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Five things to consider when building your crypto currency portfolio

  Mon, 24 Jun 2024
Crypto & Blockchain Five things to consider when building your crypto currency portfolio
MON, 24 JUN 2024 LISTEN

If you’ve decided that now is the time to invest in crypto, you may still be a little unsure of how to go about it. The good news is the fundamentals of investing apply in the world of digital currency, just as they would if you were building a traditional investment portfolio.

If you were making your first foray into traditional investment, you’d take care to research all the assets that took your interest; you’d think carefully about how much risk you are prepared to carry, and you’d probably ask an expert for guidance. “Today, the traditional financial system remains a key gateway for participation in the crypto ecosystem through fiat on and off-ramps. It allows users to participate in the crypto economy and transfer their funds safely to their bank accounts and currency of choice when needed. In other words, the two financial systems are not mutually exclusive but operate in synergy to serve users’ various needs.” notes Hannes Wessels, General Manager of South Africa.

1. What type of investor are you?
It’s important to ask yourself this question, because it’s going to determine the amount you are prepared to invest as well as your strategy. For example, if you’re simply curious about crypto and how the world of cybercurrency works, you’ll be far more cautious in your investments than if you have already done plenty of research, maybe purchased some altcoins and already seen a few market dips.

2. Which crypto currency is for you?

Did you know that Binance has 350+ cryptocurrencies? Obviously, that’s a lot to research individually – which means that most people may opt for the better known currencies, like Bitcoin or Ethereum. There’s nothing wrong with that – but remember that there are other alt coins that offer interesting returns if you are prepared to give them time. As a general rule, any social media hype should be disregarded in favour of solid research – and you may also want to hang onto some healthy skepticism when it comes to cryptos that seem to have a high novelty value (alt-coins based on a TV series come to mind here).

3. What’s your risk appetite?

Legacy coins (think Bitcoin) are more prone to price fluctuations but, on the other hand, they’re not going to devalue spontaneously, making them a sound choice for people with a medium risk appetite. If, on the other hand, you really don’t mind going for a complete wild card, you could invest in one of the newer currencies available. Usually associated with a specific platform, these currencies have been known to generate enormous gains – but it’s not uncommon for them to become suddenly worthless, either. The best approach? It’s a good idea to spread your risk, just as you would with a traditional portfolio.

4. What does your greater investment portfolio look like?

Back to the premise of keeping your eggs safe by refusing to put them all in one basket - this sentiment holds true here, too. It’s always a good idea to diversify your investments, so consider your crypto assets just one part of a broader portfolio. Just how much of that portfolio should crypto account for? Up to you – but, in general terms, a 1-5% allocation to the asset class is ideal for low risk investors, while those with medium risk appetites may want to up it all the way to 15%. Remember that, as with any investment, a long-term outlook is key.

5. Have you done your research?

You wouldn’t play the stock exchange without tracking the trends of corporate companies first, or at least finding out a little more about them. Maintain that principle when you invest in cybercurrencies, too. Read up as much as you can to make sure you have a thorough grasp of the risks involved, and get a little expert advice, too. For a start, check out the Binance Academy at academy.binance.com.

Risk Warning: Digital asset prices are subject to high market risk and price volatility. The value of your investment may go down or up, and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance is not liable for any losses you may incur. Past performance is not a reliable predictor of future performance. You should only invest in products you are familiar with and where you understand the risks. You should carefully consider your investment experience, financial situation, investment objectives and risk tolerance and consult an independent financial adviser before investing. This material should not be construed as financial advice. For more information, see our Terms of Use and Risk Warning.

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