Topic: Fundamentals of building and maintaining your crypto portfolio (Read 230 times)

As promissed, the second part is published: https://steemit.com/cryptocurrency/@cryptohumster/the-fundamentals-of-a-crypto-investment-portfolio-rebalancing

Rebalancing basis
Rebalancing your crypto portfolio is one of the most important aspect of portfolio management. It allows your portfolio to survive market deep, adopt to market condition, mitigate risk and optimize your profits. So what should you know about rebalancing?

There are two main rules:
 - Rebalancing is always based on investment horizon
 - Rebalancing is always made according to a pre-conceived scenario

I don’t need to explain why you need to consider investment horizon. It is easy to understand that if you invest for year you don’t need to rebalance your portfolio every day. You need to consider rebalancing once a month or once in 3 weeks.

As for the plan, there are two main strategies:
- Preservation of the current percentage of different asset groups (or for each risk level individually). For example, if you have moderate portfolio with 25%/50%/25% percentage, you may need to buy/sell assets to until the original proportion is restored.
 - Changing shares. Some of your assets perform better than the others. You may want to increase the share of the most profitable assets and get rid of assets, bringing only losses. This operation will make your portfolio more profitable.

You need to decide what to do with a positive imbalance after rebalancing. You can either fix your profit, leave it as part of portfolio or reinvest.

The frequency of rebalancing depends on the following factors:
 - Investment horizon. For long-term portfolios (from a quarter to a year or more), it makes sense to conduct this operation once a month. For medium-term - once a week.
 - Sharp change in the proportions. For example, there was a portfolio with a balance of assets of 50/50, and after a while, it became 60/40. Such a significant change in the structure usually requires a rebalancing.
 - Individual news background for each asset. For example, if there are positive rumors on a coin you may consider investing more and sell when the news come out. Remember, we always buy the rumors and sell the news.

In general, I will not recommend diversifying portfolio too much as it will be difficult to rebalance portfolio.

So you have Conservative or a moderate portfolio. I guess on the current market it is the best availlable option. Can you tell us, if this percentage was planned or you've been investing on projects you like and randomly ended up with this portfolio?

How many people here actually plan the portfolio? And how many just invest in projects and don't plan the protfolio itself?

Honestly I am not very good at trading, have tried several times but still got stuck. For the time being I am just a long-term holder, 75% of my assets are in popular coins and 25% I invested in my favorite alt and also ico. I'd rather be a holder, than I just follow the trend of investing and trading following a signal or trading group.

You are raising a very important point here. As was described on my post you need to diversify risks and hold several coins, but you can go even further. You can diversify your investments between stock market, crypto and other. It will make ypur position stronger, but will take much more time to manage your investment.

I'm hodling few of first 5 coins for a long term in hard wallets. And also I invest in icos. I do not trade too much coz it's not my thing. Also I have invested about 20% my risk capital on local share market. I have distributed my capital in many ways. Not only in cryptos. And I recommend you all to do the same to manage your risk.

The most important part is diversifying into projects that have a working product and have real world use cases. If you are invested in projects like those then you wouldn't have to worry when the price drops and you can hodl stronger as the price is going to recover sooner or later.

Yes, for security you always sacrifice usability. And using cold wallets or hardware wallets is a lot harder than exchange wallets. But you still have to learn to use more secure storages. Investing your time to learn security is profitable.

Yes, that's the generic advice, but there are so many other factors to consider. For me, I still stick to normal desktop clients like electrum. They're secure enough for me, I practice good security and encryption, plus more importantly, I don't have SO much that I would need hardware wallets.

There's another thing to consider too. Hardware wallets are highly technical and can be really difficult to use. Most newbies can't even run a node what more upgrade firmware on these hardware devices.

> We all know that exchange is not the best place for a long hold. Always to try to low risks and use secure storages like cold wallets, hardware wallets and so on. If you still want to store your assets on an exchange, divide them between 2 or 3 exchanges at least.

You can try some new crypto exchanges which adress exactly this issue by keeping most of the client funds in secure hardware storages: https://www.cryptocoindude.com/icos-april-may-2018/ For example, LCCX (London Crypto Currency Exchange) project will provide the facility to place 60-75% of client funds offline in cold storage.

it's always good to sell when coin reaches the highest price because after that, the price will be down again and sometimes the price will make a correction and sometime it will down too deep. so we can make a big profit for this and meanwhile we have a chance to buy another amount when the price is down and we can repeat to wait the price increase back. besides that, if we can buy at the low price, we can keep the rest of the profit to buy another coin.

So your plan is to sell when coin reach its ATH again? You don't plan to sell in parts along the way?

now the strategy lies in a very simple way
I watch what altcoin most adjusted and wait until he returns to the previous price

We are investing in a highly speculative asset, so we are at a great risk of losing. In my opinion, Bitconnect was staying in the top 30 CMC for quite a while is a proof, that the cryptocurrencies users are still misunderstood and unknowledge, they think cryptocurrencies as a getting rich quick scheme.

Yes, that's the point. No crypto asset is safe, but some has proved it's value, have a large comunity and strong fundamental reasons to be at the top. Can ETH fail? Yes, it can, but a lot should happen for this to come true. At the same time some very promising crypto can fail easily in case of bad news, team mistake and etc. Just because it is young. Anyway, you always needd to think twice and check everything you can before investing.

What are the profit goals you set for yourself? For example, a coin brings 100% profit, half of the total amount of this coin I sell, and the rest I hodl for a long time. How do you do?

Good points here.  We have to remember that BitConnect spent a long time in the top 30, and IIRC, was even top 10 for a while.  I agree with the general idea that top ranked Cryptos are safer, but you still have to evaluate projects case by case.

I do think that having a target price is very important. If you know exactly at what price you are going to buy or sell a particular coin, then it helps to protect you against making spur of the moment emotional decisions. It is a good strategy.

if I myself see the potential on altcoin that I have if altcoin is very good or high-poted then patiently I wait for it to rise to the price that I target, but if I see altcoin it is not too potential then as soon as I sell or I ignore it so only.

This is a good and accepted general point, that higher cap coins are lower risk and also have less chance of massive % increases... but it's certainly not always the case. There are plenty of projects in the top 30 that I wouldn't touch, and some outside the top 100 that are think are very solid and low risk. So I think DYOR is always more important.


I didn't follow it at first; when I started I was all alts. Now though I do have some BTC. One good reason to hold BTC is that it encourages you to keep up with BTC news, which can affect the whole market... where bitcoin leads, alts often follow.

And also, as many have argued... a pointless one, at this moment in time anyway. Then again, most people, if doing this 12 months ago, would find that had they divided up their portfolios against a well thought out strategy of mitigating risk, versus a random portfolio based on market capitalization (say, top 50) - they'd actually end up more or less at the same stage today.

There's a really big problem with crypto now to me, in that we're treating it like they've got fundamentals... when really only Bitcoin qualifies.