Why Do Crypto Investors Need To Diversify, Too?

Published on: 07 October 2021 Last Updated on: 13 January 2025
Why Do Crypto Investors Need To Diversify,

We all are quite aware of the phrase, “Never put all your eggs in a single basket.” They say it because in case anything happens with the basket, all your eggs will be wasted. So, instead of putting all your eggs in a single basket, divide them and put them in different baskets.

In case you drop one basket, you will lose a few of the eggs. Still, you will have the others that you have kept in other baskets. This is one of the major and intelligent strategies when it comes to Crypto investments.

As per the experienced Crypto investors, you should diversify your investment amount in different Cryptos in order to get a better return. The reason might be understandable to some of you.

On the other hand, you might think that when Bitcoin is performing really well, it will be an intelligent choice to invest as much as you can particularly in Bitcoin. But experts never recommend that. Here we will discuss “why?”

Why Do Crypto Investors Need To Diversify

The main benefit of diversifying your Crypto investment is protecting them from risk. Yes, it is true that eliminating the risk of Crypto is nearly impossible. But when you diversify your Crypto assets, you are getting benefited from the passive income of stable coins.

This means that you need to be smart about investing in Bitcoin, Ethereum, Dogecoin and other cryptocurrencies. Buy Dogecoin in Canada as this is going to be the hottest new thing after Bitcoin and Ethereum in this industry. You are sure to generate a high return on your investment in the near future.

Plus you are also reducing the impact of volatility in a single asset that will affect your portfolio as a whole. So, ultimately it is minimizing the risk of permanent loss, as in case any one of your assets crashes, the rest of your assets will be performing differently at that particular point in time.

So, upto a certain level, you are minimizing your risk factors while diversifying your Crypto investments. As a result, you are increasing your chances of getting more returns over time.

Top Crypto Diversification Strategies

Now, you know why it is always advised to diversify your Crypto investment. Now we will also guide you with the process; that is how. However, crypto genisus is always there for guiding you on Crypto investment.

Knowing these tactics will help you in making firmer decisions on Crypto investments and diversification of your Crypto portfolio.

1. Diversifying By Industry

Just the way you invest in stocks from different sectors for protecting yourself in case one sector takes a hit. You also can apply that strategy here in your Crypto investment. Diversify your investment in Cryptos from different industries.

Here is a list of some of the major industries with considerable Crypto projects.

●  Energy.
●  Supply chain.
●  Medicine.
●  Decentralized finance.
●  Finance.
●  Identity.
●  Data and analytics.
●  AI or Artificial Intelligence.

Regional diversification, which means Crypto projects from different regions of the world, is also an excellent way of diversifying.

2. Diversifying The Type Of Cryptocurrency

There are a huge number of options when it comes to Cryptocurrencies. So, instead of putting all your money in a single Cryptocurrency project, you can diversify your investment in several Cryptocurrencies.

It does not mean you will just select a random coin and invest 20% of your total investment amount there. You have to consider some essential factors for selecting the right Cryptocurrency to invest in.

3. Time Diversification

We hope you get this point from the very name itself. Time diversification implies “investing over time”. You might also have heard the term “dollar-cost averaging,” both of them are the same. Suppose you have $40,000 to invest. Instead of investing the whole amount at once, you can think of investing $1,000 to $4,000 on a monthly basis.

This automatically lowers the risk of having to time perfectly the market for making the best return. Time the market is an effective strategy in the investment sector, but it also comes with its own risk. So, if you want to avoid the risk, you should think of time diversifying.

Diversify Your Crypto Investment

When you are strategizing your Crypto investment and developing a proper planning point-wise, do not forget to include diversification. As we have discussed in this article, it has the potential to offer you higher returns by lowering the investment risks upto a certain level. However, always remember, there is no strategy that will eliminate the risk of Crypto investment.

More Resources:

Mashum Mollah is the feature writer of Search Engine Magazine and an SEO Analyst at Real Wealth Business. Over the last 3 years, He has successfully developed and implemented online marketing, SEO, and conversion campaigns for 50+ businesses of all sizes. He is the co-founder of Social Media Magazine.

View all posts

Leave a Reply

Your email address will not be published. Required fields are marked *

Related

cryptocurrency

How To Become A Successful Cryptocurrency Trader In 5 Easy Steps

In the last few years, cryptocurrency trading has picked up in a major way. The rise of cryptocurrency exchanges and trading platforms has meant that normal people, like you and me, can earn handsomely from cryptocurrency trading.  The first cryptocurrency, Bitcoin emerged into the scene in 2009. Over the last decade, the cryptocurrency has traded to record highs of $20000 USD to lows of $4000 USD. However, investors and traders have been able to make millions by doing the right kind of trade.  In this article, we look at 5 easy steps that can help you become a successful cryptocurrency trader.  How To Become A Successful Cryptocurrency Trader In 5 Easy Steps: 1. Choose the right Trading Platform: The first step toward success is also the toughest one. If you want to be successful, you need to work on the best crypto trading platform. This is because successful trading is all about the cryptocurrency software, which platforms use.  The best trading platforms use the most sophisticated and advanced software. This software helps you see trends, show future projections, and make informed decisions. It is essential that you do your research and evaluates how good a platform really is.  2. Make Low-Risk Trades initially on the trading platform- Most people who are too eager to get into the cryptocurrency trading game create one cardinal mistake. They make high volume and high-risk trades very early on. If you are able to pull off a high-risk trade, you stand to make greater profits.  However, this is a strategy, which should usually be followed when you are experienced as a trader. When you are starting out, it is best to go slow when it comes to making trades. This will help you get an idea about the dynamics of the trading platform and gain experience.  3. Let the Trading Software do the bulk of the work for you- The best cryptocurrency trading platforms invest millions of dollars in securing the right tech for their platform. This software uses complex algorithms Artificial Intelligence and Machine Learning to bring you the best trades.  If you want to be successful in this trading ecosystem, it is best to make informed decisions. The software is powerful, user-friendly, and will guide you at all times. Yes, the final decision rests with you. However, inexperienced traders should pay attention to what the software suggests.  4. Be informed of Global Happenings and keep yourself updated: While you do not need to spend more than a couple of hours every day on the trading platform, you can always keep yourself updated. This means reading up credible journals on cryptocurrency and doing your own research.  Many global happenings alter the valuations of cryptocurrencies. For example, if countries start legalizing Bitcoins and other cryptos, it usually leads to a massive hike in valuation. (When Xi Jinping took a favorable stance on Bitcoin and Blockchain, the valuation soared by over 30%).  5. Be Safe, Secure, and Protected at all times: The world of cryptocurrency attracts cybercriminals. This means that you have to ensure security on two levels- on the trading platform, as well as your own system. Choose a trading platform, which has a strong firewall, great encryption, and password protection.  On your end, you can choose an industry-leading antivirus solution to help you protect yourself from phishing, malware, spam, and other dangers.  Conclusion For a very long time, the general population could not take part in earning from cryptocurrencies. Mining is very expensive and requires strong technical knowledge. However, trading platforms are a great way to earn from cryptocurrencies.  By following all the above-mentioned steps, you can rest assured that you are well on your way to become a successful cryptocurrency trader.  Read Also: 4 Business Leadership Skills for Business Success Exciting Facts About Cryptocurrency And Crypto Wallets

READ MOREDetails
Mutual Funds and stocks

Mutual Funds Vs Stocks: Which One Is The Best Option For You

Many people already know that mutual funds and stocks can be excellent sources of income and present great opportunities for investment. When it comes to monetary assets that give outstanding dividends, then the concepts of stocks and mutual funds are quite easy to understand and they have the potential of maximizing your earnings. Both stocks or funds are now known to be some of the most popular investment vehicles that many investors are interested in. This article discusses mutual funds vs stocks. Mutual Funds Versus Stocks It’s worth noting that stocks refer to the physical representation of part of a company’s value that can be traded on the stock market. Therefore, when a company decides to go public and issues its shares, it means the combined value of the shares either owned by persons or the company is what makes the total value of that company. As a result, being a shareholder means you own a small part of the company and you can take part in all the annual shareholder meetings. On the other hand, mutual funds are made of a pool of funds gathered from several investors to buy securities, such as stocks, bonds, and other assets. Simply put, mutual funds refer to a collection of bonds and stocks that fund managers manage. Hence, if it's a debt mutual fund, then it can have government bonds and securities, while an equity mutual fund can have stocks. Ideally, an investment in mutual funds is a type of investment in bonds and stocks that is managed by an investment firm. Direct investment in stocks is considered to be an active type of investment that involves you handling the buying and selling of the products yourself. For a new investor, perhaps it’s a good idea to choose mutual funds as it allows the experts to handle the investment on your behalf. Direct investment in a share is great for people who understand the market and can manage it themselves. Key Differences Between Mutual Funds And Stocks Keep in mind that shares are usually offered to the public as a business growth strategy for companies while mutual funds are just an investment for people. Because mutual funds are a portfolio of stocks belonging to a company and managed by a fund manager, it means you cannot control the trade of stocks. Also, you cannot decide to exit from some of the stocks that are in the portfolio. As explained earlier, with mutual funds, an investor is not involved directly in the management of a portfolio except when it’s the time to choose the fund. This is the reason why it makes sense for new investors to opt for mutual funds, especially those who know little about the stock market. Direct investment in shares needs a good knowledge of the company's performances and the stock market. No doubt, it’s a hands-on activity that needs quick market decisions and is suitable for experienced stock traders. Read Also: Why Off-Plan Investment Is Beneficial For Expats Mistakes that Expats Make when they Move Overseas 6 Steps to make Your Trade Show a Success

READ MOREDetails
Term Life Insurance

Did You Know NOT ALL DEATH are Covered by Term Life Insurance? 

When you think about life insurance, you think about the financial security it will provide your family when you die. What most people don’t know is that life insurances do not cover every type of death.   Term life insurance is the most common and affordable type of life insurance policy. Term life insurances specific number of years before the policy expires.   You then have the option of renewing it. If you die during the term, however, your insurance will provide death benefits to your beneficiary.   You should know that life insurance policies have some coverage exceptions. Particularly when it comes to the type of death.   This is an important consideration as you purchase a life insurance policy, or if you are continuing to manage one. Deaths Not Covered by Term Life Insurance There are certain reasons why your term life insurance won’t payout upon your death.   These coverage exceptions can be a hassle for beneficiaries and loved ones. Especially those who rely on your life insurance to cover medical, funeral, or burial expenses. Deaths which might not have coverage through insurance. Fraudulent Deaths  If you commit life insurance fraud or someone lies about the cause of death, your life insurance company may refuse to pay death benefits.   It is important, to be honest, and forthcoming when applying for life insurance. Especially if you have any medical conditions or dangerous conditions you are in.   Dangerous Hobby-Related Deaths If your lifestyle is dangerous or you have dangerous hobbies, these activities may affect your life insurance. For example, certain pilots must opt-in for special aviation coverage to get life insurance.    If someone dies in a flying accident, beneficiaries will not get death benefits.   If you regularly engage in dangerous hobbies like– bungee jumping, scuba diving, or free-climbing – you need to inform your insurance agent or carrier upfront. You may need to list these hobbies or opt for additional coverage.   You may also have a higher premium. Be honest, even if it does mean a higher premium. As noted previously, if you lie on your application or about the cause of death, your beneficiaries are the ones who will suffer.   Murder If one of your beneficiaries murders you with the intent of collecting your insurance money, they won’t prevail.    The Slayer statute prohibits death benefits from being paid out to anyone who murders or is tied to the murder of the insured. If this happens, death benefits will be distributed to your contingent beneficiaries or your estate. Suicide Most life insurance policies have a “suicide clause”. This clause states that if you commit suicide during the first two years the policy is active, then the policy will not cover the death or pay death benefits.    This is designed to prevent individuals from obtaining a policy and then immediately committing suicide.   If the death is possibly suicide, such as a drug overdose, then the insurance company may deny coverage.   They will have to prove that the insured committed suicide (the death was deliberate) and not the result of an accident.   Make Sure You Understand Your Life Insurance Policy As you can see, there are a variety of situations that could result in your life insurance refusing to pay death benefits to your loved ones.    You should talk to you insurance agent to find out specifically what is and is not covered by your term life insurance policy.    Make sure your insurance agent is up to date on any medical conditions you have or any changes in your hobbies or occupation.    Doing so can help prevent your loved ones from experiencing the unfortunate scenario that is a life insurance coverage denial.  Common Misunderstandings About Life Insurance Exclusions  It's easy to assume that your loved ones are fully covered once you have a life insurance.   Are they?  But as you’ve seen, not all deaths are covered by term life insurance policies. It’s crucial to understand these exclusions clearly.   There are often misconceptions, like believing every type of accident or unforeseen circumstance will be covered, which isn't always the case. Knowing the details is key to avoiding unpleasant surprises later.  Reviewing Your Life Insurance Regularly  Your life circumstances can change, and so should your life insurance coverage. For instance, you might pick up a new hobby that could impact your coverage.   It is a good habit to regularly review your policy with your insurance agent. This ensures that any updates on your health, hobbies, or job are recorded.   Doing this can also give you peace of mind, knowing that your policy remains relevant to your current situation.  Final Note: Clarity is Key Understanding what your term life insurance covers—and what it doesn’t—is vital. No one wants their loved ones to face unnecessary hurdles during difficult times.   Take the time to sit down with your insurance agent. Ask questions, review potential exclusions, and make sure everything is transparent.   A few efforts today can make all the difference for your beneficiaries tomorrow!  Read Also: A Detailed Guide to Cashless Car Insurance Policy Insurance- Need of the time How Private Hire Insurance Takes You Out from Problems? Self-employed Health Insurance: Best Types for Every Freelancer

READ MOREDetails