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.