Everyone has a different appetite for investing and risk management and crypto being a new asset class, and still being in its infancy, is extremely volatile, with almost a penny stock nature to many coins. In this article, we cover somethings you can keep in mind before building your portfolio and maybe avoid some mistakes when the mad rush comes in…and the mad rush will come in. As I covered in previously about halving, that happens on 23rd May 2020, which is a key event for Bitcoin and will most likely usher new money and bullishness in the market, I think now is a good time as any to start planning and managing your crypto portfolio and some ways you can possibly categorize your assets.
Bitcoin Crossing $8,300 does not indicate that we will not go back to $5,000 level, I hope not but we can, though most likely not. But what it does indicate that there is a change in trend, it’s a signal to the world that the bulls are back. The current run can be attributed to Halving in one year, Consensus19, Bakkt approval, and launch timing. We will have dips and fud as well but it’s important.
Many of you have been through a tough bear market and preparation now will be key to stopping your self from running around like a headless chicken from one buy to another.
“Don’t invest more than you can afford to lose” we all know this one but if you are in the crypto space, and want to know some more tips that can help you manage your portfolio, here are some suggestions that might help you to manage your crypto portfolio.
Please note that is by no means Investment advice and simply our opinion.
- Make a plan.
It is very easy in crypto to lose money and gamble away your investment when a sudden opportunity occurs, so ideally having a small reserve for it is good so that you don’t dip into your long term investments. A plan helps you keep a track of things and make more informed decisions.
- Know your risk appetite
You can always modify your portfolio to an expected reward to risk ration. Maintain segregation as per categories. Fix your plan and try and stick to it as much as you can. Here is an example –
SAFE’ER’ COINS – 40-60%
HIGH MARKET CAP COINS – 25-35%
LOW MARKET CAP COINS – 10-20%
LIQUIDITY POOL (BTC, ETH, Stablecoins) (FOR PURCHASE or TRADES or GAMBLING) – 5-15%. In an upcoming article, we will breakdown and share some of our top coins picks for each category.
- Do not invest without research.
Unless you are gambling a part of your liquidity pool for quick trades on some rumor, try not to buy coins of projects you haven’t done an analysis for and are aware of the token’s utility, team experience, validity of partnerships, market valuation, comparison with crypto or real work competitors, basically you must know all possible good aspects and well as possible red flags about the project, that in case something triggers it in any direction, you know what your strategy is.If you want to know how to research a project for invest, let us know in the comments below and we will make a dedicated video for it.
- Take Profits
An important part of planning is to generate some income and also at least recover back your initial deposit. One good strategy is, sell 50% when your investment 2x’s, or if it moves fast take out 25% on 4x. This way your initial investment is out and all you hold is pure profit.
- Keep an eye on the prize
Know when to sell and if you plan to be in crypto for the long term, you must still have a price you want to get out at. Depending on what you have bought, a potential market cap can be anticipated for each project. If you have made 10x-50x-100x at some point it will retrace, at some point it will take a break and investors will cash out and as it is still in the realm of demand and supply, there is be less demand, so being happy with the profits you wanted to get is quite important. Being greedy may prove to be more challenging. - Cut more of your losses, than your profits.
If you have 20% profit on project A and 20% loss on project B, if the likelihood of A going up more is equal to the likelihood of B doing down, and if you absolutely need to sell, it’s better IMO to cut losses and sell B. - VC backed projects don’t mean much
Always remember that you can possibly do much better research and make better investment choices than many VCs. They have no reason to have your best interest heart and they will market and promote the project and the moment they are done selling they will move on to another without looking back. You may never know at what price the token was sold to a VC and so the risk for them is usually much lower than yours. So don’t look at it as a stamp of validation and do your independent research on your own parameters. - Follow the Trend
Crypto trends change a lot, the parameters you use for creating the basis of your research may require edits as they may be impacted by the changing trends. New exchange coins may not be a trend in the next cycle, there is a possibility that smart-contract based platforms may not be a huge trend or maybe high supply coins get more trendy. Regardless keep an eye on the trends with regard to your investments. - Don’t blindly follow influencers
Yes, yes I know, I am telling you to not follow Altcoin Buzz’s advice and maybe you should not. We have learned a lot over the last 2 years of running this channel and providing information that we have stopped being extremely opinionated. It took us a while to be slightly more mature and we will learn more and share all we can in time to come. We may have a very different risk appetite from yours, we may have invested at a different level, we may also have a small part of our portfolio in the project but yet excited about the project and there could be several other factors to consider. - Use your time and money wisely
Ever been in a situation where you have an urge to buy crypto because you heard something bullish about it on a telegram chat or on Twitter. Ever invested in the coin only to lose money or getting stuck. Nothing sucks more than that, right. Solution – don’t fomo. It’s okay, you can’t catch every train, and if you have caught one, you might miss a few others. There are over 4000 currencies and you have limited time and money, some boats will sail, some will sink. Be careful about every dollar you spend in the space because it may seem like a great opportunity, to begin with but mostly lead to disappointment and despair and that’s not like a boss.
Be ready and best of luck investing!
