Check out a number of things you can do to mitigate the risks and increase your profits from cryptocurrency investments.
Are you looking to get started in the crypto investment space? Then, you’re at the right place. Investment in cryptocurrencies is generally not recommended for conservative investors because the market is too volatile and risk involved is relatively higher than other markets.
Almost every investment professional or trader you would ask will advise you to build an investment strategy with a diversified portfolio. While portfolio diversification works in almost all types of investments, it is particularly profiting in the crypto market because of the high risk involved. This is the secret we are going to talk about today.
How to Diversify Your Crypto Investment Portfolio?
10% to 30% – Top (trending) Coins
Invest a quarter of your funds in the top coins such as Bitcoin, Ethereum, XRP, Litecoin, etc. You can find the complete list here. These are market shifter currencies whose price change very frequently. So, limit your investment in these coins to not more than 30%.
40-50% – Popular Altcoins
Altcoins are the currencies that are created as an alternative to bitcoin. Some of the popular ones include NEO, Titan coin (TTN), etc. Experts strongly believe that altcoins are most likely to outperform bitcoin and other established coins. This is because they have a strong foundation along with great growth potential, profit structure, utility mechanism, etc.
There are many other similar altcoins with great potential. The risk with these coins is minimal while the return potential is high in the long term. So, most of your investment should go here.
ICOs and New Coins
There are roughly 50+ new cryptocurrencies launched every month. You can invest a part of your funds in these new currencies or ICOs. Again, rather than investing all the amount in a single coin or ICO, you should spread it across multiple projects to substantially increase the possibility of high returns.
Day trading is usually recommended for those who are looking for high returns in the short term. The catch is that you invest in a cryptocurrency and then sell it as soon as the price goes high. Cryptocurrencies that are highly volatile are perfect for this kind of trading. If you are going to day trade, make sure not to invest more than 10-15% of your entire portfolio, because the risk is very high in this market.
Other Tips to Maximize Your Crypto Investment Returns
- Keep updating your portfolio on a frequent basis, usually in a month or so.
- Invest in projects that can produce returns in the short to medium term.
- If you trust an altcoin, don’t hesitate to hold your funds for a longer period.
- Focus on big winnings.
- Take profits wherever you can.
The ultimate strategy for crypto investments is to be wise in the project selection. The crypto market is still very uncertain, and there are far more bad projects than the good ones. Analyze a coin (project) thoroughly before you invest in it.
Amit Gupta is the CEO and founder at SAG IPL, an India-based technology firm providing a range of service/software solutions in the web development, design, app development, and SEO industries.