Without a doubt, in the past few years, Bitcoin and other cryptocurrencies have been on one wild ride that has taken investors on many ups and downs. Doesn’t matter if you are new to digital currencies or have been buying them from the start, one thing is true, they can be volatile. Crypto has been known to grow and plummet dramatically over the past few years, with the 2020 pandemic and new government regulations in many countries adding to the mix.
But don’t let the craziness and what may seem like unpredictability scare you away from investing in crypto. On the contrary, it is only growing as a stable asset and as more and more countries take notice and approve it as an acceptable payment option, its growth will only continue.
However, like any other investment, such as stocks, bonds, ETFs, gold or real estate; diversification is key to creating a smart portfolio.
Enter Bitcoin…the OG of crypto.
While BTC deserves its spot at the top of your crypto investment list, adding different currencies and tokens to your portfolio is your best option for ensuring your investments continue to rise. But why is it so important to diversify? If BTC is the best and most secure, shouldn’t you just buy that? – Sure, it is a great idea to have a large sum of Bitcoin as it has proven to be the most secure coin, but if it drops, are you sure you want to lose everything?
This is why diversifying is vital for any investor.
In this post, we are going to look into how you can build your crypto portfolio like a pro. We will walk you through why and how while giving you some tips and tools along the way to help you achieve a healthy and diverse portfolio.
Building the Foundation of Your Crypto Portfolio
Having a variety of digital assets is always smart. Any seasoned investor would tell you the same: buy as much as possible and keep it long-term. Bitcoin, as it was the first cryptocurrency available, is the strongest and it also led the way for other “altcoins” such as Ethereum, Ripple and many others. If you are just getting started in the world of crypto, it can get a little overwhelming as the lingo is different and varies on the type of currency.
For example, apart from buying and selling cryptocurrencies, some tokens exist on blockchains that can include DeFi tokens, or, on the other end, NFTs (non-fungible tokens). Each one plays a role in the digital realm of crypto and can be a great investment opportunity for diversification. You will need to hold the tokens in a DeFi wallet.
The Best Way to Build Your Crypto Portfolio
Creating a diversified crypto portfolio requires you to make strategic choices and most importantly, to have a clear vision of what outcome you want. Here are some steps to consider when starting to build your crypto portfolio:
- Define Your Investment Goals and Risk Tolerance: This is a really important question to ask yourself before you start using that hard-earned cash to buy crypto. Think to yourself, “How much can I afford?” “Can I risk to lose?” Try to outline your short-term and long-term goals when investing in crypto to help determine which coins, tokens and blockchains to buy.
- Determining Your Investment Horizon: Consider your investment horizon, meaning the length of time you plan to hold your investments before selling. A longer horizon usually allows for more time to “ride out” market volatility, potentially leading to greater returns. For example, BTC has had many ups and downs since 2009, but last year alone it delivered a 500% return! Now that is a great investment if you are willing to hold onto it for long enough.
- Diversification: As the old saying goes “Don’t put all your eggs into one basket” also applies in buying crypto. You need to spread the possible risk of a big crash to protect yourself. There is a basic 80/20 rule that is easy to follow…80% should be the “big” coins, like Bitcoin, Ethereum, USDT, and Ripple, and 20% should be made up of low-cap crypto like, Dogecoin, Scotty and Tuk. The best cocktail is to have a mix of Bitcoin, Altcoins, Tokens, and Stablecoins.
Diverse Crypto Portfolios
Ok. So far, everything seems straightforward, right? But just in case you are still a bit put off by where to begin with your crypto portfolio, let’s have a look at some examples of different crypto portfolio combos.
One particular portfolio that stands out is by Reddit user DoragonMaster1893 who gives a detailed account of their diverse portfolio consisting of 8 coins, following the 80/20 rule. Their portfolio includes BTC, ETH (for the most part) and then EVM, Matic and DOT.
Another example of a possible portfolio choice is one recommended by user DriftMethod, who thinks that diversification with 7 coins is the best choice, investing in BTC and ETH for a higher percentage value in the portfolio. They suggest claiming an investment of BTC at 40%, ETH at 35% and 5 Altcoins at 5% each.
ETFs and Bitcoin
Crypto Exchange-Traded Funds (ETFs) offer investors an easier option for entering into the cryptocurrency market. Crypto ETFs work similarly to stock ETFs, and it is perfect for a new investor or someone looking for a more “passive” investing experience. These funds track the performance of cryptocurrencies, are traded on traditional stock exchanges and can be bought through brokerage accounts. Buying ETFs can take away some of the risk factors and technical issues for those who do not feel confident in their tech abilities.
Overall, ETFs are a great entry into the world of crypto investing and diversifying your crypto portfolio. It is an easy investment to add to the mix.
Keeping Track Of and Securing Your Crypto Portfolio
Once you have researched your potential investments and have purchased your crypto on an exchange, you will need two VERY important things to help manage and safeguard your portfolio: a crypto portfolio tracker and a cold wallet.
1- Crypto Portfolio Tracker📈
This is a useful tool for a new or experienced digital investor. It helps you monitor and manage various investments on one platform, giving you real-time information about the performance of your crypto. There are many portfolio trackers to choose from, with some of the most popular being Coinmarketcap, which is a free tool available as an App for iOS and Andriod, but it does not work with other exchanges or wallets; or there is Delta, which supports 300+ exchanges and wallets worldwide, has a free plan and a paid-for one for further services.
No matter which portfolio tracker you decide to go with, make sure that you feel confident in using it and that it provides you with fundamental information like the real-time performance of coins, tokens and ETFs and that your asset allocation is easy to read and understandable. If you don’t know how much of what you have, there is no way you are going to be able to organize your assets.
2- Cold Wallet Storage👛
Whenever you buy Bitcoin, you want to make sure that it is safe and cannot be stolen. As we keep fiat money in a wallet in our back pockets, we also need to keep our digital holdings in a safe place, away from hackers and scammers.
You can go about this a few different ways, relying on exchanges and hot wallets (internet-based software) to store your portfolio or you can move your crypto to the safest place: a hardware cold wallet. Material Bitcoin, among other hardware wallets, gives you the securist option for storing your BTC, ETHER and USDT.
The beauty of Material Bitcoin is that it is 100% a self-custodial wallet, safeguarding your portfolio’s most valuable assets. It keeps your seed phrases and private keys offline and out of the hands of hackers. It does not have any electronic components and is super easy to use for transferring funds.
With all of this info, we hope that you are ready to start investing. But in case you have some more doubts, check out the FAQ section below.
Quick Crypto Investment Insights: FAQ
How do you build a crypto portfolio?
- Start with Bitcoin, and then diversify with a mix of altcoins and tokens.
What makes the best long-term crypto portfolio?
- A mix of Bitcoin, essential altcoins, and emerging tech sectors like DeFi and NFTs for growth and diversification are your best bets.
What is a good crypto portfolio?
- A balance of established and emerging cryptocurrencies that align with your investment goals.
What crypto has the most potential?
- Cryptocurrencies that show innovation and public acceptance such as Ethereum, and projects in DeFi seem to have the most potential for the future.
What are the best crypto portfolio trackers?
- CoinMarketCap, Blockfolio (FTX), and Delta are highly regarded trackers.
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