According to Investopedia, diversification is defined as “A risk management technique that mixes a wide variety of investments within a portfolio.” Akin to the old adage of “Don’t put all of your eggs in one basket”, diversification reduces your risk in many ways when investing. Investing in one specific asset in an asset class exposes one to both the failures and the profits gained by that one asset. You as the investor take on a lot of risk that the asset will falter or potentially die.
Instead of investing in one or two assets, Investopedia recommends a portfolio of 25–30 is the ideal according to many mathematical models. This ensures that when some of the assets are “up”, others will be “down”. If the portfolio asset class is growing as a whole, then your portfolio its self will grow.
Many people in the crypto space have their “favorite horse” — A crypto that they believe will gain huge amounts of value. I have been in the space for a few years now. Trading both on technical indicators and fundamental-ish analysis are paths that I have explored almost thoroughly. It is really hard to account for risk when you are betting on a single crypto or even a few cryptos. Most people would probably be better off just purchasing an index, like in the stock market.
The Cryptex Index Tracker is a portfolio building software for cryptocurrencies. It tracks your choice of number of cryptos by their market capitalization. You as the investor remain in control of your accounts on the various exchanges. Instead of trading actively to mimic the market cap, you use Cryptex Service’s software to mathematically follow the market. Check us out at www.cryptex.services.
*This is not financial advice. Speak with a professional if that is what you are seeking.
