Millions of investors around the world have seen tremendous success with their cryptocurrency investments. However, whoever invests in crypto knows about their high volatility, much more than other stocks.
So, what do you do? Should you shy away from this incredible investment opportunity or build a balanced portfolio to pre-empt and minimize your risks?
Your crypto portfolio comprises all the currencies that you, as an investor or trader, own. Here are some ways in which you can build a safe crypto portfolio that works for you:
1. Educate yourself:
Just like you would with any stock market, the first step is to educate yourself about what crypto is, how the exchanges work, and how to invest. Then, match your education and due diligence with your investment objectives to know where you are headed.
2. Know your risks:
There are several reasons why cryptocurrencies are so volatile. These include their relative newness in world markets, absence of a centralized agency to control this currency, new regulations, and how quickly market sentiments affect them. Or, sometimes the crypto company itself fails or recalls their currency. To avoid getting affected by the market volatility directly, you can invest in companies that have holdings in crypto. You can also look at investing in crypto infrastructure instead of the currency directly.
3. Explore different currencies:
Everyone knows about Bitcoin. But with Bitcoin’s capped supply, you need to look at other options. Did you know that almost 9,000 altcoins exist today, all with their unique propositions, features, and benefits? These include Ethereum, Dogecoin, Ripple, Litecoin, Cardano, and more. These currencies also have different interests ranging from entertainment, charity, sustainability, etc. All of these together have a market capitalization of almost $2 trillion, waiting to be tapped into.
4. Choose the best-performing currencies:
Once you have educated yourself about the different currencies, you need to pick the ones with the best performance and investment value. While some are already established, some may still be on the way to building their reputation. The best way to know their performance is by studying their market capitalization, trade volumes, network upgrades, proposed innovation, etc. It also helps to keep an eye on the prevailing conversion rates. You can check conversion rates for various cryptos like Dogecoin to INR easily on credible platforms like Coinswitch.
5. Start with a small investment:
With all the buzz and excitement surrounding them, crypto investments are certainly attractive. But cryptocurrency markets are highly speculative and sensitive to market conditions. To avoid putting your monies at too much risk, it is better to ease into your investments. Start small and gradually build your portfolio that includes the best-performing currencies. Also, stagger your investments i.e. start with a small portion and wait to see how the currency is performing.
6. Keep yourself updated:
It is not enough to know all that you can about different currencies. Updating yourself once you have already invested is also essential. Some crypto companies publish whitepapers, videos, news, and research articles about how the currency is doing and its future roadmap. Staying up to date with all this can help you make informed decisions, especially when you need to pull out from certain currencies and invest in others. This will also help you put in place stop-loss orders to protect yourself from a hit when the prices of your currency drop drastically. Also, keep checking conversion rates of Cryptos. For Example – Ethereum to INR to keep yourself updated.
Despite the volatility of the crypto market, it is still possible to build and benefit from a balanced portfolio. Knowing and aligning your risk appetite, investment objectives, and strategy is the best way to ensure that you never go wrong with your crypto investments.
