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How to properly diversify your cryptocurrency portfolio
When investing in cryptocurrencies, it is important to achieve the right balance. Proper diversification of your cryptocurrency portfolio lets you increase investment profits and minimize potential risks. In other words, you need to distribute your investments correctly.
How much should be in the portfolio?
According to analysts, diversification is helpful for investors working with sums starting at $500. With smaller amounts, distributing your funds doesn’t make much sense. Of course, you could work with amounts such as $100, $50, and even $1. But creating a portfolio this way is not the best idea.
So if you haven’t yet reached the $500 mark, just keep saving more money. However, nothing is stopping you from thinking ahead about diversifying your future cryptocurrency portfolio.
Strategy to create a portfolio
As a rule, a diversified portfolio has three types of investments:
– Low risk – Investments in bitcoin and other established coins among the top 10 cryptocurrencies, such as Ethereum or Litecoin;
– Moderate risk – Investments in cryptocurrencies with high market capitalization; these are usually cryptocurrencies in the top 30;
– High risk – Investments in cryptocurrencies that have recently appeared on the market and do not yet have a reputation or trust in the crypto community.
As for the ratio of these types of investments, most investors use the following allocations: 50%/30%/20% or 60%/30%/10%. This is the distribution they consider to be the best.
Your portfolio will need to be adjusted
Once you have created a portfolio, you can’t just forget it and always make a profit. In fact, you must not forget about it, because it will need constant adjustment and additional investments. The cryptocurrency market is dynamic, so you need to carefully track your portfolio and regularly run the numbers. This is the only way to confidently stay afloat.