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).