Buying your first coin is all it takes to start building a cryptocurrency portfolio. This can either be a market leader, such as Bitcoin, or a lesser-known altcoin that's new to the crypto space. But how do you maximise your profits when trading? Finding a strategy and building a balanced crypto portfolio can help you improve your chances of success on your trading journey.
Before buying cryptocurrencies, you need to establish your goals, risk tolerance, and long-term plans to help you create a balanced portfolio. Including a mix of assets with different use cases and values can also help you make a diversified portfolio that can help you reach your full trading potential. In this guide, we'll discuss all the best beginner tips for building a balanced crypto portfolio!
How Do I Get Started With a Crypto Portfolio?
If you're ready to set off on your exciting crypto trading journey, then it's time to start building your portfolio! Getting started with a crypto portfolio is easy enough to do and takes absolutely no prior knowledge. (However, we urge you to do extensive research about crypto trading before you invest your own money. Trading is extremely risky, and losses are expected, especially for first-time and inexperienced traders.)
The first step is to sign up for a professional crypto platform that can connect you with a suitable broker. Full-featured platforms that we highly recommend include Coinbase, Bitcoin Up, and Kraken. All you need to do is head to one of these websites and complete the sign-up form. This will generally require your full name, email address, country of residence, and phone number. You then be asked to verify your account before you are connected with a top-notch broker. This broker will be best suited to you based on factors such as your location and trading experience level.
With your assigned broker at your side, you can navigate the crypto market and start building your portfolio with ease. With a selection of tools and helpful resources, this broker can offer you all the guidance you need to make sound investment decisions. This is a fantastic way to increase your confidence when building a balanced crypto portfolio, so you will be well on your way to becoming a master trader!
Top Tips for Building a Balanced Cryptocurrency Portfolio
If you're ready to begin your trading journey, or you already have a portfolio and want to maximise your profit potential, then check out these hot tips for building a balanced crypto portfolio:
1. Decide on Your Goal
Before you buy or sell anything, you should take some time to think about the road ahead of you and establish your crypto investment goals. To help set yourself up for success, you should think about what 'success' means to you. Rather than simply wishing to make a profit, you should be much more specific and find an attainable goal.
For instance, you may choose to double your investment within X amount of time. Remember your goal should be realistic to avoid unnecessary disappointment. Setting a goal is also a great way to fight against impulsive decisions as you'll have an actual plan in place that you can stick to. This can also help you to stay clear of the fear of missing out (FOMO) which is what trips up many inexperienced traders. Also, it's normal for your goals to change as you develop your trading skills and build up your portfolio over time.
2. Consider Your Risk Tolerance
Not only do all crypto traders have different goals, but they also have different risk tolerances. Some love the appeal of volatility and are more interested in making a quick profit. On the other hand, some traders would rather invest in stablecoins and are happy to accept short-term losses on their journey to making long-term gains.
Before you start building up your crypto portfolio, you need to know what your risk tolerance is. Once you decide whether you are more interested in high or low-risk investments, you can start to assess various coins and decide which are best for you to invest in. (Another key rule: You must only ever invest what you're willing to lose.)
3. Choose a Mix of Assets
Even though it's important to decide if you want to trade for short-term or long-term gains, you'll still ideally want your portfolio to consist of a mix of low, medium, and high--risk investments. Diversity is a crucial part of having a balanced portfolio and can prevent you from experiencing big losses. If your portfolio consists solely of either high-risk or low--risk investments, then it cannot be considered very balanced.
The main benefit of investing in a mix of assets is that you can reduce your overall trading risk. This is because you can offset any losses with gains to keep your portfolio stable. If you don't want to reduce risk, then you can choose to create a concentrated portfolio. However, we don't recommend this strategy, especially not for beginner traders.
4. Include at Least One Market Leader
Including at least one of the top ten cryptocurrencies in your portfolio is a wise decision. These coins are typically quite stable, making them low-risk investments. Of course, the most popular coins, such as Bitcoin (BTC) and Ethereum (ETH), are expensive, but you will have the option to invest in a faction of them.
Some trading experts even recommend that traders split up their portfolio with 70% made up of the lesser volatile, established coins, whilst 30% is made up of smaller, riskier altcoins. Do remember that all coins, regardless of their value and popularity, are still risky to invest in, so always remain cautious when choosing a market leader to build up your portfolio.
5. Focus on Coins With Different Use Cases
Since all cryptocurrencies have different uses and can be categorised, many trading experts suggest investing in coins with different use cases. This can include coins used for low-cost, international payments, privacy coins, gaming coins, and decentralised finance (DeFi) coins. We suggest picking out a few of these categories and investing in at least one coin for each to properly diversify your portfolio.
If you're not sure which coins to invest in then you can head to a crypto marketplace such as CoinMarketCap, head to the 'filter' option, and check out all the most popular coins from each category. You can also filter by industry, algorithm, and platform as well as sort by price, market cap, and 24h volume to help discover new coins.
6. Find New Coins With Potential
To further diversify your crypto portfolio, you can invest in new coins. Some new traders decide to only invest in Bitcoin and Ethereum as these can be considered 'safer' investments, but as we've mentioned, you'll ideally want a mix of smaller coins too. There have been numerous cases where small coins suddenly skyrocket, so it's always a good idea to flesh out your portfolio.
If you attentively follow crypto-related news and events, then you will soon begin to discover altcoins that have a lot of potential. Of course, you have a greater risk of failure when investing in small crypto coins, but you also have the chance of making a huge profit as the coin takes off.
7. Rebalance When Necessary
Since the crypto market is notoriously volatile, it's a good idea to regularly check it out and periodically rebalance your portfolio. After all, maintaining a balanced portfolio is just as important as building one. To find success when trading, you need to cash in and sell assets that have significantly risen in value. Otherwise, you'll face a huge loss if the asset then happens to plummet.
Since prices will drastically change as you continue to trade you always have to be ready to rebalance your portfolio. Some traders find it difficult to let go and sell certain assets, but this is a key part of trading and what has to be done to make a profit.
8. Think About the Long Term
Planning how to expand your portfolio whilst still maintaining your balance will help you to become a profitable trader. Many new traders tend to only focus on short-term outcomes when what happens in the long term is really what matters. Even when you've made a profit and consider yourself an expert, there's always much more for you to learn. Continue researching new coins and set new goals as you expand your crypto portfolio.
You may be lucky and make a big profit in the early days of your crypto adventure, but maintaining a profit over the course of months and even years requires you to always prepare for the future.
So, now you know how to balance your crypto portfolio and set yourself up for success! If you're ready to start trading crypto then you first need to establish your goals and consider your risk tolerance. Next, you can start investing in various assets and building your portfolio. Remember to invest in a mix of high-risk and low-risk assets which can include market leaders and lesser-known altcoins. Additionally, if you do your research, then you can diversify your portfolio of coins that have different use cases as well as new coins that have a chance to skyrocket.
Finally, you should be prepared to rebalance your portfolio as the crypto market chances and prices rise or fall. Always check back at your initial goals and consider what your overall trading plan is. Other than that, be cautious when trading, don't give into FOMO, and enjoy working your way up to becoming a cryptocurrency master!