Welcome back,
Yesterday, I talked about one of the most important things to do when you start your journey as a trader or investor. If you haven’t read that blog yet, I would first ask you to check it out so that you can understand why that particular thing ( setting your goals ) is so important for a person starting their Investment journey. You can read that blog below:
Today, I will talk about diversification and of our investment, which is another important thing to do and the reason why I am saying this will be known to you by the time you reach the end of this blog. So, let us now understand how to diversify our portfolio or investments in the best possible way.
Allocate 70–50% for Top Cryptocurrencies
The first thing to do is to reserve 70% or at least 50% of your portfolio value in the top 10 cryptocurrencies, or in cryptocurrencies that have a market cap of over $10 billion. It can be one or many currencies from that category but I will personally ask you to choose 3-5 crypto currencies only and not more than that.
So, When you invest 70% or at least 50% of the total investment in these tokens, you are actually making it ensure that your investment remains relatively safe and secure compared to when you invest in other categories about which we will talk later in this blog. So, these cryptocurrencies have a very low risk and there is very less chance that the entire investment will go till zero from this part of your portfolio.
Allocate 20–15% to Mid Cap Cryptocurrencies
Now, let us move to the second part of diversification, where we allocate 20% or at least 15% of our portfolio’s value to cryptocurrencies with a market cap between $1 billion and $10 billion. These are considered to be the Mid cap crypto currencies. You will generally find these tokens within the top 100 cryptocurrencies, as their market cap is above $1 billion. So, choose some strong projects from that range and invest 20% or at least 15% of your investment in them. It is up to you to decide how many tokens you want to buy from this category but I will suggest you to pick 3 strong projects at max after doing your own research.
Allocate 5–10% to Small Cap Cryptocurrencies
Now comes the part where the market cap falls below $1 billion. This is where we start taking bigger risks, as cryptocurrencies in this range are obviously riskier than those in the first and second categories. However, it is still ok to take that risk here because you are only investing 5–10% of your portfolio’s value here. So even if you lose that 10%, you still have the remaining 90% secured. The chances of making 10-15X are also there in these tokens so the risk of this 10% is actually justified but make sure to do your own research even before investing in these categories.
The Meme Coin Gamble
There is one special category I want to talk about which is the most trending category among the people, I am talking about the meme coins here. Now, there are meme coins in the market with strong market caps, like Shiba Inu, which is in the top 20 cryptocurrencies, and Dogecoin, which is in the top 10. But here I am not talking about them. They are still ok to invest in and so one can still consider investing in them and even earn decent returns.
I am referring to the meme coins that are being launched on blockchains like Solana, Ton, or other Blockchain. Most of these meme coins are highly risky and often turn out to be rug pulls. You need to be extremely cautious and stay away from such tokens because they are usually created with the sole intention of milking your investment. They will steal your money and disappear. Maybe 1% of them will succeed in the future, but 99% of these meme coins are pure scams.
Still, since we are all human and greed often gets the better of us, I know many of you will want to invest in meme coins and try your luck. So, if you do decide to go down that path and invest in these highly risky meme coins, make sure to allocate only 1% of your portfolio value in them. These tokens carry extremely high risk, and if you are investing in them, you must be mentally prepared to lose the entire amount because that is a one of the possibility or maybe the possibility with highest probability.
Let us conclude
Diversification is really important and once you learn to do it, you will come and thank me on this blog. It does not close doors for making the best out of your investment at all so don't be worried about that thing. Even BTC has come up by 8X in since last bear cycle so even with the most of your diversification in top crypto currencies you can still make 5-10X on your portfolio.
But in the end, I must also like to say this that there is absolutely nothing wrong if you are trying to build your own strategy and choose to diversify your portfolio in a different way. That is completely your call. What I have shared here is one of the most secure forms of diversification, but there are many other approaches out there. Some of them might involve allocating a higher percentage to riskier assets and a lower percentage to safer ones.
At the end of the day, it is your hard earned money, your strategy, and your responsibility. You are the one making the decisions so always make sure you are comfortable with the level of risk you are taking but, as I mentioned earlier in the blog, I will still say that if your goal is to move forward securely and ensure that you don’t lose your money in the process of trying to make profits, then the strategy I have shared might just be the best option for you.
Thank You and Happy trading everyone.
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