Hey, Average Investor back with another article and video! If you prefer audio/visual check out the video. If you prefer text read the article below!
So you've heard everyone in the space telling you to diversify your portfolio! But is that really the best option for your investment? Most people seem to put this advice everywhere regarding cryptocurrency, but it is definitely not for everyone. I am going to cover some of the pros and cons to it and how you how my portfolio is set up.
First thing to consider before trying to diversifying your portfolio is the cost of it! It can become really expensive to spread your investment into many assets. Second, you really need to consider the amount of time you're going to have to put into all these assets you're researching. Having too many and not enough time to look into them could lead into some poor investments. Third, you need to consider possible tax complications of buying a bunch of different assets. Where I live I can be taxed just for trading a coin into another even if I didn't make profit! The last thing to consider is that it could really affect your timing of the market and deciding the best time to sell.
So considering all of those thing, then how can diversifying your portfolio be beneficial to you? Well, to start it can help you mitigate some risk. With many people attempting 51% attacks, hacks, and bugs in coding it could never hurt to have a few projects doing the same thing in a different way! Next, it can really help prevent a loss. The market can do crazy things at time and the market goes through cycles of even just bitcoin dominance, so being spread out can really help stop a loss. The final reason is that this can help you balance our your risk and reward of your portfolio. Maybe you like it risky, or your prefer more stable assets with a long history!
So now you might be asking "what is diversification?". Well, to put it simply it is the act of spreading something out into multiple categories. For example if we have a farmer that only plants potatoes and a disease comes through it could potentially wipe out the entire amount of crops. But if the farmer decide he wants 50% potatoes, 25% carrots, and %25 tomatoes, then he would be less prone to losing his whole yield of crops this season.
My portfolio
BTC 46.11%
LTC 21.12%
ETH 19.24%
BAT 7.63%
OMG 3.93%
GNT 0.91%
CVC 0.52%
SALT 0.44%
PRE 0.1%
So as you can see in portfolio I am not a huge risk taker. I have over 80% of my portfolio into high market cap coins with a long term history. I look at BTC as a virtual gold that has good use in high dollar transactions. I look at LTC as a virtual silver, that is good for faster small payments. Then ethereum, which is a decentralized platform for smart contracts. Basic attention token for revolutionizing the ad space. Omisego for transacting payments, that is a bit more focused on Asian markets. Golem, which intends to make a global super computer. Civic that wants to digitize identification and put it on the blockchain. Salt for a lending platform based on cryptocurrency. Then presearch, which aims to decentralize web search results.
To build your portfolio you're going to have to start doing some research! Find projects that you like the idea of, or ideally something that already works. Then you need to look for reasons that project could become adopted. Always make sure that you're researching the team making the project! Once you have done that, now you need to find competing projects trying to complete the same test and research them! Now if it is possible try using their platforms in your everyday life!
https://cryptoslate.com/coins/
I prefer this site, when I am looking into projects to research. It is pretty visually appealing. A lot of the information you want first is just a click away on the coin. I like typing in things like "gaming coins" and I can receive a large list of projects that are looking to change the gaming industry!
One of the most important things to take away from diversification is that it is not just for crypto! It would be wise to look into other investments such as Gold, Silver, Real Estate, Bonds, stocks, CDs, etc. There is all sorts of physical assets that can hold or gain value as well. Of course you can't forget cash! Always good for an emergency and good to stack up while waiting for the best opportunities!
I appreciate you taking the time to read my article! I would love to hear some of your feedback on what I could improve. As well as what you would like to see me writing about!
DISCLAIMER: The information in this article should not be taken as financial advise. Average Investor is not responsible for any loss that may occur with information used in this article.
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