act or investment consultancy under section 4 paragraph (2) point 9 of the lnvestment Services Act.