When it comes to crypto, my investing philosophy is relatively simple. I approach investing in cryptocurrencies as similar to startup and venture capital investing. When it comes to startup investing, it's typical that money will be tied up for years on end and the success rate of each investment is very low.
Despite this low success rate, startup investing can be extremely profitable. This is due to the exorbitant profits that are earned from picking 1 or 2 startups that end up taking or creating a huge market share.
In my eyes, crypto investing is near identical in this way: It's likely that many of the thousands of random cryptocurrencies are going to fail, but the ones that succeed, will succeed so big that they will obliterate the losses on all the other investments in a well-diversified portfolio.
So that's why I buy an almost equal weighting in each crypto (excluding Bitcoin, Litecoin and Ethereum - a larger weighting is given to these currencies). By purchasing an equal weight in a large set of cryptocurrencies that appear to be fundamentally sound, I'm hoping that just a small percentage of the portfolio's holdings will actually pay off over a 2-10 year outlook. The goal is that these few successful currencies will gain such a large market share that they will completely outweigh the losses of the majority of the holdings in the portfolio.
I do also very occasionally pull out profits from some of these investments to cover certain costs and also expand the portfolio. I time the selling of small portions by waiting for an exuberant run-up (50%+ in 24 hours) and then selling a very tiny portion of the holdings and re-allocating elsewhere. Oftentimes, the price will cool back down and then I'll decide whether or not I'll add back to the position.
*NOTE that I never sell more than 20% of my position - thus, the portfolio usually doesn't change much, excluding a few outlier situations which I will discuss in future posts.
That's pretty much the whole strategy. The only other point I'd like to add is that I do very extensive research before adding a crypto to this list. I need to understand the technology (as best as I can), I need to love the team and what they stand for, I need to love the mission, I need to see the vision, I need to know the viability of the end-product, I need to research the industry and market needs, etc. etc. etc.
My next post today will discuss the specific weighting % (and the reason for certain weightings) of each of crypto in my portfolio. In case you missed the last post, here's the portfolio list once again:
My Current Portfolio (in no particular order):
- STEEM
- XZC
- NEO
- NAV
- BAT
- ARK
- GNT
- OMG
- MYST
- ANT
- BMC
- BTC
- LTC
- ETH
- DNT
- XVG
Disclaimer: This is not financial advice. Invest only what you're willing to lose. This content is for entertainment purposes only. Thank you!
Thanks for reading! Here's the Question of The Day, don't forget to post your answers in the comments!