Many new cryptocurrency investors choose to invest in a single coin. The success of their crypto investment depends entirely on the enthusiasm, work, and support of the group behind a single project.
But, in such cases, when they are dependent only on one crypto, successes are less assured, and some succeed more or less than others.
It is, therefore, suitable to avoid taking this risk and invest in a well-diversified crypto portfolio. In the next few minutes, we’ll define a cryptocurrency portfolio, outline its advantages, and go through several resources for management.
Five tips for Managing Your Portfolio
Building a long-term, stable crypto portfolio begins with constructing a diversified one. The world of digital asset investment is still young and full of unfamiliar jargon.
So, get a solid idea about the fundamentals of this market first before your start. If you’re ready to start constructing, I’ve laid down five cornerstones to help you strike that balance and control your cryptocurrency holdings.
● The Theory of Average Costs:
Many investors don’t have a massive chunk of money sitting around that they could immediately reinvest in a cryptocurrency portfolio. Therefore, regardless of the price of cryptocurrencies, making consistent, little investments from your income cash flow is a good idea.
Therefore, dollar-cost averaging is a great trading strategy that may help you construct a portfolio in both bull and bear markets.
Automated dollar-cost averaging (DCA) allows investors to put away the same amount of money every month, no matter how much a given token has fluctuated in value. Smooth down the jitters caused by imprecise timing by investing in installments.
When the market is strong, or crypto prices are going to rise, you can buy more shares. If the value of the cryptocurrency decreases, but your investment in fiat currency does not, you will be able to buy more shares.
● Track Your Cryptocurrency Investments with A Portfolio Tracker:
Keeping track of your bitcoin holdings across your wallets might take a lot of work. As your portfolio grows, you may have to manage many wallets, exchanges, and platforms to take advantage of all the available discounts and bonuses.
● Think Logically:
The value of cryptocurrencies is notoriously unstable, swinging wildly in either direction. Furthermore, the blockchain technology that powers cryptocurrencies is itself a cutting-edge innovation. But don’t let your feelings go into overdrive because of all the excitement.
One of the leading causes of poor portfolio management among traders is FOMO. It’s common for investors to buy assets at inflated prices due to their emotions, only to suffer losses when the market experiences a sharp decline.
Moreover, it’s normal to feel uneasy if the market declines by 30%, as nobody knows if the correction will go deep enough to reach a 70% correction.
● Create a Well-Thought-Out Exit Plan:
As you plan in the beginning to get your entry righteously, having an exit plan is also necessary. If our transactions are successful, the brain will release a dopamine chemical, making you feel good. Unless they have a way out, that high will indefinitely keep it in the position.
Higher levels of dopamine result in greater resolve to maintain the position and vice versa. Next, you can anticipate that the situation will be recovered soon. The cryptocurrency market recovers and starts to rise in an ideal scenario. Of course, there’s always the possibility of the correction worsening.
● Investment Portfolio Diversification:
Investment portfolio diversification is a critical component of any sound management plan. You’ve probably heard the adage about not putting all your hope into one thing. You wouldn’t want to risk losing everything in one big spill.
Hype abounds around the world’s fastest-moving and best-performing cryptocurrencies. Specific cryptocurrencies have a bright future and find use in solving practical problems, so some excitement is justified. Other cryptocurrencies do the same, yet traditional business and finance still rule the day.
The process of creating a crypto portfolio doesn’t have to be complicated. However, you’ll need a strategy and tools like a portfolio tracker to pull it off.
Several cryptocurrency exchange platforms offer these tools to facilitate investments for newcomers to the market. According to Bitcoin Prime: “Depending on how carefully you handle your crypto assets, they can add significant value to your portfolio.”