· 4 min read · Sep 28, 2020
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Unless you are a seasoned trader and investor, with deep knowledge of the industries you trade, investing can be hard. There is always guesswork in which asset to buy, at what price and what quantity. Gold, blue-chip stocks and index funds are all the craze now. A popular hashtag TINA which recently became famous (stands for There is no alternative) is a crude theory as to why stock markets are rallying up in the middle of a recession. Then there are cryptocurrencies.
Ray Dalio (founder of the world’s largest hedge fund) states that the golden rule to wealth management is — diversify, diversity & diversify. Cryptocurrencies is an uncorrelated asset class that traditional markets have not tapped into yet. On the other side, people and companies who understand technology and finance are mostly enthusiastic about it. For instance, Micro Strategy an IT company recently made headlines when it bought over one billion dollars’ worth of Bitcoin as a hedge against inflation as a part of its liquid asset pool. Which makes sense considering that on a year to year basis, major cryptocurrencies have outperformed every other investment option, including gold.
Bitcoin (the poster boy for cryptocurrencies), was worth only $327 five years ago, but now is roughly around $10,500. This represents a 3111% increase over the time, or on an average 622% per year! This kind of price movements are no rare occurrences in crypto markets. And most of the other top cryptos have grown similarly beating any other asset class in the world.
As an investor, these projects present immense opportunities, enough to drive one’s portfolio growth for years to come. Yet, many people are wary of investing in cryptos as they are notorious for being volatile. To capture the huge potential upside while keeping the risk low, one should can invest a small portion of ones net assets to diversify by creating a portfolio of top cryptocurrencies as a part of his net worth. Risk averse investors can go up to 5% of their net holdings and more adventurous investors can start with 10%.
Let’s take the Bitcoin example. If you had $10,000 net portfolio five years back, and invested $500 (5% of your savings) in Bitcoin, your investment would have been worth $15,555 today, bring the net portfolio to over $25,000 ( a 250% growth of total portfolio value from only 5% of the portfolio). On the other hand if you were to loose that money, your portfolio would be worth $9,500. That’s probably the best risk-reward ratio you can come by.
With the inherent volatility in cryptocurrencies, it doesn’t make sense to just buy into cryptos at any point in time like you would buy into an index fund. Also, there are many cryptocurrencies to pick from and not understanding the overlap between industries and use cases of these tokens can hurt you investment. Should high risk tokens be bought and traded frequently, or a long term investment in high market cap coins be made?
In my opinion the only thing that the user must decide while building a crypto portfolio is his own risk profile. Based on a risk preference, an automated system can create multiple portfolio building and trading strategies that can be run in parallel. Being a passive investing strategy, no trading or coding skill is required at user’s part. And that’s exactly what Botsfolio does.
Botsfolio is a hedge-fund grade tool that makes it as easy as it gets to build a crypto portfolio and trade. It allows users to make profit from crypto assets without studying technical and fundamental analysis and spending days looking at charts. The service connects to the users Binance crypto exchange account, sets up multiple bots based on user’s risk preference and starts trading and portfolio building on user’s behalf. Based on the risk level, Botsfolio distributes user’s capital into different cryptocurrencies, automatically picking up the top cryptos diversified across use cases and the right buy price for each. It also trades with a smaller portion of the money to create recurring returns on the net portfolio.
What do you think about our 5% rule of investing? Let us know in the comments.
