For anyone wanting to create a strategy and build a portfolio, choices have to be made. It requires being introspective. What are your reasons for investing? How much can you afford to lose? Without knowing what you want, it is pretty much impossible to create a strategy to attain your goals.
Assess your risk profile. Does volatility affect you emotionally? If so, perhaps you are overinvested and should reduce your position size appropriately. Are you unaffected by price swings? In that case, allowing the ability to afford it, you should invest more!
Are you the type of trader that prefers to invest in high market cap projects like Bitcoin and Ethereum? Midcaps with more potential for growth but viable products so the risk isn’t too high? Moonshots aka relatively unknown projects with extreme gains at the cost of extreme risk? In my opinion, diversifying is the best option. It allows you to have exposure to all 3 of those types of investments or trades.
After understanding the risks you are willing to take regarding your portfolio, you must then prioritize your goals. Always ask yourself questions and stick to your plan. Long term investing vs short term trading? At what price point will you cash out? Set limits for yourself to avoid being greedy. How often do you want to cash out? Do you calculate profit in crypto or in cash? Once you have your profit-taking strategy in place, it is now time to choose the projects that will make up your portfolio.
Even though many people are unaware, it is possible to follow a portfolio strategy similar to ones that you can find in the stock market. The choice between growth vs dividend must be made. I have a personal preference in dividends however I understand that growth is as important. Finding an equilibrium between both is a must, especially one that is adapted to your risk and strategy.
Don’t fall for scams! High-yield tokens are very often ponzi or pyramid schemes. If something sounds too good to be true it usually is. There are rare cases that gems can be found if you do your own research and come to the conclusion on your own. Do not blindly trust research done by other people. I’m here to give you advice but you must always take it with a grain of salt and apply what you think is applicable after researching, thinking, and questioning it yourself. Knowing how to research projects is the most important skill you can have as an investor. If you can research and find value in projects, regardless of the size, you can also take advantage of that knowledge and make money.
In my portfolio I have projects that pay me out in Ethereum or in DAI. My strategy is to increase my Ethereum and DAI holdings. For this reason any dividends paid in other cryptocurrencies does not interest me. I am following my strategy. I also hold projects which I believe will grow. Cryptocurrencies which perform token buybacks and burns to reduce supply over time. They often perform buybacks with profits generated through fees. They also use their dividends to (in theory) increase the value of their cryptocurrency over time. These projects are usually in the large to midcap range, this means they can also offer growth through volatility in their price regardless of tokenomics.
Other cryptocurrencies I could hold would be moonshots or microcaps. Tokens which have competitors with much higher valuations but an equal or similar working product. Recent projects that haven’t yet had much exposure but propose a product or service of expected value. Holding these types of coins can be very risky. The volatility can go in both directions. Always stick to your plan and set prices at which you want to buy and sell.
A portfolio is unique, the knowledge to build one is not. I hope I have given you a basic understanding to be able to build your own portfolio. If you have any additions that you would like to make commenting is appreciated! This is the first article I have written so please bear that in mind. I will gladly accept all criticisms to be able to write better and provide more value to readers.
Here is a quote about Doing Your Own Research (DYOR) and the value of knowledge from a well known investor.
“The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.” - Paul Tudor Jones
PS : He has recently invested in Bitcoin
Disclaimer : This is not financial advice, it is only meant for informational purposes. Please do your own research before investing in any financial markets. Losses and gains are not just numbers, they are real.
