In the formation of a well-diversified portfolio should take into account three factors: timing, distribution and selection of components.
The interim strategy helps an investor to figure out what to do when the market is rising falling or moving sideways. Common sense dictates that you should be buying at the lows and sell — highs. We should not try to predict market movements. It is enough to understand what state the market is in the moment and make decisions based on this.
Distribution strategy allows to decide which part of the capital to allocate for the purchase of a particular coin.
Finally, the strategy for the selection of assets helps to find the most promising candidates. This article will be devoted to the choice of coins, with the success of the enterprise largely depends on two other components: time and distribution.
According to legendary trader Paul Tudor Jones, investors should focus not on profit, but on the preservation of capital.
In other words, a well-diversified portfolio should be formed in such a way as not to lose money.
In our example, we will create a portfolio of five different types of cryptocurrencies (and offer good options in each category). These coins belong to the five directions in the industry, so they not only protect your portfolio from high-risk, but will also allow the investor to participate in all favourable market processes.
1. Market leader — bitcoin
Bitcoin is the leader of the crypto world. This is the first and largest capitalization of the digital currency, and by a considerable margin. The total number of coins is limited to 21 million; the current proposal is 17.2 million
Bitcoin included in our portfolio due to its leading position in the market. Any growth without the participation of bitcoin is impossible.
The share of bitcoin in the portfolio should be significant (about 30-60%). This is due to its high popularity and fame — any global increase in interest in crypto-currencies primarily will affect bitcoin and altcoins then.
2. Stable coins — Tether
Tether is a crypto — currency equal to the U.S. dollar. 1 USDT is always equal to $1. The company, which released the Tether, ensures that each coin has always supported the us dollar. It can hold an additional issue, increasing the amount of dollars in their accounts.
Tether will help the investor survive the downward trends and negative points on the cryptocurrency market. It is important that it constituted a significant share portfolio — then after the fall of the market can be cheap to buy other cryptocurrencies. Share Tether should gradually increase during the bull market, and lower during falling.
The percentage of Tether in a well-balanced portfolio depends on the current state of the market; at the peak of growth, it can reach 60%, and during the fall it can be reduced to 15%. However, to fully empty the reserves stablon should not be.In addition to the Tether, the investor can use other stable coins: TrueUSD, Gemini Dai and Dollar.
3. Tokens for passive income — NEO
NEO popular in the stock market mainly because its a system with two coins. Like Ethereum, it is a platform, but the fee per transaction paid to a different cryptocurrency called GAS. NEO coin itself represents the share in the network project.
Storage NEO in the portfolio allows investors to obtain income in the form of GAS tokens. Such passive income is extremely important for the long-term portfolio. Remuneration for storage of cryptocurrency — a unique feature essential for a well diversified portfolio.
In an extreme case, GAS will offset trading costs. And this is a good way to make money in a sluggish market.
Share tokens for passive income depends on the size of the portfolio. Large investors (>500 PTS) it is recommended to invest in them up to 5% of the capital (depending on market conditions). In other cases, the proportion can reach 25%.
4. Trading hedge BNB
BNB is a token format, ERC-20, released cryptocurrency exchange Binance.
Traders on the platform Binance get a discount of 25% when paying commissions tokens BNB. In addition, the owners of the 500 BNB has the right to expect the referral bonus from 20% to 40%. Additional information about the tokens is available on the website of the exchange.
Exchange tokens have got in our portfolio due to low correlation with other cryptocurrencies. Its price is primarily dependent on trading activity on the exchange, and that grows from both bullish and bearish markets.
As a rule, the stock of coins is less affected by global sentiment. Analysis of the cryptocurrency market in the second quarter showed that the exchange of coins was much more stable than other digital currencies (except the stable). This unique quality makes exchange coins an integral part of a well diversified portfolio.
BNB tokens, perhaps, the largest stock exchange in trading volume, which makes them a smart choice in this category. The proportion of this type of assets in the portfolio should be 10-20%.
5. Bet on the future — ICON
ICON — one of the projects involved in the unification of the various blockchains. In the future there is a need for communication of many different blockchains. The solution to this problem is the focus of the project ICON.
This part of the portfolio of the most speculative. ICON was selected on the basis of future potential — token can grow a 100 times and bring investors a good profit.
However, in this category you can include many other coins — it all depends on the preferences of a particular investor.
Keep in mind that the share of this category in the portfolio should be the smallest (4-10%), as it is associated with significant risk and does not bear any unique advantages.
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