If you want to get good returns on your financial assets, then it definitely calls for a great amount of strategic planning. And the first rule is diversification. The reason? diversification reduces the element of risk inherent in any form of trading. You can diversify your investments by allocating your funds to various financial assets […]
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If you want to get good returns on your financial assets, then it definitely calls for a great amount of strategic planning. And the first rule is diversification. The reason? diversification reduces the element of risk inherent in any form of trading. You can diversify your investments by allocating your funds to various financial assets and tracking those, once you have created a portfolio. Now let’s come to crypto portfolios. So, what exactly is a crypto portfolio, and how does it differ from a conventional investment portfolio?
The answer is simple.
While your investment portfolio would cover different financial assets, a crypto portfolio in contrast tracks your investments that are solely related to crypto assets and crypto financial products. The biggest challenge in crypto investments is its volatility. But nothing to panic: you can stay ahead of the volatile markets by using a reliable crypto asset tracker that is attached to your portfolio.
A well-planned and balanced portfolio helps you make the most of your crypto investments. So, here then are five simple steps that you can use to build your crypto portfolio:
Step 1: Assess your appetite for taking risks
The first step is to decide the amount of risk you are willing to take, should you decide to go for an investment in crypto assets. You should also determine the returns that you can expect from your assets well beforehand. Subsequently, create a healthy balance in your portfolio by judiciously combining a mix of high-risk investments and some medium and low-risk investments. This investment strategy helps counter risks.
It also helps to set up stop-loss orders. When you set up a price at which your asset will be automatically sold, you are in the process setting a limit of loss that you will incur in the event of a price drop. This is one approach to manage your risks well. However, first and foremost, you should also consider the volatility of the asset, before setting up a stop-loss order. This is because, at times, the value of an asset can increase as rapidly as it can fall.
Also, you should determine the tenure of your investment and plan your next steps accordingly. Maintaining a good tenure balance is key to maintaining liquidity.
Step 2: Do a thorough research
Doing a substantial amount of research will help you understand the basics of your potential investment. This holds true if you are buying a crypto asset like Ether (ETH) or Bitcoin (BTC).
Be sure on what you are investing, if you want to create a profitable crypto portfolio. Conducting in-depth research on themes like how an asset is trading or the ongoing trends will support you in the long run.
Moreover, you should also learn how to analyse the community. This is because, community is the driving force behind the rise or fall of any crypto asset. These days several hundreds of assets are being traded on cryptoasset exchanges in India, like ZebPay. A sound assessment on the discussion around assets could give you a fair idea of their performance as well as the future potential.
Step 3: Diversify then invest
Now that you are clear on your objectives, you can create a list of assets you want to invest, in order to achieve your financial goals. Even at this stage, it becomes imperative to diversify. You could do so by the following means:
i. Invest in crypto assets that belong to different industries so as to balance your portfolio
ii. Counter your investment in small market cap assets along with investments in mid-cap and large-cap assets to balance off the volatility
iii. Consider an investment in stablecoins. This will readily help in countering the volatility of crypto markets.
Step 4: Regular review of your portfolio is key
Once a preliminary crypto portfolio has been built, you must then track any changes happening to your assets, specially if they hamper your objectives. This means, you need to rebalance your portfolio on a regular basis to help you remain on track with your financial goals.
Step 5: Stay alert to new updates
The last and final step is to watch out for new crypto assets. You will also have to stay tuned to any upgrades of crypto assets that could potentially impact your portfolio. Repeat all of the steps above and maintain an up to date crypto portfolio. The beginning of a successful journey with investing in crypto assets starts with a safe crypto asset exchange besides performing some basic research. Use these steps to create your crypto portfolio today. For a hassle-free crypto experience, start trading with ZebPay.