Cryptocurrencies make a great addition to a traditional investment portfolio. In the last couple of years, cryptos have become widely accepted by the general public and by investors in particular, and they can provide dynamism to the portfolio if they are carefully chosen. Cryptos also expand and gain new usage cases with new industries on a regular basis.
In this article, we’ll go over how to add crypto to your list of investments without letting it overwhelm the portfolio. Our advice works regardless of the size of the investments, both in crypto and traditional assets.
How Much Crypto
The first choice to make is how much of your portfolio should be in crypto. A portfolio needs to be well-balanced. Therefore, most experts claim that the ideal percentage of cryptos within a portfolio is about 5 percent of its overall size.
That way, the portfolio wouldn’t be driven by crypto alone, and within that five percent, there’s plenty of room for diversification among different coins and types of currencies. It’s also important to note that this percentage is suited to slow and steady growth rather than a quick turnaround.
Choose Where to Trade
Cryptocurrency investments can only be traded on crypto exchanges such as the ones found here. These are more like foreign currency exchanges than the stock market. The investors should take into account the safety features each exchange has to offer, as well as its fee structure and the range of cryptos you can trade on it.
Investors should look for a mixture of convincing and functionality. With that in mind, there are exchanges that are better suited to new investors handling a small crypto portfolio, as well as the ones that are better suited to larger amounts.
A Balanced Crypto Portfolio
Two cryptocurrencies have been shaping the industry for years now – Bitcoin and Ethereum, but there are also dozens of important altcoins with a smaller base of users that have an important role to play within their user base and industry. A balanced crypto investment portfolio should be a mixture of both of these.
It also helps to diversify the types of cryptos you’re trading based on the type of blockchain they use. Such an approach will prevent an investor from putting all their eggs in the same basket, as it’s a recipe for failure if their crypto of choice goes downhill.
Choose the Coins
Once you’ve decided on the principle we mentioned, you should choose the exact coins you plan to buy. Researching the market can be as simple as buying the five most traded coins, or it can take months of deep dives into the world of altcoins and smart contracts.
There’s no need to reinvent the wheel if you’re a new investor just looking to expand your portfolio with cryptos. Such investors need some Bitcoin, some Ethereum, at least one stablecoin, and at least one altcoin used in a specific industry on the rise.
Create a Tracker
Once you’ve added crypto to your portfolio of assets, it’s important to follow up on the investment and create a tracker that will alert you of any changes regarding their value. These trackers are sometimes independent tools and sometimes come as a feature of the crypto exchange.
The trackers can be set up to notify the investors when the cryptocurrency reaches a certain price or when it changes the price by a certain percentage. However, trackers aren’t enough to keep investors notified about the state of their crypto investment. They should also keep careful track of the industry news and the overall business climate.
Decide When to Dump the Investment
As soon as an investor decides to add crypto to their portfolio, they should also choose when to dump the said crypto if it doesn’t perform as planned. However, investors should be aware that cryptos tend to experience downward turns and recover in the long run.
The best approach to most crypto investing is to buy and hold and wait for the market to adjust. It’s up to the investor to decide how much risk they are willing to take. This decision also depends on how the rest of the portfolio is structured.
To Sum Up
Adding cryptocurrencies to an investment portfolio is a smart business idea, as it brings dynamism and can bring in significant profits over time. Cryptos are also somewhat of a novice venture, at least from the standpoint of traditional investors, and adding them shows that the markets are changing.
Investors should choose crypto exchanges to buy and sell crypto and organize trackers to help them follow up on their latest investments. Investors should also be prepared for crypto values to dip at some point and have a plan for how much of a dip is enough for them to give up on that investment.