It’s April and you’re finally starting on your new year’s resolution to build a crypto portfolio. Where to start?
Determine your goals and positions
Ask yourself these questions: What are my crypto goals? What’s my risk appetite? How would I feel if my portfolio is down more than 50%? How long is my investment horizon? What assets are blue-chip crypto, low-risk or high-risk?
For example, if you’re highly afraid of risk, you’d probably want to allocate more into less-volatile blue chip crypto and stablecoins. Conversely, if you are highly tolerant of risk, you have more leeway in playing with “shitcoins'' and high-risk positions.
Investing in crypto for short-term gains or for the long-term also affects the type of assets you hold. You may be more tolerant of short-term volatility if you are willing to hold a coin long-term. Research about crypto projects to find those that you believe in, or that you feel have potential.
Sample portfolio allocation
Here are some sample portfolios you could refer to when crafting your own. Percentages can and should be adjusted according to your goals and needs.
Scenario: You prefer to be on the safe side but still want some thrill.
Blue chips and low-risk crypto take up 75% of your portfolio. The remaining 25% could be used to experiment.
You could break up each section into a smaller percentage for more exposure e.g. Low-risk could be 12.5% X crypto and 12.5% Y crypto. Note: Overly diversifying may make it difficult to earn more profits if you don’t have huge capital invested.
Scenario: You are comfortable with volatility and an altcoin lover.
Blue chips crypto takes up 40% of your portfolio. Low/medium risk crypto makes 30% while high-risk crypto makes 20%. You could also have some stablecoins to exchange for crypto.
Similarly, you could invest in a few low/medium-risk crypto or high-risk crypto depending on the exposure you want.
There is no one-size-fits-all portfolio, so do your due diligence. Do not follow these samples blindly without considering your goals and needs!
Tips and reminders
You’ve built a working portfolio. Now what?
- Track your portfolio: Most crypto traders hold multiple wallets across blockchains. Make use of portfolio tracking apps or Google spreadsheets to track PnL, market value, portfolio allocation and even taxes.
- Keep updated of project developments: Certain project developments could instill confidence in traders and increase coin price, and vice versa. Read crypto news or follow the project’s social media. Know the latest updates to inform your trading decisions.
- Rebalance your portfolio: Crypto markets are volatile and you should rebalance your portfolio periodically. This means selling or buying assets to keep to your desired level of risk or asset allocation.
- Explore hedging: When you progress in your crypto journey, hedging with derivatives could be a good trading strategy. For example, if you buy bitcoin spot and think that price could increase, you could then short bitcoin futures on a platform like ApolloX as a hedge. This way, you minimize risk no matter how the market moves.
- Tips for bear markets: Some traders like to have over 50% of their portfolio in stablecoins ready to buy “safe” crypto like bitcoin and ethereum when the market is bearish. It is also useful to put your stablecoins and blue chips into proven, reliable DeFi protocols e.g. curve.fi or exchanges’ structured products to earn yield and grow your crypto.
Crypto can afford huge opportunities, but you could easily lose your hard-earned savings if you’re not careful. Always DYOR and understand your risk appetite. Have discipline and stick to your goals. A good mindset will surely take you a long way in crypto.
The views expressed in this article are the author's alone and do not necessarily represent the views of ApolloX.
Risk Reminder: Crypto trading carries a risk. All trading activities are done at your discretion and at your own risk. The information here should not be regarded as financial or investment advice from ApolloX. ApolloX will not be liable for any loss that might arise from your use of any financial product.
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