How to Build a Cryptocurrency Portfolio for Beginners
Cryptocurrency has become substantially valuable in the past ten years, gaining more investors and enthusiasts each day that passes. But how exactly do we invest in cryptocurrency? Many might think that investing in any digital currency would be a good idea. When thinking about cryptocurrency, I think it’s essential to build a structure for evaluation and then use that structure to build a portfolio. When investing, it’s imperative to develop a framework for how to evaluate potential investments.
In this blog, you will learn the key preparations that you will need in building your cryptocurrency portfolio.
CREDIT CARD or BANK ACCOUNT
You will need to have money for you to start getting a cryptocurrency such as Bitcoin. You can either get it from your bank account or use your credit card.
FIAT TO BITCOIN EXCHANGE
First, you need to sign-up to an exchange that converts fiat to Bitcoin. All these exchanges have their advantages and disadvantages for the most part if you are a beginner and do not have any idea what you are doing, I highly suggest you use Coinbase. Coinbase is a secure online platform for buying, selling, transferring, and storing digital currency. And, it operates in 32 countries.
You can also check the other exchanges below:
BITCOIN TO CRYPTO EXCHANGE
The next exchanges that you should look into are the ones you will be using for the Altcoins. The smaller coins that you cannot find in these large exchanges. The only way to buy those smaller coins is by buying them using Bitcoins. You need to deposit Bitcoins as you cannot buy coins directly from them, so that is why it’s crucial that you have a Fiat to Bitcoin Exchange first.
You can buy Altcoins from Binance, BitTrex, Kucoin, and Kraken.
It is essential to have your crypto wallet before buying cryptocurrency as you will need it to store your coins. Some exchanges provide crypto wallets, but ideally, it’s best to get your cryptos out of those exchanges due to possible theft.
You can also choose from the following types of crypto wallet.
- Crypto Exchange
- Desktop (Exodus)
- Mobile (Eidoo)
- Hardware (Ledger)
BEFORE GETTING STARTED
These are kind of mental notes for yourselves.
- Only invest in what you can afford to lose
- Do not take a loan to invest
- Do not try to day trade (It’s very tempting to Day Trade, you see coins go up and down, and you feel like you can catch the swings, the highs, and the lows. Believe me, as a beginner it is hard as you cannot predict top or bottom. Once you get involved in a coin, you hold it. It could be for weeks, months, year and once you have made enough, that’s the time that you sell off.
- Do your own research (there are a lot of YouTube videos where people tells you what to do, what to choose, what’s a good entry point, and when to sell your coins. But, make sure you do your own research. You can use the videos for guidance or reference, but it’s your money and your life that is going to be affected, so you have to do your own research.
- Set realistic expectations (you may have seen people showing how may profit they have gained out of cryptos, but you need to set realistic expectations because you will never know when the market will change. There could be a month of nothing but ups and downs and after that a whole month of downs, and you could lose a lot.
This is the strategy or rule that I’ve been using, and this is how you are going to set up your cryptocurrency portfolio. This has saved me countless times.
50% of your portfolio should be Bitcoins. That is definitely a good number. The reason for that is Bitcoin is stable and it’s kind of a protection from potential losses. Bitcoin is the coin that you may want to accumulate as much as possible as it is the coin that is set to pop that could bring life-changing wealth for you. If Bitcoin goes up, your portfolio goes up too. If Bitcoin doesn’t move, you still have your Altcoins. So, having 50% Bitcoins on your portfolio is definitely the smartest and right move.
25% BIG CAPS & 25% LOW CAPS
Some of you are wondering what Big Caps and Low Caps is. Big Caps mean any coin that has over 5 billion in total market and Low Caps mean coins under 5 billion in the total market.
So, as a beginner, I highly suggest you follow the 50/25/25 rule. By following this, it really maximizes profits. This doesn’t mean that you are increasing your profits rapidly, but you are maximizing your profits as much as possible while reducing risk.
DOES THE NUMBER OF COINS MATTER?
In my opinion, the number of coins doesn’t matter. It only matters if you are not able to track it. So, as long as you can track coins effectively and you follow the 50/25/25/ rule, it would not really matter if you have five or ten or twenty coins.
Here are some of my recommendations and this is a good list. We’ll go through the list, but you don’t need to have this many.
Ethereum, Ripple, Cardano, IOTA, Litecoin, and NEO are really good Big Caps. You don’t need to have all six coins, you can just have two or three, and you can have six but you need to remember the 50/25/25 rule that you want to follow.
The one listed here is a combination of Mid Caps and Low Caps, that’s all kind of mixed together. Icoin, OmiseGo, Binance Coin, Loopring, and Basic Attention Coin. If you are not familiar with some of the other coins, you might want to start doing your research.
You have met all the basic essentials, mental notes, and the 50/25/25 rule. So, what’s next?
Watch the Daily Bitcoin and Cryptocurrency news. You might want to start with ccn.com or the crypto coins news. This site provides news coverage around cryptocurrencies including Bitcoins. You can also view the latest Bitcoin price with their interactive and live Bitcoin price chart. Start watching YouTube videos as you can learn a lot from it, and, stay tuned for my upcoming blogs on cryptocurrency.