I am often asked on my articles about how I go about buying cryptocurrency, or even what is the best way to build a portfolio. Now usually people will give you the usual rundown of answers for investing in cryptocurrencies. Some of these go as follows; 1) It is best to dollar cost average into bitcoin, ethereum and other coins and HODL. 2) To have a greater chance at finding pumping coins it is best to diversify your portfolio and use those gains from altcoins to reinvest back into bitcoin and ethereum. This helps to even out your portfolio and decrease your risk. 3) Or it is best to learn how to trade the market to make maximum gains.
9 times out of 10 when you ask for advice, this is the type of feedback you will receive in return. But in my belief, they aren't telling you the most important secret to gaining wealth, be it with crypto , stocks, or anything else worth investing in.
There has been a common belief and idea shared that it is best to have a well diversified portfolio. Never be too dependent on one category of a cryptocurrency or a stock. If you are a completely hands-off type of investor this might be the best approach for you. If you like to invest in something and then just forget about it for a long-duration of time.
But in my situation, I am in it for life-changing gains. And there is nothing I enjoy more than researching what I'm considering investing in. If you truly put the research into whatever you are researching, be it bitcoin, ethereum, or even Tesla or Apple, if you put the research into it, then you'll be more prepared for the future outcomes, and much more successful.
Like I have mentioned many times already. There is a myth that having a well-diversified portfolio is the key to building wealth. I believe that is a lie.
The truth is that having a highly concentrated portfolio is where the biggest gains are actually made. But if you don't know what you're doing, it can also be where the biggest losses happen as well.
I believe it is a pretty self-explanatory idea. The more specific crypto you have, the more you will profit when the price of the coin goes up. Having just a little bit of a lot of markets won't actually help that much.
Warren Buffet, the most successful investor of recent history echoes a similar opinion. "Wide diversification is only required when investors do not understand what they are doing."
This philosophy requires us to ask ourselves a very difficult question that might be difficult to answer honestly. Do you actually know what you're doing?
An idea I often see asked to crypto currency Youtuber's goes like this; "I have $1,000 to invest in crypto, how should I split it up among different coins?" It's a great question, and something we have all thought about at some point or another when we first entered the market. While like I said before, everyone's situation is different and diversifying, or lowering your risk might be the best decision for you. But at the same time, if this this is your approach, it is very likely you will never make life-changing profits from your portfolio. Only nice bonus or rainy-day type of gains
As the famous phrase goes; the higher the risk, the higher the reward. Or even another famous phrase; it takes money to make money. I think both of these apply very well to this philosophy.
In my situation, this has helped me to reach my portfolio goals much faster than I ever could have imagined. And have been able to grow my passive income channels from lending out crypto and staking as well. When you spread out your investments over many different coins, naturally it takes a lot more time to grow your portfolio.
As always with investing it is crucially important to know what your goal is. Have this goal extremely well-researched, and then go hard after it. This has led me to do much better with bitcoin and ethereum than I could have imagined. Once you reach your goal with a specific coin, you can then move on to your next goal with perhaps a different coin.
Of course, this is just my opinion and not financial advice.
But I would love to hear what your approach is to investing in the cryptocurrency market. Do you have a highly concentrated portfolio, or do you prefer to lower risk and diversify!?
As always, thank you for reading!