Crypto portfolio management is the process of picking as well as managing a group of investments to meet particular financial objectives and risk tolerance. Specifically in the crypto world, this refers to picking various tokens and coins.
The anticipated return of the portfolio is a classic financial objective and risk tolerance is the amount of volatility that one can accept. Choosing the right mix of crypto assets for a portfolio, so it becomes very significant to have a desired return along with risk tolerance.
The significant steps involved in portfolio management involve asset allocation, investment selection, trade execution, monitoring, and rebalancing. Some more key aspects are diversification and active versus passive management.
A lot of people are captivated by emotions while investing or trading and destroy themselves in that way. Crypto portfolio management will result in keeping emotions on track, checking your performances, and recognizing your strengths and weaknesses while investing.
The most common crypto portfolio management mistakes
However, there are some common mistakes that everyone should avoid during crypto portfolio management and some of them are as follows.
- Putting your money into whim
Newbie investors witness something they like and quickly jump into a coin due to a recommendation or a social media post. However, the swifter you invest due to this, the higher the probability that you will regret it if it is wrong.
The best way to put one’s money for the long haul is to buy some coins at fixed intervals despite thinking about their price. That is the way you can avoid short-term fluctuations and fail out by selling if you witness any price drop.
- Not having a look at your investments
You should always track your investments unless you have only one coin in one place. Some trackers in the market that make your work easy are Zappier, Debank, Zerion, and Apeboard. And most of them are there to accumulate investments in one wallet over various blockchains.
There is also a lack of crypto portfolio management software as well as crypto portfolio management apps that you can use to be on top of your investments.
- Always have an exit plan
If you have followed many tips before managing your portfolio, you can still get trotted up by not focusing on when you want to make a profit or reduce your losses. For investment or trade, you should have answers to some questions like why you invested when you plan to draw profit and why, when you want to reduce your losses and why, and what new detail can change your investment thesis.
By meeting your expectations in the right way, you are cutting the chance of quick decisions on days of big gains or losses.
How to avoid these mistakes?
There is a set of basic rules that you can follow while managing a crypto portfolio. We will discuss it one by one.
- Having a balanced portfolio
The very first thing is to have a balanced portfolio. Even with cryptocurrencies which are highly volatile, a lot of investors just can’t get enough and attempt to go all-in on one coin or trade with a lot of leverage.
If you wish to manage your portfolio in the right way, then this thing should be your priority.
- Diversification
Diversification in crypto is not a child’s play as a lot of assets are mostly correlated. So, you should focus on minimizing your chance of total capital loss. You can easily achieve this by putting the biggest part of your money in large-cap coins such as Bitcoin.
However, investing in Bitcoin may give you smaller gains as compared to some altcoins, thus it will also lead to losing less value when the industry faces a bear market. A lot of investors don’t notice the emotional impact of losses and think they are unaffected but it can affect them a lot.
