Cryptocurrency… is it for you? You are probably here today as you convinced yourself that waiting another day to buy cryptocurrency is no longer an option. You now may know that cryptocurrency is the right investment for you, and may even have yourself signed up on exchanges ready to buy. In today’s topic, I will not be telling you what to buy, but instead explaining what an efficient portfolio looks like.
There are many ways on designing your portfolio, but this is what I believe to be the most effective way in a few simple steps.
- Step 1: Decide how many coins you should be diversified in. I believe that the prime number is 7 or 8. This is not a must, but just a guide to go by. Even the wisest and richest man, Solomon, was a huge advocate for diversifying. (Give a portion to seven, and also to eight; for thou knowest not what evil shall be upon the earth-Ecclesiastes 11:2) One may have heard the phrase, “Don’t put all your eggs in one basket.”
- Step 2: Now that you know the number of coins you want, you should be diversified in both low, medium, and high risk coins. For example, the coins with highest market cap are your low risk coins. The reason for this, is that a lot more money has been poured into that coin, and will take a lot longer time for the price to decrease. #1-10 market cap coins are often considered to be on the safe side and is highly recommended. You should have approximately 2-3 low risk coins such as Bitcoin and Etherium to weigh out your portfolio. Often times, when major alt coin prices decrease, the price of Bitcoin and Etherium rise. I also encourage 2-3 medium risk coins (#10-30 market cap). Lastly, I even urge you to consider high risk coins such as #50+ market cap coins. If the market cap is low, it leaves incredible potential for the price to rise. In fact, if you truly believe in a project, go for that coin that is #500 in market cap! You may even want to consider in an ICO stage of the coin (Initial Coin Offering). In other words, you are scooping up a coin for discounted prices, in hope that it goes big when it becomes available to the public.
- Step 3: Now here is the best but trickiest part: choosing the right coins! Here is a brief list in going about this. 1) What is your reason for investing in this cryptocurrency-do you see it being utilized and adapted in the future? For example: I chose Medibloc because being a Registered Nurse, I see a huge potential in adapting blockchain technology into healthcare including private patient information. 2) Is it different and unique compared to other coins? If it is a replicate of bitcoin, it most likely will not have substantial growth or utilization. 3) Who is the team behind it? A good working team can make a platform go a long way.
- Lastly here are some keywords you should learn in understanding how the prices of cryptocurrency evolve. According to Investopedia.com,
What is Market Capitalization
“Market capitalization refers to the total dollar market value of a company’s outstanding shares. Commonly referred to as “market cap,” it is calculated by multiplying a company’s shares outstanding by the current market price of one share. The investment community uses this figure to determine a company’s size, as opposed to using sales or total asset figures.”
What is Circulating Supply
Circulating supply of a coin may often be thought of as the coin available to be purchased at a given time.
Price of a coin= MarketCap/ Circulating Supply
Ex: Bitcoin: ($16,734.30)
Market cap ($280,872,256,418)
Circulating Supply (16,784,225)
Here are some tools for keeping track of your portfolio:
- Blockfolio: Free App available in both Google Play Store and the App Store.
- Delta: Free App available in both Google Play Store and the App Store.
Stay tuned for more reviews,updates, and latest news on cryptocurrency.
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Disclaimer: Crypto currencies are a high risk, speculative market and subject extreme volatility, never invest more than you are willing to lose. None of the information found on this website should be taken as investment advice or council. We are not liable for any financial losses. Some links found on the website may be affiliate or referral links. Images obtained by google.com (images)