Building a diversified investment portfolio which incorporates digital assets requires a solid base of knowledge.
Making cryptocurrencies one of those digital assets in your wider portfolio also requires further, more specific insight. Here, we look at the ways you can integrate crypto.
Start Small, Gain Confidence and Know-How
Take small steps with crypto at first, to ease yourself into the space and gain knowledge and understanding along the way. As a rule of thumb, most experts recommend starting with around 5% of your portfolio in crypto, due to its volatility and risk factor.
Focus on the Established Cryptocurrencies
The larger cryptos such as Bitcoin and Ethereum have longer track records and tend to be less volatile than smaller alt coins, although they are of course subject to market volatility like all cryptos.
Diversify Within Crypto
Don’t place all your crypto allocation into one single coin, but spread it across multiple established cryptocurrencies.
Use Dollar-Cost Averaging
Avoid putting down a lump sum in one go and spread risk by making smaller purchases over time on a regular basis. This reduces the exposure to short-term price swings.
Look into Crypto-Related Stocks and Funds
Considering Exchange-Traded Funds (ETFs), for example, can be one way of gaining exposure to the crypto market but with potentially less volatility than direct crypto ownership.
Security Is Key
Exercising extreme caution around potential scams, and also employing basic security measures around your crypto holdings is essential. Cold (offline) storage for larger, long-term holdings is just one method that should be considered.
Keep up to Date
The crypto space evolves at a fast pace, meaning prices can rise and fall sharply due to market volatility. Being aware of the latest happenings is important in order to monitor developments that can directly impact your crypto holdings.
The descriptions provided about the above trends and products are all based on publicly available information and general knowledge about cryptocurrency. As such they cannot be considered as financial advice or encouragement to invest. All transactions involving digital assets involve certain risks, which you should familiarize yourself with prior to any investment.