With the upcoming Bitcoin Halving in less than six months, now is the perfect time to consider revising your investment strategy and building a crypto portfolio.
If you were to build a brand new cryptocurrency portfolio knowing what you know after investing in cryptocurrencies for more than five years, how would you do it and why?
However, remember that no one can build a crypto portfolio for you due to the myriad factors involved, including timing, risk tolerance, and project categories. To thrive in this fast-paced market, you must be an active learner and investor.
Here are four crucial steps to constructing the ultimate crypto portfolio.
Disclaimer: The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Blockzeit. You should consider seeking a financial advisor to check how the website information relates to your unique circumstances.
1. Stick To Your Plans
The first step to building a successful crypto portfolio is setting clear rules and sticking to them. Without a plan, you’re merely gambling. Establish specific targets for taking profits and know when to cut losses. Define your risk tolerance for each project, ranging from 1% to 35% of your portfolio, based on your confidence level. Lastly, decide whether your investment is for the long term or a quick trade, and if it’s the former, commit to holding it for an extended period.
Read: How To Plan Your Exit Strategy In The Current Bitcoin Bull Run
2. Set Money Aside For Investing
Never invest more than you can afford to lose. Allocate a portion of your income, whether it’s 5%, 10%, or more, exclusively for cryptocurrency investments. This approach eliminates emotional decision-making and cultivates patience, allowing your gains to accrue over time.
Read: Crypto Investing: How To Get Started With Small Capital
3. Determine Your Risk Tolerance
Before making any investments, decide whether you prefer a low, medium, or high-risk portfolio.
A low-risk portfolio might include 50% large caps, 25% medium caps, and 25% low caps.
A medium-risk portfolio could be 35% large caps, 25% medium caps, 25% low caps, and 15% micro caps.
A super high-risk portfolio might involve allocating 25% to each category.
4. Taking Profits
Warren Buffett’s advice, “Be fearful when others are greedy and greedy when others are fearful,” applies beautifully to the crypto market.
You don’t need complex charts and indicators; instead, focus on identifying greed and fear. Buying opportunities peak when fear prevails, while locking in profits is ideal when the market exudes greed.
Always remember that your gains remain unrealized until you hit the sell button, just as losses are not incurred until you do the same.
Read: Ready For The Bull Market? Avoid These 3 Common Mistakes That Investors Make
Creating a Beginner Crypto Portfolio
For those new to cryptocurrency and seeking a low-risk portfolio, consider the 50-25-25 strategy. In this case, with a $1,000 USD capital, let’s allocate 50% to Bitcoin (BTC), 25% to Ethereum (ETH), and 25% to XRP (XRP). These coins are among the least risky in the market and consistently rank among the top 10 cryptocurrencies by market capitalization.
1. Head On Over To CoinMarketCap and Click “Create Your Portfolio”
2. Click “Add Transaction” and Select BTC, ETH, and XRP
3. Allocate Your Capital Into BTC, ETH, and XRP
4. And You’re Done!
Final Thoughts
While this portfolio offers lower potential risk, it also presents significant upside potential in the crypto market. The ultimate goal of your investment in cryptocurrencies is to achieve substantial returns far beyond what stocks or other financial instruments can offer. However, also acknowledge that the crypto space still carries inherent risks, which you must be prepared to accept in pursuit of its greater upside.