Almost three years ago, on the 26th of June 2014 to be exact, my adventures in the world of crypto had officially started by buying €50 worth of BTC. One month later I would own about 5 BTC and things started to get more serious. Of course, everybody has their own approach depending on personal preferences, willingness to take financial risks, time able to invest and do research, ability to still sleep, etc. By now I have a system for investing in cryptos that suits my personal needs. I want to share it with you and am very curious about your approach to building your portfolio.
The 70% Core / 30% Play Money Approach to a Crypto Portfolio
The basic philosophy behind my crypto portfolio is simple: a 70% ‘Core’ (long-term) segment and a 30% ‘Play Money’ (short-term) segment.
The ‘Core’ segment
Having this set of cryptos enables me to reap the benefits from a growing cryptocurrencies market without losing sleep over volatility. This segment holds projects that are based on different platforms and are focused on different problems or opportunities to create diversification.
- Investment period: Long-term (3+ months).
- Total value rule: Must be at least 70% of the total value of the portfolio.
- Number of cryptos rule: Maximum of 10 different cryptos at any given point in time.
- Rebalancing rule: Redefine ideal relative positions of holdings every four weeks and redistribute accordingly.
Other Core segment rules:
- Know as much as you can about these cryptos (team, community, primary focus, tech, roadmap, most important competitors, funding, business model).
- Make sure to keep yourself educated about recent and near future developments of these cryptos.
- When redistributing, ignore small deviations from ideal distribution to avoid unnecessary transaction costs.
The ‘Play Money’ segment
Having this segment in my portfolio allows me to enjoy the excitement of finding cryptos that might have the potential to outperform the Core segment at least in the short term. It allows for speculation but simultaneously prevents unlimited Fear-Of-Missing-Out (FOMO) buying behavior.
- Investment period: Short-term (a few days up to 3 months).
- Total value rule: Can be maximum 30% of the total value of the portfolio.
- Number of cryptos rule: Maximum of 10 different cryptos at any given time.
Other Play Money segment rules:
- When adding a new crypto to this segment, the investment should at least be €200. This is to make sure that the potential profit is worthwhile the time invested in research.
- When making an investment, set a date at which you will evaluate whether to keep the crypto in your portfolio or sell. When the decision is to hold, set a new date to evaluate again.
- When stepping out of a crypto, sell the full amount of coins you own. Use most of the money to strengthen the Core segment and use the rest for future Play Money investments.
To minimize discussion on technical details of certain coins (there are better places on this forum for that) I have not included the specifics of which cryptos I hold. I might do that at a later moment.
So, who would like to share their approach and thoughts?
Disclaimer: I am not a financial advisor, trader or developer. I am just a crypto/blockchain enthusiast. Please do your own research, draw your own conclusions and do not invest any money that you cannot afford to lose.