More than 20% of Americans have invested in crypto in some form or fashion. This is a large number of people that will only keep growing year after year as crypto becomes more popular and commonplace.
If you’re someone looking to invest in crypto, it’s important that you treat it with the same principles you use for other investments. Diversification is key for any financial portfolio because it keeps you from getting stuck on any one investment, so your wealth doesn’t tank when one part of the economy takes a dip.
Here’s what you can do to add some diversification to your crypto portfolio.
Know the Benefits of Crypto Portfolio Diversification
First, it’s important to understand why portfolio diversification is so important when you’re investing in cryptocurrency or any other investment. This is especially important for crypto because it’s a brand-new form of currency that can be quite volatile. Though plenty of people are crypto investors, the landscape of digital currencies will take some time to develop.
When you are able to not put all of your eggs in one basket, you stand a much greater chance of protecting your assets. This way, you can accumulate wealth on your terms without taking as much of a hit if one of your crypto tokens takes a nose dive.
It is easier to diversify your portfolio when you have a basic understanding of the major crypto assets:
This is the form of cryptocurrency that people use to make payments. Payment tokens involve peer-to-peer, business payment transactions, and long-term assessments.
These are the most common forms of crypto tokens that most people understand and discuss.
With gaming tokens, the value of the coin is based on in-game transactions. The video game industry is a multi-billion dollar industry now, and it has become quite commonplace for people to make in-game purchases for items or to access premium or gated content. Because of this, gaming tokens have also become more popular among gamers.
Expect these tokens to grow by leaps and bounds over the years. Find a list of gaming tokens that you can invest in to beef up your portfolio and round it out with different types of crypto.
Security tokens are also important because they hold plenty of intrinsic value. They are backed by different types of securities, including real estate or other valuable assets.
Basic Attention Tokens
Attention is currency in this day and age, and that applies to the crypto world as well. Basic attention tokens are those that pay people for the attention that they give. This can apply to advertisements, surveys, and other forms of digital content.
Non-Fungible Tokens (NFTs)
If you’re getting into blockchain investments, non-fungible tokens (NFTs) are part of the most recent wave that many people are starting to invest in. They use blockchain ledger record keeping so that you have an authentic record of something that you own.
Do Your Research Into Crypto Strategy
There are a lot of crypto hacks that people look into when they want the best from their portfolios. Instead of simply focusing on hacks and ploys, make sure that you have a fundamental strategy you can stick to that will help you get the most from your portfolio.
When you have a strategy and stick to it, you’ll have a far easier time managing your crypto and switching to the tokens that best fit your strategy. For example, you might decide to invest in one growth token that is expected to skyrocket for the next several years. Once you start to see returns on it, you might then use those returns to buy larger and more popular crypto token options.
By knowing your strategy upfront, you will be less likely to deter from it or invest haphazardly.
Study Lesser Known Crypto Tokens
If you’re just getting into investing and are looking to build your crypto portfolio, you’re most likely to jump on the most mainstream tokens first. While these are the standard bearers for crypto, there is still plenty of value to be found in the lesser-known tokens.
There are some lesser-known tokens with growth potential because they’re used for things like creating smart contracts. Others might focus primarily on anonymous transactions.
Pay attention to the current value of the token and compare it to the amount of potential it has to expand to new heights. Plenty of tokens today are valued at a fraction of a penny, but they may have the potential to reach $100 or more.
Pay Attention to New ICOs
If you’re going to experience some growth in your crypto portfolio, you need to be on the lookout for new Initial Coin Offerings (ICOs) as they come along. These ICOs will give you the chance to learn what’s next so that you can stay on the cutting edge of the crypto industry. There are new ICOs for crypto tokens released regularly.
Read through the white paper to see how it’s structured and to learn the most important details of the coin. Study the terms and conditions so that you understand what you’re signing up for by investing in this coin.
Invest Heavily in the Leaders of the Pack
Diversification means spreading your money out between different coins. Investors often take this as a chance to buy as many different tokens as possible. While there’s nothing wrong with this, don’t forget about the blue chip crypto tokens. This adds stability to go with your diversification so that your portfolio remains strong and built to last.
There’s a reason why investing in crypto is becoming a common strategy for many investors. While also branching out into more obscure tokens, don’t forget about the crypto tokens that were the first out of the gate.
Invest in Crypto-Based Stocks
Believe it or not, you can also invest in crypto without even buying crypto directly. There are some crypto-based stocks that you can invest in that will add further diversification to your portfolio. Stocks for crypto marketplaces could potentially provide some value since exchanges are becoming more mainstream and are growing every day.
By investing in one of these stocks, you are supporting the crypto industry and investing in its future.
Consider the many stocks that are based on the chips used to mine crypto as well so that you’re supporting this burgeoning form of investing in crypto. These chips are the resources that will only become more essential as crypto mining grows in popularity. Do your research into the various microchip companies to know which are leading the pack.
Look for Growth Opportunities
Finally, make sure that you are always on the lookout for the next growth tokens. This is one of the most intriguing aspects of investing in crypto since there are several available that hold a value of a fraction of a penny. Once these tokens start to take off in value, you will get to see a substantial return on investment (ROI) – particularly if you bought plenty of it.
Consider these opportunities and do your research so that you have a better idea of what you’re looking into. Reach out to a financial advisor who also specializes in crypto investments.
They can not only point you toward some favorable options but may also help you keep your crypto more secure. They can advise you on things like purchasing a crypto wallet and making sure that you choose a platform that is secure.
Part of growth is making sure that you hold onto what you’ve already earned, and these pros can help you minimize fees while maximizing your ROI. You will also be well-informed when new opportunities arise so that you can take advantage of them with full confidence.
Manage Your Crypto Portfolio Wisely
These tips are worthwhile for anyone trying to get the most from their crypto portfolio. The more time and effort you put into investing in crypto, the easier it’ll be for you to grow your wealth on your terms. You will also be able to avoid some missteps so that you’re in a better position to spread your investments out in a way that serves you while securing your financial future on your terms.
We would be happy to offer insight in the meantime.
The Foundation on Digital Asset Risk (FDAR) can help you out when you’d like to learn more about this new frontier of business and investing. To stay in touch, subscribe to our newsletter or reach out for more information.