Investing your money is the wisest decision you will ever make. This begs one question, what to invest? There are many worthy investments out there. If you want to invest in traditional systems, you can consider stocks and mutual bonds. If you want alternative and smartoptions, you can consider cryptocurrencies. Cryptocurrencies are virtual currency that can be used as a medium of exchange. It is protected by cryptography that secures and verifies the transactions.
There are different cryptocurrencies. As of April 2018, there are 1,565 cryptocurrencies in the world. Balancing your crypto portfolio through diversification is important when investing. Remember that a well-balanced portfolio will mitigate your risk but it can restrict your total gains.
Diversification is ideal because there are many new cryptocurrencies these days. Keep in mind that there are no industries that target only one currency. You should learn from others. As an investor, it is crucial that you know ways to balance your portfolio. Here are some strategies to balance your portfolio:
Based on the types of cryptocurrency
You can balance your portfolio based on the different types of cryptocurrencies. The types of cryptocurrencies include:
1. Transactional coins: this refers to coins that are used for transactions. The most common example is Bitcoin. Other examples include Litecoin, Dash, and Monero.
2. Platform coins: this refers to cryptocurrencies that are bound to blockchains. This blockchain allowed the generation of applications on them or smartoptions like the Ethereum, NEO, Cardano, and Lisk.
3. Utility tokens: this refers to the token that is designed on one of the platforms. This gives access to a particular blockchain application and designed for a particular task.
4. Security tokens: this refers to tokens given by companies to raise funds. The companies allow investors to participate in the growth of the company.
5. Stable coins: this refers to cryptocurrencies that represent the value of the underlying assets of gold and fiat currencies.
Stick to the bigger and more established cryptocurrencies
You have to be aware that the crypto market is risky and unpredictable. Knowing this, you should stick to bigger and more established cryptocurrencies. You can consider Bitcoins for instance. These days, it can be used as a form of payment and you can trade or mine it. Other established cryptocurrencies include Ethereum, Litecoin, Ripple, Dash, Modero Zcash and many more.
Use a tool
There are many portfolio trackers that you can consider. It is crucial that you keep track of your portfolio balances. Finally, pick a day in a week to evaluate your portfolio so you will know its status. It is not advisable to check every 5 minutes. Many investors evaluate portfolio every Wednesday because the market plummets a bit over the weekend.
There are two types of investor – the “all or nothing” type and the “balanced portfolio” type. If you are the “all or nothing” type, you go with one currency to make you rich. However, you need to think about market volatility. If you are the “balanced portfolio” type, you consider several cryptocurrencies. Whatever your smartoptions, always remember that your goal will steer you to the right direction.