How to build/structure a crypto portfolio

For many, a crypto portfolio evolves over time from the purchase of a single crypto.
However if you’re starting from scratch, and want to build a portfolio from nothing, or want to rebalance an existing portfolio, there are many factors to consider.

First you need to decide what your risk appetite is, and time horizon for return on investment (ROI).

If you’re the least risk averse person, you would go all in on a relatively unknown coin and hope for 100 - 1000x returns.

In this case you have no need for a portfolio as you own a single asset. However anyone who is concerned by risk will want to hold many assets, which brings the next concept into the mix:

Diversification

Diversification is a way of smoothing returns across a range of assets, the more diversified your portfolio is, the less volatile the profit and loss should be. This is less true for the crypto asset class as most of crypto is still heavily correlated with Bitcoin. This will change in the future as more FIAT-to-crypto gateways open up.

Risk weighting

Portfolios should be segregated into risk weighted sections, now what percentage you allocate to each bucket will depend on what your risk appetite is, but here is an example of a balanced portfolio:

Core holdings - 50% (mature cryptos with high volume, such as Bitcoin/Ethereum)
Strong use cases - 40% (relatively newer projects with established partnerships and functionality, for example, Vechain, ADA, XLM)
Moonshots - 10% (very high risk, low market cap coins with potential to increase over 10x, i.e OysterPearl, Snovio, Bounty0x, Ethos)

Do your research

Before buying any assets, always do your research and due diligence, this does not purely mean reading reddit, many crypto subreddits are huge echo chambers. For every pro in a coin, try to seek an opposing view so that you can make a balanced decision. You should understand that many coins are or have been aggressively shilled on reddit, such as Nano, Vechain and WTC. This doesn’t mean they’re bad projects, but you are unlikely to see a balanced discussion over them without seeking out additional sources of information.

Don't go all in
You should keep a portion of your cash aside so that you have some liquidity to trade good opportunities, such as a market dip on a coin you have been eyeing up.

Monitor
Once you have your crypto portfolio set up, you need a way to keep track of how each asset is performing. To do this, you can take a record of the assets you have bought and their respective prices and log this in a crypto tracking app. I highly recommend either Blockfolio or Delta to new investors as they are convenient and easy to use.

Rebalance where necessary

Now your crypto portfolio is generating some profits (or losses) you need to monitor the portfolio, and take action where necessary. Sometimes you may be forced to sell assets at a loss, this comes with the territory. If this worries you, do not think of it as selling at a loss, think of it as lowering the overall risk profile of your portfolio by getting rid of a bad asset.

Your thoughts
How is your crypto portfolio doing? Are you leaving yours static or rebalancing? Let me know in the comments below!

Please note this post is for informational purposes only and does not constitute financial advice. I am not a financial advisor. All investments carry inherent risk.