Diversification is basically allocating your investment assets to several types of investment products. If it is associated with cryptocurrency, then we divide our investment into several coins at once. This is done in order to minimize losses and maximize profits so that the income stream you receive be more secure.
In the world of cryptocurrency itself, applying diversification can keep your investment funds safe even in a market that has a high level of volatility. Here we will share tips that you need to consider in diversifying investments, especially cryptocurrency investments.
Watch Your Risk Tolerance
Risk Tolerance is a limit on the level of risk that can be taken or accepted. In simple terms, it is how much you are ready to bear the risks that may occur in investing cryptocurrency.
For example, you have an investment fund of IDR 100 million, in which you are only able to lose a maximum of 20% or IDR 20 million if there is a decline in the value of the assets in the investment. The value of 20 million is your risk tolerance. Actually this applies also in investing in any instrument, not only cryptocurrency. This Risk Tolerance is closely related to your Risk Profile.
Know and Determine Your Risk Profile
Risk Profile is your risk characteristic as an investor. Keep in mind the principle of investment “High Return, High Risk” the greater the results obtained must be followed also by the risk that must be borne.
Are you investors who remain calm when there is a fluctuation in the value of investment assets or tend to panic, fret and emotions when the market is in a bearish condition? In the investment world, there are three types of investment risk profiles, namely conservative, moderate, and aggressive. Let’s get to know which type you are.
Conservative type is the type that tends to have a low tolerance for possible risks that will occur. In short, investors with this type tend to panic, get confused, and also be anxious when the market is in an unstable condition, like what is happening now in the Covid-19 pandemic situation.
Moderate types are types that have a moderate tolerance for risk. Moderate type investors can understand that there is a risk follows for every investment decision. And can tolerate if there is a decline in investment assets and know what to do when it happens. Generally, moderate types have diversified before investing in selected assets.
Aggressive type is an investor who has a strong mental endurance in facing investment risks in the future. Generally, aggressive type investors have special funds that are already prepared for investment and have long-term investment goals. In fact, unstable market conditions are actually being captured as an opportunity for aggressive type investors. If you fall into this type, you should equip it with good analytical skills.
So, which one are you?
Adjust Asset Options with Risk Profiles
After knowing your personal risk profile, it’s time to determine what type of investment or coin suits you if you want to invest in cryptocurrency. Always research before investing, paying attention to the fundamentals of the project as well as the company and the team involved. You can learn this by looking at the performance level information of the coin, monitoring the performance of the product or service offered, community support, the usefulness of the coin, and other factors. Honest Mining has an interesting article on this subject, please read Honest Mining Coin Rating.
Do Rebalancing Periodically
Rebalancing is the process of balancing asset weights in your investment portfolio. Diversification that is carried out needs to be balanced through the activities of buying and selling assets. This is done so that approval is carried out in balance with the investment objectives that you generate.
Focus On Long-Term Goals In Investing
By having long-term goals, you can determine investment assets that fit your goals. It is not easy to be tempted to buy assets that do not contribute or can even be detrimental in the future.
In all types of investment including crypto, diversification is an important thing to do so that investment funds can develop optimally by minimizing the level of risk that exists. Currently, there are many solutions that can facilitate investors to develop their crypto assets, one of which is by following the trading algorithm.
In the Trading Algorithm, all diversification and trading strategies have been made at the beginning by professional traders and can be analyzed for performance through the results of backtests conducted. This will make it easier for everyone who wants to start investing in several assets at once according to their risk profile.
Salah satu penyedia layanan Algoritma Trading adalah Nobi. Dimana investor dapat dengan mudah memilih dan bergabung pada strategi dengan melihat dan menganalisa performa dari strategi tersebut sebelum memutuskan untuk bergabung.
Also published on Medium.