Even though Bitcoin is the most popular digital currency, it doesn’t mean that it should be your only crypto investment – a diverse portfolio is the way to go! Keep reading to find out the crypto portfolio definition and get valuable insights on how to build it.
What Is A Portfolio?
A crypto portfolio is a collection of cryptocurrencies that an investor or trader owns. Such portfolios typically feature a variety of assets, from bitcoins and altcoins to stablecoins and NFTs. Thus, the concept is similar to traditional investment portfolios, except the user is sticking to one asset class.
What You Need To Know About A Portfolio
There are two key strategies you should be familiar with before starting to build your portfolio:
- Asset allocation. This concept refers to investing in different asset classes, such as crypto, precious metals, stocks, bonds, and so on.
- Diversification. It means distributing your investment funds across various assets or sectors. For instance, in the case of stocks, it would involve investing in different industries, such as healthcare, energy, agriculture, etc.
Both of these approaches help to avoid building a concentrated portfolio or, in other words, putting all eggs in one basket. Their ultimate goal is to maximize the potential returns while minimizing associated risks.
Even though cryptocurrencies belong to the same asset class, you can still diversify your portfolio across products, tokens, and coins that serve distinct purposes. You could also allocate your portfolio wisely between assets like bitcoins, NFTs, stablecoins, and beyond.
Here are some more tips for creating a balanced portfolio:
- Divide your portfolio between high, medium, and low-risk investments and ensure they have appropriate shares
- Get stablecoins to boost liquidity for your portfolio
- Allocate new capital wisely to prevent parts of your portfolio from overweighting
- Do your own research for investment decisions
- Rebalance the portfolio whenever needed
While it’s possible to track a crypto portfolio manually via a spreadsheet, many investors opt for specialized tracker tools. Portfolio trackers enable users to monitor the movements of their holdings and check how the current allocation aligns with long-term goals.
