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By diversifying their portfolios, investors aim to reduce the impact of individual investment losses on their overall wealth. If one investment underperforms, the negative impact can be mitigated by positive performances elsewhere. Generally, you don’t want to spread yourself too thin, though. Morningstar recommends around 20-30 assets that balance each other out and align to your risk profile.
With crypto, you have a plethora of diverse assets to choose from. Of course, you have the popular cryptos, like Bitcoin and Ethereum. However, there are thousands of altcoins with other potential use cases that could be a part of a diversified portfolio. And then you can also add some more balance to your portfolio with stablecoins tied to more proven real-world assets like USDT and USDC.
If you want a straightforward way to create a diversified crypto portfolio, you might want to have a look at Luno’s coin combos. You can use them to buy multiple coins in just a few taps. And with different options available, you can pick a combo that suits you: a bit of everything, a collection of the most popular coins, or a selection of your choosing.
Focus on Time in the Market
Timing the market perfectly is incredibly difficult, even for the most experienced investors. Instead, many professional investors focus on time in the market rather than timing the market.
A long-term investment strategy can help smooth out any short-term volatility and market fluctuations. More time in the market also has an additional benefit of compounding. This is where passive income is earned through methods such as interest, dividends, or, in crypto, staking and reinvesting your returns.
Focusing on the long-term can certainly help you keep a level head. And, if you have a strong understanding of your risk appetite, then you should be in a good place. This will help you invest confidently in assets that match your personal aims, while keeping a focus on the long-term, rather than the short-term ups and downs.
Look to "Blue Chips"
“Blue chips” refer to large, established, and financially stable companies or assets with a long history of consistent performance.
Because of their longevity, these companies or assets are more likely to have demonstrated resilience and are less prone to extreme fluctuations compared to smaller, riskier stocks. Some investors choose to invest in blue-chip companies to help them balance their risk exposure as this could provide them with a degree of stability and the potential for long-term capital appreciation.
Crypto is still a nascent industry and yet to establish itself. So stability in these sorts of assets is different to that of more traditional investment options. However, it’s still relative and there are cryptocurrencies that may offer more stability than others because they’ve been around for longer. Established cryptocurrencies like Bitcoin and Ethereum, for example, are time tested when compared to others in the market.
Conclusion
It’s important to remember that risk can never be completely removed from investing. However, taking certain measures can help you reduce the potential impact of market downturns, provide a degree of stability, and increase the potential for long-term investment success. Aspiring investors can use these tips to make informed decisions and build robust investment portfolios.
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*This information should not be construed as a solicitation to trade. All opinions, news, research, analysis, prices or other information is provided as general market commentary for information purposes only and is not investment advice or recommendation. Always obtain your own independent financial advice before investing or trading in cryptocurrency