How to create a good cryptocurrency portfolio?

One of the biggest questions from cryptocurrency users is: How to create a good cryptocurrency portfolio? It is normal, since everyone wants to know how optimize your rewards and build a strong portfolio.

The answer to this question is not easy, the very volatile nature of cryptocurrencies makes it difficult to choose which cryptocurrencies can be more interesting. However, there are several points that can help you build a good cryptocurrency portfolio and, in this case, we will give you some points that you can take into account when building a solid cryptocurrency portfolio, which you can take advantage of.

Introduction to the cryptocurrency portfolio

A cryptocurrency portfolio is a collection of different cryptocurrencies that an investor has put together to invest and make a profit. Like a stock portfolio, diversification is important to minimize risk and maximize profit. Investors create a portfolio of cryptocurrencies for long-term profit.

Diversification is the act of distribute your investments in different cryptocurrencies to minimize risk. Investing in cryptocurrencies is a high-risk activity, as the value of cryptocurrencies can fluctuate rapidly. Therefore, by having a well-diversified portfolio, you can minimize risk and protect your investments.

Types of cryptocurrency portfolios

First of all, you should know that there are different types of cryptocurrency portfolios. Each of these types of portfolios has its purpose and characteristics, such as:

Degree of participation

1. Active: in this type of investment the manager has a dynamic participation. Its main objective is to outperform the benchmark index.
2. passive or indexed: the manager is not actively involved and is limited to outperforming the benchmark. It requires less management work and does not carry out active strategies on the stock portfolio.
3. Mixed: the two previous options are combined and the degree of involvement of the manager depends on the market conditions and the objectives of the investor.

time period

1. Short term: seek to obtain benefits in a period of less than one year. They usually imply a higher risk, but also a higher potential return. Some examples are trading, binary options or cryptocurrencies.
2. Medium term: those who seek to obtain benefits in a period of between one and five years. They usually involve moderate risk and balanced returns. Some examples are mutual funds, stocks, or bonds.
3. Long term: seek to obtain benefits in a period of more than five years. They usually involve less risk and greater stability. Some examples are pension plans, real estate or gold.

Risk level

1. Conservative: is the one that seeks to preserve capital and avoid losses. They usually invest in low risk and low return instruments, such as bank deposits, treasury bills or fixed income funds.
2. Moderate: seeks to obtain a reasonable return without taking too many risks. They tend to invest in medium-risk, medium-return instruments, such as mixed funds, stocks of established companies, or corporate bonds.
3. Aggressive: the one that seeks to maximize profitability by assuming high risks. They tend to invest in high-risk, high-return instruments, such as startup stocks, financial derivatives, or cryptocurrencies.

How to build a solid cryptocurrency portfolio?

Now that we know the three types of cryptocurrency portfolios that we usually see in the world, it is time to know what points we must take into account to build a solid portfolio:

1. To create a good cryptocurrency portfolio, it is essential that you investigate the projects that most attract your attention, which in cryptocurrencies is known as DYER or "Do your own research." Think that they are still companies and you have to analyze their projection.
2. Once you have chosen the cryptocurrencies that you want to include in your portfolio, you must decide how to distribute your capital among them. There are different strategies for doing this, but a general rule of thumb is to divide your portfolio into high, medium, and low-risk investments, and set appropriate weightings.
3. You can also consider “holding” some stablecoins so that they help provide liquidity to your portfolio, and rebalance your portfolio if necessary, based on changes in the market and your goals. Allocate new capital strategically to avoid overweighting one area of ​​your portfolio.
4. To facilitate the management of your portfolio, you can use monitoring tools (trackers) of external portfolios, or manually record your transactions in a spreadsheet. Some "trackers" can be linked to your personal wallets and cryptocurrency exchanges, to make the process more comfortable. An example of a "tracker" is CoinMarketCap o CoinGecko.

Factors to consider when selecting cryptocurrencies

Now, selecting cryptocurrencies to include in your portfolio may sound very easy, but the reality is that to choose in the most optimal way, you must take into account the following factors:

1. Study the historical performance of cryptocurrencies. investigate performance Historical of the cryptocurrency in which you are interested. Have you performed well in the past? Has it had significant fluctuations in value?
2. Review the potential and technology behind cryptocurrency. Research the technology behind the cryptocurrency you are interested in. Is it a solid and reliable technology? Is it innovative and unique?
3. Community. Research the community behind the cryptocurrency you are interested in. Do you have an active and engaged community? Do you have a strong and committed development team? Knowing this will help you choose projects with great prospects and well-constituted communities, which guarantee their continuity in the future.

How to choose the best investment strategy for you?

There is no single answer to this question, as it depends on various personal factors, such as your your age, your financial situation, your objectives, your risk tolerance and your level of knowledge. It is best to analyze your investor profile and seek professional advice before making any decision.

However, there are some general guidelines that can help you choose an investment strategy that is right for you:

1. Diversify your portfolio: don't put all your eggs in one basket. Invest in different instruments, sectors and markets to reduce risk and increase the chances of success.
2. Adjust your strategy to your time horizon: If you have a short-term goal, such as buying a car or going on vacation, opt for safe and liquid investments. If you have a long-term goal, like retiring or leaving a legacy, opt for stable, profitable investments.
3. Respect your risk profile: Do not invest more than you are willing to lose or expose yourself to situations that cause you stress or anxiety. Invest according to your financial capacity and your personality.
4. Review your strategy periodically: the market is constantly changing and your situation can also change. Therefore, it is important that you review your strategy at least once a year and make the necessary adjustments to keep it aligned with your objectives.

Thus, for example, you can take all these points and apply an investment strategy such as that of Dollar Cost Average (DCA). In this way, each cryptocurrency that you have in your portfolio will respond to a progressive evolution where the use of DCA It will help you maintain a positive state in your investments, and in case it falls, you can compensate with your other currencies or directly make the decision to leave that asset and look for new options if necessary.

Conclusion

So, remember that cryptocurrency investing is a high-risk activity, but with the creation of a strong cryptocurrency portfolio and proper management, you can maximize your profits. By following the steps outlined in this article and using the right strategies, you can build a strong cryptocurrency portfolio and maximize your profits.