6 strategies for better managing your crypto portfolio

Crypto has become popular worldwide as many people learn about the benefits of the financial ecosystem. News headlines about successful crypto stories draw more and more people to the market hoping to earn a passive income and achieve financial freedom. But as soon as they enter the crypto space, investors find that things are not as bright as they seem from the outside. The market is volatile, and while there may be many opportunities, there are also scary price drops. And the rule of buying low and selling high is not enough for proper crypto portfolio management. Truth be told, nobody in the world likes to lose their money. Although you may experience some losses in your investment journey, it is possible to reduce the risk and increase the gain. Here’s a no-nonsense guide to managing your crypto portfolio effectively.

What is crypto portfolio management all about?

Simply put, managing your crypto portfolio is about constantly assessing your digital assets and updating them based on your investment goals. Different techniques have the same purpose: to help you maximize your profits as much as possible and minimize your losses. There is not a one size fits all strategy that fits every crypto portfolio. However, many crypto investors use apps that help them collect data on the performance of their assets and adjust their portfolios accordingly. There are two styles of portfolio management: active and passive. The former is more risky because it relies on techniques such as short selling and leveraged trading. Additionally, traders must keep an eye on their holdings at all times, as this style of management is all about monitoring shorter time frames. On the other hand, passive portfolio management involves a long-term investment approach. Since investors do not enter the market only to leave it as quickly as possible, they use strategies that include buying and holding their preferred crypto, which allows them to put less money into their investments.

What are the benefits of managing your crypto portfolio?

We know managing a crypto portfolio isn’t exciting, but it’s a necessary step you need to take to survive market volatility. Here are the most common benefits of managing your portfolio:

• It provides insight into your losses and gains;
• It helps to control your emotions better;
• It gives a clear picture of your trading performance;
• It eases the process of filing annual taxes.

In episode 710 of the Money Girl podcast, Laura Adams covers six ways to invest in crypto, including some smart tax advantages to avoid capital gains tax. You will learn what cryptocurrency is, how to buy it, how it is taxed and a strategy to start stacking coins.

Best Practices for Crypto Portfolio Management

Develop an investment thesis

Before building your portfolio, you should educate yourself about the crypto industry and find out which projects appeal to you the most. You want to develop an investment thesis that includes details such as how much you are willing to invest in crypto, which coins you are most interested in, and your profit expectations. You should also be clear about your goals for investing in crypto.

Diversify your assets

Your crypto portfolio includes all the assets you own, such as ETH, USDT and Bitcoin, and their value is based on the current market price of your cryptos. Suppose you are new to the crypto space and want to buy bitcoin; it is important to choose an exchange platform that Binance which allows you to diversify your portfolio over time. Diversification is essential for success in a market that is subject to significant ups and downs. The more assets you include in your portfolio, the greater the chance of reducing risk.

Rebalance your portfolio

Rebalancing means buying and selling parts of your portfolio to adjust your asset allocations. Suppose you want your crypto portfolio to consist of 25% ETH, 50% BTC and 25% altcoins. In that case, if small-cap altcoins increase and take more than 35% of your portfolio, the goal of rebalancing is to gain more exposure to BTC and ETH. To do that, you need to sell a part of your altcoins.

Use a portfolio tracker

A portfolio tracker is an effective tool that allows you to monitor the performance of your investments and gain insight into:

• Gains and losses;
• Your portfolio balance;
• Inventory;
• How your investments align with your goals.

With an automated portfolio tracker, managing your budget will be easier, and you’ll make better investment decisions and feel confident about reaching your financial goals.

Plan an exit strategy

In life, everything is temporary, and good things can come to an end at some point. Because the crypto market is volatile, you need to be prepared for a bear market. The price of an asset can fall unexpectedly, and it is important to find out early how much you can afford to lose. Developing an exit plan in advance is an effective portfolio management strategy and will help minimize losses if things don’t work out in your favor. More often than not, investors overlook this step and end up holding their position for a long time, even though it may result in losses. But these situations can affect your crypto portfolio and investment strategies. Therefore, to be a successful investor, it is important to plan your exit strategy before entering the crypto space.

Avoid emotional trading

People often let their emotions take control of their actions, and this is especially true when it comes to crypto. But greed and fear can lead to big losses, so investors must learn to keep their emotions in check. FOMO is common in the crypto industry, leading to hasty investments and investors falling victim to scams. Peer pressure can also be the reason why you may end up investing in a coin that does not give you any profit at all. Therefore, it is important to do your own research and avoid investing in a crypto just because of the hype around it. Your emotions shouldn’t get in the way of achieving your long-term investment goals, so be sure to consider this tip when managing your portfolio.

Remove key

Crypto portfolio management is not as complicated as it may initially seem. But you need to develop a plan and decide how much you are willing to invest in a particular asset. Diversifying your portfolio is essential because it ensures long-term growth. In addition, crypto portfolio trackers can help you monitor the volume, price and market cap of your tokens. Don’t trade based on your emotions and create a plan that will help you stay on track during your investment journey.

Feeling bitcoin or cryptocurrency FOMO right now? Laura, from the Money Girl podcast, interviews Fred Schebesta, author and founder of Finder.com about the future of cryptocurrency and what bitcoin newbies should know. Find out how to slowly add crypto to your investment portfolio, keep it safe, earn higher returns and where to learn more.