Tips to Keep in Mind When Creating Your Digital Currency Portfolio

By Daniel Zo Investing, ICO

Judging by the recent price increases for digital currencies, more and more investors are considering the idea of getting their very own digital currency portfolio. However, as easy as it may sound, having a crypto portfolio with a high-yield potential can often be difficult if certain tips aren’t followed, and especially if investors are on a budget.

Therefore, when making digital currency investments, it is often essential to reach a perfect balance in your portfolio, by finding smart ways of diversifying it. In return, this will lead to an increase of the potential yield, while also reducing possible loses, based on market volatility.

Bitcoin investment

Should I diversify my portfolio?

Well, this depends on several factors. Firstly, the budget represents the number one way to determine whether it’s worth investing in multiple digital currencies, or whether you should stick to one. For instance, an investment of $300 across multiple digital currencies wouldn’t be successful unless another cryptocurrencies sees a value increase, similar to that of bitcoin. Otherwise, potential yield stands at a couple of dollars.

However, when dealing with more than $1,000 in capital, diversifying is indeed possible, and even encouraged. This way, price increases across your pool of currencies will have a bigger influence on the profit.

How to diversify a crypto portfolio?

At this moment in time, most people choose to divide their digital currency portfolios in three different categories, based on the amount being invested.

The first category would be the low-risk, where you pool some of your money in one or two coins that you really trust. This category often has the highest amount of money dedicated to its, thanks to the stability of the market and high price increase potential. A suggestion would be to consider coins such as Bitcoin or Ethereum for this category. A stake of 50% would be sufficient here.

The second category on the other hand consists of coins that have been established for a while, yet carry higher risks. Altcoins with big market capitalization would be excellent candidates for this category. Also consider coins which offer benefits when compared to others, and are not generally the same system under a different name. A stake of 30% would be sufficient here.

Last but not least, the last category consists of high-risk investments, which can often be exciting new coins with huge potential yet lacking popularity, crazy ideas, or Initial Coin Offerings, where you basically help a start-up raise money and get tokens in return, which can then be sold for a profit. A stake of 10-20% would be sufficient here, due to the high risk often associated with ICO investments.

Based on everything that has been outlined so far, how would you choose to diversify your crypto portfolio? Let us know your thoughts in the comment section.