Because we must use The Power of Diversification in our portfolios.

By derwin25 | Worldinfo | 21 Sep 2019



Investing is easy, the hard part is doing well.


Diversification is a technique where investors share their investments in various financial instruments with the objective of maximizing their returns. In this way, risks that would be assumed in investing in one are minimized and in this way it is guaranteed to invest in different places that will react differently to adverse situations. Experts always say that diversifying does not guarantee that there will be no losses, but that it is one of the most important tools when it comes to achieving long-term goals, and above all, minimizing risks.

 

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At present, any investor faces several risks when it comes to investing. On the one hand, Systematic Risk, which is closely related to force majeure issues such as political instability, wars, media manipulation and especially the manipulation of banks and financial institutions. This risk is not particular to a company and it is not possible to reduce or eliminate it through manipulation. By default there is a risk that all investors accept from the moment they decide to enter this market. On the other hand there is also the Risk of diversification that tells us that you must invest in different types of assets so that the investment is not affected by the movements that the market constantly generates.

 

Why should we always diversify?

 

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Imagine you have invested in a portfolio that only contains TETHER. If it were announced through all means that TETHER is the cause of the manipulation of prices and apart from it, money laundering is done and is a complete fraud, your portfolio would experience a great loss of value, as we say Bitcoiners: GOES TO 0.

Now let's think about another scenario, if you complemented your Tether investments with a part in Bitcoin and Fiat, for example, the loss would have been much lighter and only part of your portfolio would be affected. In fact, there is a great chance that bitcoin has escalated, since as a result of the fall, investors would have passed their capital to bitcoin.

But there is still more: we can take our diversification strategy even further as there are many risks that affect both bitcoin and tether since, after all, they are both involved in the same market. In that sense, a global diversification, not only in different types of cryptocurrencies but tokens or Icos, is the best option. Always remember that the less related to each other your actions are, much, much better.

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derwin25
derwin25

I like to look for new method of passive income.


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