Diversifying Your Portfolio

A good portfolio management strategy includes diversifying your investments. You’ve heard the saying about not placing all of your eggs in one basket. In case the basket was to fall, you don’t want to lose all of your eggs.

A lot of hype surrounds fast-moving, high-performing cryptocurrencies. Some of the hype is warranted, as certain cryptos do have a promising future and solve real-world problems. Other cryptos solve real-world problems as well, but our world is still dominated by traditional business and finance.

Two highly volatile and uncorrelated crypto assets can smooth each other out, providing outstanding risk-adjusted returns. The bad news is that a lot of cryptocurrencies are correlated to each other. Therefore, while diversifying your crypto portfolio can be challenging, it is still possible.

First, plan out a base for your portfolio. Which cryptocurrencies have large market capitalizations, leading to strong future potential? Second, consider investing a portion of your portfolio into stablecoins that you can lend out for a high-interest rate. Adopting a portion of your portfolio to act as a high-yield savings account means that a portion of your portfolio will always be gaining — even in a down market.

Third, consider small amounts invested into small high-growth projects. These projects may still be correlated to the gains and losses of the broader crypto market, but if one of them takes off, the additional growth may bump your portfolio’s overall value higher.

Do your research by reading up on the fundamentals of a cryptocurrency’s native token. Sometimes, the current price does not reflect the true value the token brings to the crypto economy.