Cryptocurrency Portfolio Management: How to Build a Solid Crypto Asset Profile?
How to Build a Solid Cryptocurrency Portfolio
Many people assume that you need a lot of money to get started in crypto. This is not surprising seeing as the current going price for bitcoin is between $6,500 and $7,000. The average American doesn’t have the much stashed away, let alone investing it.
However the good news is you can actually build a solid cryptocurrency portfolio without having so much. In fact, it is possible to start with as little as $250, and then continue investing over time.
Don’t be discouraged by those wallets with huge balances in the thousands. Most of them were built up gradually by their owners who just remained consistent with their investments. What you often see in their balance is a combination of their investments and profits.
Besides, it’s better to start small and learn how to navigate your way in the crypto trading and investing world. If you lose money, it won’t be as devastating as starting big and losing everything.
The lessons you learn along the way while building your portfolio are priceless and will make you a seasoned investor. There are also a few tips that will help make navigating this path easier. If you heed these tips, you will enjoy incredible success in your crypto investing and trading.
Focus on Long Term Projects and Profits
If you’re into crypto investing as against trading, then your focus should be on the long game. Crypto traders typically capitalize on short price spikes, buying lower and selling higher in the process. This often provides decent returns, but typically not as much as long term investments.
This is even truer when the project is a viable, long term one. In fact, this is the first thing you should look out for when trading cryptos. There are many shill and scam coins all designed to fleece unsuspecting investors of their hard earned money.
Some of these are known as the pump and dump coins –cryptos specifically designed by the founders for the purpose of artificially inflating the value and then selling to make a killing-, while others are outright scam projects.
Identifying the legit long term opportunities can be a little difficult, but it can be done. The following should help though:
- Look for an active community behind the project
- Sizable market share
- Solid utility
- Transaction volume –although this is a somewhat shaky parameter
- Ease of scalability
- Solid development team and transparency in the process
- Solution to real problems
- Innovation on current solutions
You want a project that says yes to at least 5 out of the 8 points listed above.
Pay Attention to the Project’s Risk Profile
More importantly, what your risk tolerance? How much risk can you stomach easily? High reward projects are often accompanied by high risks. This means you might experience a bit of volatility in pricing for these tokens.
A project’s risk profile could mean that it has groundbreaking tech or it might be a pipe dream. You need to be able to differentiate one from the other. Lower risk assets tend to be safer for long term investments, seeing as they have a more conservative growth pattern. More importantly, they may attract far less returns on investment than their high risk counterparts.
Whatever the case, you need to decide this for yourself. If you cannot resist the high risk projects because of the potential financial gain, you can buy some and add them to your portfolio, while balancing them out with lower risk projects. This is a safer bet than going all in on the high risk project.
The bottom line is risk management and tolerance. Add projects that match your risk tolerance and have higher risk management protocols in place.
Short Term Profits are Possible
As earlier mentioned, short term profits are often avidly sought out by traders, not investors. But, this doesn’t mean that you can’t benefit from short term trades too, particularly when you spot a rising trend early.
So, you might want to mix and match the tokens in your portfolio with those that have short and long term rewards. Here’s the reality, traders are making small fortunes every day trading the markets.
You can also profit from these opportunities, just keep your eye on the prize –a portfolio of highly valuable cryptocurrencies.
It’s very easy to get distracted by short term profits. In fact, many budding crypto investors have fallen victim to this. Don’t be one of them. Profit from short term trades if you want, but always remember the long term goals.
If short term trades appeal to you, try looking at the lower priced altcoins or ICOs that are currently selling for anything between 5 cents and $5 a token. In a bullish market, these can easily double, triple or even quadruple in value. Just remember, these are higher risk crypto investments.
Be Cautious at First
Since you’re just beginning, always err on the side of caution. It doesn’t matter if you’ve got $100k seed money. The smart thing to do is start with smaller investments, then grow it over time as your confidence, skill and knowledge grows.
You can start with as little as $500, then invest in increments of $1,000 every 2 weeks for the first 3 months. Then, depending on your skills and knowledge, you can start doing $5k-$10k every month. It’s your call, really.
Be Patient and Disciplined
Listen, one of the biggest mistakes you can make while building your crypto portfolio is to trade emotionally or without discipline. It will cost you a lot of money because you will make bad trading/investing decisions.
Establish money management and trading rules, and stick with them no matter what. If you lose some money or your preferred cryptos drop in price, never chase your losses. Learn to be patient, focused and disciplined.
These three traits will serve you far better on the road to building your crypto portfolio than anything else. I know this is not your regular make millions from crypto advice, but the reality is this fundamental advice is critical to how successful your investment portfolios will be.
It’s easy to lose millions of dollars trading cryptos. Doubt it? Let’s do a quick refresher. Bitcoin was at an all-time high of $18k+ in January this year. Millions of people jumped on because they feared missing out on the wave and potential profits, entering the market at that huge price.
Smart and seasoned investors know that you never trade because of FOMO (fear of missing out). Now, there are many waiting for bitcoin to get back to that same price so they can cash out.
While that might still happen, there’s no guarantee that it will happen this year. Those who will profit from bitcoin’s eventual growth value will be those who are in it for the long term, and that will involve rational and logical decisions.
Be Prepared for Anything
Generic advice? Maybe. Practical? Definitely. When it comes to trading and investing in cryptos, one thing you should always have at the back of your mind is that anything can happen.
It doesn’t matter if the crypto has been performing throughout its lifespan, it can lose value once the FUD (fear, uncertainty and doubt) army latch on to it. If you doubt it, lookup OmiseGo and Verge.
A single or series of negative news items about a cryptocurrency can tank its price and value faster than you know what hit you. So, plan for the best, but be prepared for the worst.
Lookout for legit news items –fake news is a real problem in crypto trading- track them and pay attention. Verify any new information, and more importantly, never panic if you notice a drop in value. Cryptos typically go through this cycle multiple times a day.
Research the coins you want to invest in thoroughly. The more knowledge you have and certain you are about the viability of the project, the surer you are of the project’s eventual growth in value, even if it doesn’t look like anything is happening at that point.
Track Your Portfolio
Thanks to a wide array of tools, you don’t have to manually track your cryptos anymore. If you want to do that though, suit yourself. But, take advantage of tools that have automated the process.
While there are many, the easiest to use is Blockfolio. It has both a desktop and mobile app. You can simply add the cryptos you’re tracking to the app, and watch how your portfolio grows. This is very beginner friendly and is pretty easy to setup and use on your devices.