Tips for Creating a Crypto Portfolio In 2020

Handy Tips / 17.03.2020

When venturing into the cryptocurrency business, you will require to create a portfolio that is all rounded. Therefore, several tips will come in handy to help you decide which coins to add in your portfolio, as well as which digital assets to invest in. Although it will all depend on your personalized expectations on the assets to include and the coins to trade, a simplified guide will at least give you a jump start of what to expect while you get into the crypto race.

Portfolio Diversity

Diversity is classified into three substantial sections; market cap, coin technology, and target market. In each category, your portfolio is expected to meet specific criteria to guarantee you get a better standing on the market.

Market Cap

With a diverse market cap, your portfolio will have several market coins in large-cap, mid-cap, and small-cap. This helps you in planning for both long term and short term growth without encountering too much risk. Therefore, you can plan your portfolio with 50%, 30%, and 20% split on large, mid, and small-cap coins, respectively.

However, telling the difference between large, mid, and small-cap coins is a daunting experience. Being a common question that investors often ask, you can always find the difference in the coins selling price on the market.

Coin Technology

In the cryptocurrency market, technologies are quite different, and coins use varying technology too. Every technology has its advantages and disadvantages when it comes to implementation on the market. The difference in mining algorithms and proof systems in the cryptocurrency industry, however, impacts the possibilities of adopting the technology.

It is, therefore, essential to ensure you understand various technologies and how they operate before, including in your portfolio. Additionally, as a beginner picking a variety of coins that use different technologies could be quite helpful. Remember, one technology, regardless of how good and strong it appears to be, when the market shifts, it could impact your investment drastically.

However, when you invest in multiple coins with technology diversity, the market shifts will not put you off balance completely.

Target Market

The cryptocurrencies attempts to address various markets. In every investment face, different markets come up while others shrink or ultimately die. Therefore, when creating your portfolio, it is crucial to diversify your investment across various industries.

With various industries options, your portfolio will remain secure even when one market is not working well. Additionally, it would be best if you always strived to associate with industries that are thriving or have the potential to grow and stay relevant. Some of the top markets include computing, development platforms, decentralized storage, lending, privacy, social media, and distributed exchange, among others.

Research

Putting trust in people is, at times, useful. However, when talking about serious matters that can cost you a fortune, doing things yourself could be much better. Therefore, don’t trust everything you come across due to the face behind the information, always perform your research the best way you know.

When you are creating your portfolio, it is recommended that you take your time and research thoroughly. Not all coins are as promising as they appear to be when placed on the real market. Some coins look promising when they get to the market as investors pump money to grow the coins, and later gain profits from the same.

Therefore, if you include such coins in your portfolio, you are likely to get twisted on the investor’s strategy, which might be costly for you. Perform comprehensive research, learn more about the team behind the coins before you backup any project.

In your research, be as specific as possible. Ensure to know the target of the particular project and the team’s proposed plan to achieve their goal. This will give you an estimation of far the coin will penetrate on the market, among other crucial things.

Before making the ultimate decision to invest in a particular coin, ensure you understand its purpose and the roadmap towards success. However, also keep in mind that not all coins will remain at the top ranking for long.

Product Development

This might sound almost similar to research, but it has exclusive features and information that can only be mentioned in product development. In your portfolio, there should be room to evaluate new cryptocurrency to understand its public code repositories. Seek information on how contributors push for repository commits, how frequent the commit code, the effects of reported issues, and how many pull requests recorded.

With this info, it will be easy for you to tell whether you are on the right investment track or you are losing. Additionally, product development and activity information allows you to connect with developers on various steps of the process.

Community

As in any other business, your growth in the cryptocurrency business solidly depends on the community behind it. Regardless of how appealing and attractive a product may seem, if people don’t use it, its chances to succeed are quite minimal.

For your coin to succeed and reach its development purposes, you will, therefore, require to have a strong community to support. Therefore, understand that there will always be an evaluation of people who support the coin in a given community.

A coin that is thriving on the market cap with minimal or no community involvement is likely being pushed from behind the scenes. This will suddenly result in a downfall when investors start to collect their profits.

With a supportive community, they ensure to take the coin through various growth steps, including marketing, developing, and using the currency to make it popular among other investors.

Conclusion

Creating a perfect portfolio is among the first steps towards succeeding in the crypto industry. Cryptocurrency investment is a continuous process. Every time the industry matures, and it is essential to position yourself strategically for you to make exceptional profits. Therefore, always ensure to identify new opportunities and technologies to help keep you at the top.

Featured image courtesy of Shutterstock.

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Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, he covers trendy issues on digital currencies.