If your crypto portfolio is well-balanced and in tip-top shape, not only will you be able to preserve what you have, but also you’ll have a chance to make a profit. After scoring a big win, prudence and planning will help you multiply your revenue and reinvest the profits to see an even more significant return in the future. The best time to buy Bitcoin, for example, is during low BTC coin price dips, but remember that, as with any investment portfolio, it’s crucial to take into account your needs and financial goals. If you’re seeking guidance or expert opinion, there’s no one-size-fits-all solution, meaning that what worked for others won’t necessarily work for you.
Here’s what to do to manage your crypto investment portfolio for the best results.
Understand Your Personal Attitude to Risk
Your willingness to undertake financial risk is called risk appetite, a subject that’s been up for debate among both market participants and observers. One of the most important decisions is how much risk is acceptable in your portfolio. In other words, before buying or selling digital assets, know if you’re a high-risk, medium-risk, or low-risk trader. Gauging your degree of risk appetite is relevant from a financial standpoint because it’s associated with the loss of some or all of your investments. It’s easy to over- or underappreciate what amount of risk is suitable for you, so understanding what risk to take can be tricky, if not impossible, without guidance.
Since risk appetite is an internal measure, it’s invisible and impossible to measure. If you want to get ahead financially, you must have some tolerance for risk; you can’t pull your money out at the slightest market fluctuation. Cryptocurrencies like Bitcoin are subject to sudden, massive price swings, so if you have little to no comfort with changes in BTC coin price, you might want to consider building a portfolio with less investment risk. Adopting a suitable risk attitude can help modify initial risk thresholds, so you can better balance resources and focus your time and attention towards better achieving your mission.
Pick Coins with Different Use Cases
Spreading your investment across multiple coins helps minimize your holdings’ overall volatility, so you can enjoy the stability of mainstream tokens like Ethereum and the enormous potential of mid- and low-cap coins. Much of the attention has focused on Bitcoin, the first cryptocurrency ever created, but there are countless other options you might want to consider. For example, Cardano, which runs on the PoS Ouroboros consensus protocol, is used to build DApps and large DeFi platforms. As far as Cardano transactions are concerned, they’re affordable and fast. Another investment can be in Solano, which is used to create NFT apps allowing users to mint or trade digital artwork.
Control Your Emotions: Save You from Yourself
Manage your emotions and make calm, rational decisions when you trade. The fear of missing out is widespread in the crypto community and can lead to excessive buying and selling, which ultimately leads to losses. What happens is that you make an irrational decision to trade or invest based on some piece of information, usually received from social media, where others highlight or emphasize the positive and rewarding sides of their lives. As a result, you buy digital assets at their highest prices and sell them at their lowest prices, rather than the other way around, simply because you see others doing the same.
More often than not, you get emotional because you don’t know what to do. It’s recommended to take a step back and learn more about the topics you’re interested in. For instance, you can look at past price changes and volume data to understand how the crypto market works and forecast future price changes. The market is continually evolving, meaning there are things you don’t know about, so sign up for a newsletter or follow an investment authority. Planning for various outcomes is essential, so be prepared ahead of time. Consider your personality, expectations, risk tolerance, and trading system.
Develop An Exit Strategy
You concentrate all your energy on finding the ideal time to enter a trade, but you don’t have an exit strategy to protect your profits and minimize losses. It’s important to keep in mind that price corrections are temporary, and prices can immediately bounce back, leaving you stuck in the trade. When it comes down to crypto investing, you need a plan for how you’ll liquidate your position and walk away – it will allow you to make more money than the initial investment. You can exit by your return percentage, selling your investment once it reaches a certain percentage return, no matter the current market value. It’s just an example.
Are There Crypto Portfolio Management Tools?
Even if retirement is far away, it’s never too early to think about investing. It’s not as hard as it appears to be to benefit from the magic of crypto, so trading can turn out to be a very lucrative pursuit as long as it’s properly executed. If you have a complex situation, it’s best to enlist the help of a professional to manage your investment portfolio. Even better, you can actively monitor your trading activity using an app that allows you to seamlessly manage your investments. While some focus on taxes, others offer a general overview of your trading activity. Connect your wallet so that everything is updated in real-time.
Depending on your investment strategy, diversifying your crypto portfolio can produce tax consequences, so you’ll create a liability. In case you didn’t already know, taxes are due when you sell, trade, or dispose of the coins in any way and obtain a gain. You don’t owe taxes if you simply hold crypto. Speaking of which, long-term crypto holding is a relatively straightforward strategy by which you acquire a token and hold it in a secured wallet for a long, long time. How long you should hold the crypto for depends on your plan and beliefs. Digital assets with strong fundamentals, like Bitcoin, are good to buy for the long term because they hold their value.
All in all, regularly review your investments on a regular basis to make sure you’re on the path to reaching your financial objectives.