HOW TO BUILD A BALANCED PORTFOLIO

Greetings,

It's your friend @mondraye and today I would be sharing another important content on investments and how to build a balanced portfolio.

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WHAT IS INVESTMENT

Investment is simply an act of putting money into a bussiness or purchasing an asset with the sole aim of making profits.

This act requires discipline as one tend to overlook current situations with the goal of getting future reward on the time, efforts, and money overlooked over a certain period of time.

Some investments are made physically such as buying lands and buildings while others are mostly visual meaning that you can only see your investment by going through your investment portfolio.

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• What is a portfolio?

In cryptocurrency, a portfolio is simply a collection of different cryptocurrencies owned by a particular individual. It comprises of different coins and tokens with their collective and individual values showing on storage wallet.

In cases whereby the assets are scattered in different wallets, the values can be tracked using portfolio trackers which are spacialized tools made for tracking portfolios.

ASSET ALLOCATION AND DIVERSIFICATION

• Asset allocation

Asset allocation refers to spilting your capital into different asset classes such as Stock, Crypto, commodities, valuable metals, etc.

• Asset diversification

This refers to distributing your capital into different sectors. It can be regarded as the subclass of asset allocation whereby you diversify your stock investment into different sectors such as Healthcare, agriculture, energy, industry, etc.

If it is cryptocurrency for instance, you can diversify by investing in governance tokens, DeFi tokens, meme coins, etc.

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• Let's look at an instance.

Let's say you have $1000 capital for investment, you can allocate 50% into stock and 50% into cryptocurrency.

The 50% allocated into cryptocurrency which is $500 is now seen as 100% and can be further diversified by sharing it among various cryptocurrency projects such as 50% in Bitcoin, 20% in altcoins such as STEEM, 20% in Stablecoins, and 10% NFTs.

HOW TO BUILD A BALANCED PORTFOLIO

• Consider risk

Divide your capital equal and invest based on high, low, and medium risk investments. Too much to one side is definately not balanced.

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• Be flexible

Your investment decision should always change with consideration of the situation of the market. For instance if there's an issue of too much volatility on an investment, you should consider changing it instead of holding on to it till it goes to zero.

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• Distribute fresh capital evenly

Evenly distribute capital while adding fresh capital on exiting investment. Focusing on selected ones will add more weight to them which will make it difficult for other investments to balance the losses made on them.

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• Make your own research

It is important to always carry out your own research while making investments. This will help you to understand what you are going in to and also know how to go about it.

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• Invest what you can afford to lose

It is also important that you invest only what you can afford to lose for there's always an amount of risk associated with every investment.

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• Do not overdiversify

In as much as diversification is important, it is also necessary you don't over diversify your investment because it will make it difficult for you to keep track of them and know what is happening and when to pull out.

Summary,

It is certain that no investment is risk free and this explain why it is best for us to allocate and diversify our investment capital. This will help us in reducing the chances of losing huge amount as when one asset is under performing, others tend to balance the losses.

_{10% to @Tron-Fan-Club}