If you’re just getting started in cryptocurrency, establishing a portfolio can be a complicated process. In fact, having a portfolio that can stand on its own in the long run will put your investment skills to the challenge, but it’s not impossible to achieve.
Fortunately, there are some ways to establish your own cryptocurrency portfolio. Regardless of your goals, whether you want to focus on Bitcoin or you prefer to to buy ETH, below are some of the tips you can take into consideration to build the best possible cryptocurrency portfolio:
- Understand The Basics Of Cryptocurrency
Even if you’re only making small investments or financial allocations to Bitcoin and other cryptocurrencies doesn’t mean you don’t need to do your homework. Before you get started, you should first understand the basic principles of blockchain technology and cryptocurrency. After that, you can focus on applying what you’ve learned.
At present, there are many cryptocurrencies available, and these are the most popular ones right now:
- Ethereum – Also referred to as Ether, it’s one of the biggest cryptocurrencies. Ethereum is primarily an application for the currency and allows the creation of smart contracts and the building of the decentralized application. It can also be used to buy some cryptocurrencies.
- Bitcoin – It’s the largest cryptocurrency and was the first one to hit the market. As of now, it’s the most expensive and popular cryptocurrency.
- Litecoin – It’s another alternative cryptocurrency that provides faster transaction times compared to most other known digital currencies.
- Ripple – Another popular cryptocurrency that was made by banking institutions to provide an affordable way to make various financial transactions.
When it comes to cryptocurrency trading, your cryptocurrency portfolio must contain any of those assets aside from the smaller currencies available. However, ensure that you approach this venture with a long-term mentality. Also, you should expect to face market volatility including the possibility of losing 100% of your investment.
- Choose The Right Platform For Your Investment
If you’re new to cryptocurrency, chances are you’d invest in the most popular platforms. But there are other platforms that you should also consider exploring.
Before you settle with any platform, try to make a comparison of your preferred platforms in the cryptocurrency market. Then, choose what works best for you. Like any other investment opportunity, cryptocurrency isn’t a one-size-fits-all kind of industry.
- Do More Research
When creating your cryptocurrency portfolio, make sure to do thorough research. Learn as much as possible about the company behind the virtual coins or cryptocurrencies before investing.
Also, before you make any final decision on crypto trading, ensure that you understand its purpose. Take note that not all cryptocurrencies will stay on top as shifts are expected. So, prepare yourself for market volatility.
By doing research, you’ll be able to learn to analyze the market trends and conditions to keep yourself up-to-date and in the know with the cryptocurrency market. Before considering exchanges, potential returns, or wallets, it’s crucial to have a robust understanding of how cryptocurrency and blockchain technology works.
Cryptocurrency is markedly different from traditional financial markets, such as derivatives, bonds, and stocks. With a better understanding of their underlying technology, you’ll be more aware of the operations behind any cryptocurrency you want to invest in or trade.
- Set Your Stop Losses
As mentioned, the cryptocurrency market is highly volatile. It can be beneficial to set guardrails around your investments, which include stop losses. Generally, stop losses are the orders to sell assets once it drops to a particular price. Setting this on your cryptocurrency will help protect you from taking a huge hit when the prices get very low.
- Diversify Your Investment
If you want to build a successful cryptocurrency portfolio, you should invest in a combination of cryptocurrencies. Many successful investors often recommend a combination of at least three to seven digital currencies.
The diversification of cryptocurrencies in your portfolio won’t only improve your risk-adjusted returns, but it’ll also reduce your exposure risk. A good way to do this is by investing in solid options including Ethereum and Bitcoin to other low-cost options.
- Stay Rational When Making Decisions
Another important tip when building a cryptocurrency portfolio is to stay rational when making decisions. You must maintain your ability to think and make decisions rationally. One of the things you should realize is that the cryptocurrency industry and the prices are heavily influenced by emotions and hype.
Amidst the hysteria in popular media, you should always strive to preserve your objectivity. Never just dump coins because you experience loss. Consider doing deep evaluation and analysis before making a decision. It’s always best if you’ll base your decisions on tangible facts and careful considerations. If possible, do research and try to scrutinize your options.
These are just some of the many tips to build your cryptocurrency portfolio. With these considerations in mind, you’ll be able to navigate the market and avoid falling into various investment pitfalls. It also ensures that your money would get more returns over time.