Each trader or investor will have their own opinions about what makes a portfolio of cryptocurrencies well-balanced. But there are some general guidelines to remember:
1. Distribute the investments in your portfolio among those with high, medium, and low risk, and weight them appropriately. A portfolio with a sizable percentage of high-risk investments is undoubtedly unbalanced. It may have the potential to give you greater gains but it also may result in significant losses. What is best for you will depend on your risk profile, but there should be a balance.
2. To help your portfolio stay liquid, think about holding some stablecoins. Many DeFi platforms rely on stablecoins, which can be used to swiftly and inexpensively lock in gains or exit a position.
3. If necessary, rebalance your portfolio. The cryptocurrency market is quite erratic, therefore you should base your choices on the circumstances at the time.
4. Strategically allocate new funds to avoid favoring one area of your portfolio over another. It can be tempting to add additional money if you’ve recently achieved significant gains from one coin. Don’t let greed get in the way, and consider where the money may be spent more wisely.
5. Conduct original research. You really can’t go wrong with this timeless bit of counsel. Don’t rely only on recommendations from others as you are investing your own money. See 5 Common Cryptocurrency Frauds and How to Avoid Them for advice on how to recognize potential scams.
6. Never risk more money than you can afford to lose. If your portfolio causes you stress, it isn’t balanced properly. If something goes horribly wrong, your positions shouldn’t have any major repercussions for you.