We are close to the next bull market, it may be close, it may be far away… (Listen to your words, such as listening to a seat)
But the future is inherently difficult to predict accurately, and for crypto investors, perhaps the more important thing at this stage is not to predict when the next bull market will start, but to start laying out the next bull market, although it is impossible to determine when the bull market will come, but the bull market will come sooner or later.
For different investment philosophies, for example, if you are optimistic about the infrastructure in the cryptocurrency field, you can combine the cryptocurrency public chain portfolio with public chain coins as the main focus, or if you are optimistic about the development of DeFi, you will merge the leaders and potential rookies to form a cryptocurrency DeFi portfolio.
For different strategies and risk tolerance, adjust the project and allocation ratio, for example, a more stable way will put in more leading projects & increase the proportion of leading projects, and a more active strategy will put more rookies & increase the proportion of rookie small coins.
Why is building a portfolio a better investment strategy?
Because of the diversification of risk, because people can be wrong.
Holding a single cryptocurrency is the most concentrated and maximum potential rate of return, if you are optimistic about a project with a hundred times the possibility, all in bet on it, as long as you look right and hold on to it, it is a hundred times; if you take the approach of a portfolio, it is unlikely that every project in the portfolio will be 100 times, even if you win one or two hundred times the coin, it will be pulled down by other projects that are not 100 times the overall rate of return.
But there is no such thing as a free lunch, higher potential rewards usually mean higher risk, and the risk of holding a single cryptocurrency is the most concentrated, if there is an accident in the development process of the project, or simply you are wrong, even if the market as a whole rises, you will still miss it.
The first is to diversify risks, the probability of a project developing an accident may not be low, and the probability of all projects in the portfolio developing an accident is much lower; second, people may be mistaken, the expected potential of the project may not actually have potential, through the practice of holding a portfolio in a basket, even if you look at the wrong project, but as long as you look at the right market, you can still make a profit.
How to build a portfolio?
Active Portfolio: Take the initiative to set goals, select projects, set allocation ratios, and pursue better performance than the market. With regard to active portfolios, we will return to three fundamentals for planning:
Predictions for the future
Which track, which technology, which business fields, such as privacy, public chain, ZK, modular blockchain, LSD, RWA, GameFi, DeFi…
The target rate of return on investment
The higher the rate of return, the more likely the category and project layout, the target rate of return and risk tolerance must be evaluated together, after all, the reward and risk are closely related.
Risk Tolerance
The higher the risk tolerance, the higher the allocation of small coins, and the number of projects can be less and more concentrated; the lower the risk tolerance, the more stable the proportion of projects in the portfolio will increase, and the number of projects in the portfolio should be increased to diversify the risk.
Take a portfolio of leading DeFi projects as an example
Blockchain and cryptocurrencies are essentially a new asset class born in response to financial innovation, assuming that DeFi (decentralized finance) will play an important role in the future and will develop well, and want to form a DeFi portfolio.
Then, after comprehensively evaluating the target rate of return and risk tolerance, assuming that if you want to make a relatively stable investment, as long as you can achieve similar performance as the overall DeFi field, you can decide to include several leading DeFi projects in the portfolio, invest evenly, and plan the following portfolio.
MKR: The leader of decentralized stablecoin protocols
CRV: Stablecoin exchange leader
UNI: The leader of decentralized exchanges
LINK: Oracle Faucet
AAVE: The leader in decentralized lending protocols
The average investment is 20% each.
If you want to have a higher expected return, you can add some potential rookie projects, if you want to diversify your risk more, you can add a few more leading projects in other categories in DeFi, or if you have a higher risk tolerance, you can increase the proportion of rookie projects, and plan your desired portfolio according to this way of thinking.
End of article
Investment is most afraid of looking at the market but not making a profit. Make good use of the portfolio guarantee to diversify project risks
The more painful thing in investing is losing money than seeing the wrong thing: seeing the right thing but not making money.
Seeing the right can also be further divided into looking at the right market or looking at the right project, looking at the right project but not making money, which is biased towards the problem of trading methods and entry and exit timing, as for looking at the right market but not making money, this can be avoided through the way of investment portfolio.
Because we may look at the wrong project, and we need to diversify our risk and use a portfolio to invest in cryptocurrency, we will not miss the rise of the overall market or category, and we can also avoid the risk of a single project crash.
In the later stage, we will bring you the analysis of the leading projects of other tracks. If you are interested, you can click to pay attention. I will also sort out some cutting-edge inquiries and project comments from time to time, and welcome all like-minded people in the currency circle to explore together. If you have any questions, you can comment and ask questions or send private messages
Source: Golden Finance
