Cryptocurrency portfolio

Daily rate fluctuations of even the most reliable cryptocurrencies sometimes reach 20-30%. Such volatility provides huge prospects for earnings, but at the same time carries significant risks for investors. A cryptocurrency portfolio is a convenient tool for investors, which allows them to diversify investment risks and correctly allocate capital to achieve their goals. ProstoCoin tells how to do it.

Cryptocurrency portfolio

A cryptocurrency portfolio is a comprehensive combination of an investor’s various cryptocurrency assets in the right proportion. The key objective of a cryptocurrency portfolio: to ensure minimum risk and maximum return for the investor.

Unlike a stock market investment portfolio, risk diversification in this case is carried out not by investing in different assets, but by purchasing one asset – cryptocurrency – in different tokens.

If, according to financial experts, the formation of a traditional investment portfolio is worthwhile only if the capital is large enough, for the cryptocurrency market the creation of a portfolio is relevant even for small investments. Because, in addition to risk diversification, a cryptocurrency portfolio will allow taking part in a larger number of projects where investments at the initial stage can bring high income in the future.

Why create a cryptocurrency investment portfolio?
There are over 1,000 varieties of cryptocurrency today, but not all can be profitable for an investor. Investing their investment capital in one type of cryptocurrency, an investor runs the risk of losing all of their investment if the rate collapses. Creating a cryptocurrency portfolio allows you to reduce the risk of loss and mitigate it by increasing the value of other cryptocurrencies.

For example, if all of the investment capital is invested in one type of cryptocurrency, the investor will lose the corresponding amount of percentage of his capital if the rate drops by 20%. If the investment was divided equally among three cryptocurrencies, then if one currency decreases by 20% and the other two increase by 10%, the investor will not incur losses and can calmly wait out the decrease in value. Even if the value of the other assets does not fully cover the fall in exchange rates, such a fall will still affect the total invested capital to a much lesser extent.

Cryptocurrency Portfolio

Keep in mind that no matter how stable the value of tokens or coins may be, it will always fluctuate. Only a competent allocation of investments can make an investor resilient to such fluctuations.

Additional benefits of building a cryptocurrency portfolio of different tokens include increased chances of successful investments. The cryptocurrency market is quite young, but rapidly developing. Not all investors have had time to appreciate the prospects of investing in cryptocurrencies, but recently there has been an increase in demand and investor interest, which can lead to a steady rise in the value of coins of any relatively successful project. Most tokens represent promising projects that can become useful for humanity, which attracts a new audience to the market and new investment streams.

As we know, the value of coins invariably rises as investment grows, but it is almost impossible to determine with certainty which project will attract the most investment. If you choose an investment strategy only in the implemented and successfully functioning projects, such as Bitcoin and Etherium, you can count on minimal risks, but do not expect their value to skyrocket. Beginning projects, on the other hand, hold the prospect of thousands of percent return on successful implementation, but the risks of financial investment in them are high. Accordingly, investing small amounts in different projects, the investor expands his perspective of profitability, at the same time maintaining the stability of proven investments.

The basic principle of proper asset allocation in an investment portfolio is asset diversity. A cryptocurrency portfolio should contain all instruments for earning and reducing risk in the right proportions. Most of its components should consist of popular cryptocurrencies with stable growth and demand among users. Experienced investors have developed several optimal strategies for building a cryptocurrency portfolio.

Cryptocurrency portfolio

For cautious low-risk investing, you should:

80% of all investment capital to invest in coins that have a stable rate and occupy leading positions in the ranking of cryptocurrencies;
15% to allocate for new tokens, which have high liquidity and an average exchange rate;
5% to leave for tokens of promising projects, which are at the initial stage of development and have a low value.
As the risk of investment in the long term increases, so does the return. For more risky investments, the portfolio may include ICO projects that are capable of generating impressive income with minimal investments. In this case, assets should be divided according to the following principle:

60% to invest in major cryptocurrencies;
25% allocate for popular altcoins with a stable rate and the prospect of growth;
15% to invest in ICO tokens.
The best cryptocurrency portfolio – formed on the basis of proven strategies. Otherwise, improper allocation of funds can only compensate for losses, but not bring income at all. High-risk investments that are too inflated can wipe out income from profitable projects.

Principles of Selecting Currencies for Investing
A cryptocurrency investment portfolio consists mainly of coins with a high stable growth in value. It is due to them that diversification of investment risks is achieved. Bitcoin or Etherium can play the role of such currency.

Altcoins, which fill the rest of the cryptocurrency portfolio, should be selected based on the analysis of the prospects of the coin:

The prospectivity of the project behind the coin will ensure that the token will continue to grow. If the development team is able to propose a new idea or significantly improve the existing one, the token will be in demand and will gradually grow.
Analysis of quotes and trading volume on the coin will show the real demand and investment inflow. If the trading volume is constantly increasing, then the total capitalization of the currency and, accordingly, the value will increase over time.
Maximum coin issue is an important indicator. In some cases, the maximum issue can exceed the real demand for coins. In such a case, achieving a high token value will be much more problematic.
The development team must necessarily be active in improving and promoting the project. The perspective of an idea will not bring profit if the public does not know about it. The predominant part of investors prefer the strategy Buy&Hold, the essence of which is the purchase of cryptocurrencies for long-term storage with an increase in the rate of value.
Experts note that recently the most promising coins for investment are those designed to modify the economy and the habitual activities of mankind, which existed before the advent of blockchain technology. Among such currencies are EOS, NEM, NEO, IOTA.

Investing in the top 20 cryptocurrencies is considered reliable. Often such currencies have a stable rate, high liquidity and a tendency to constant growth. A cryptocurrency portfolio should be constantly reinvested and modified. Cryptocurrencies can lose popularity, leave the market, become unprofitable, and new developments that can bring even more income in the long run are constantly taking their place. It is important for a cryptocurrency investor to track market trends, be able to get rid of unprofitable coins in time and add new ones to their capital.

Where to create a crypto portfolio?
The easiest method of building a cryptocurrency portfolio is considered an exchange. You can easily buy a cryptocurrency portfolio on it, and the assets will be distributed by varieties and will be displayed in your personal account. In addition, it is a convenient way to monitor the value of cryptocurrencies and trading volumes, which will help to notice trends in decline in time and sell unprofitable assets. The only disadvantage of such storage is unreliability. Most exchanges store encrypted private keys to users’ wallets on their servers, without giving them out to users, which means, in fact, in this case you don’t really own your assets.

For more secure storage, you should use multifunctional desktops or hardware wallets (like Ledger Nano S).