A financial investment plan is crucial for any asset to achieve milestones from time to time. As most of you know, cryptocurrency is a volatile market. It becomes even more vital for investors to plan their investment strategy to mitigate loss and earn better risk-adjusted returns. It can also help you easily sail through bear markets if you are new to crypto and want to get started. Here are some tips to help you create a personal crypto investment plan.
Understand, Research, and Evaluate
The first step to creating a personal crypto investment plan is to evaluate your current financial standing and determine how much you can invest in the crypto market. Once you are clear on it, you can start researching on which cryptocurrency to invest in — understanding the supply and demand, utility, blockchain, accessibility, communities, and tokenomics before taking a step ahead. Later, depending on that, you can choose a crypto exchange.
Note: Do not invest what you can not afford to lose. It is prudent to start small, gain experience, and gradually scale up.
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Decide on the goals
After evaluation and research, you can set either long-term or short-term goals depending on your targets. For example, if you just want to try out your hands in crypto, you can set a less risky and short-term goal, while if you want to earn a passive income because you want to retire early, you can choose a high-risk investment to align with a long-term goal.
Just defining where you want to get can help you accomplish things better. It also helps in gaining an understanding of how much risk you can take in the crypto market.
Diversification
Next comes the diversification of your portfolio. In the cryptoverse, you can diversify across various products, coins, tokens, and use cases depending on your goals.
For example, you can allocate your crypto portfolio with 40 percent of Bitcoins, 30 percent of altcoins, 15 percent of stablecoins, and 15 percent of NFTs to avoid risk rather than putting all your eggs into one basket.
A diversified portfolio is capable of reducing the overall risk and volatility. In order to earn more risk-adjusted returns, it is essential to build a well-diversified portfolio, spending little time on research.
Bonus tip: Following news and events around the crypto realm can help you decide better on your portfolio diversification and what and when to invest, depending on the sectors' opportunities.
Time the market
The prices of cryptocurrencies can drop or overgrow in seconds on nothing more than a rumor without a base. So, as a novice investor, the first thing to do at such times is not to panic.
Keep your cool and research things, and then decide if you want to book profit on time or sell. But a smart way could be just to stick to your plan and invest to avail the rupee-cost averaging and to experience the power of compounding.
Also, one should know that the market is in its nascent stage. So, there are more chances of new tokens and projects entering the market and creating buzz. But, it is vital to stay aware of such trickster schemes to stay safe.
Bonus tip: Investors should consider setting stop-loss orders. These are orders to sell an asset when it declines to a certain price level. It can help protect investors in times of crisis.
There are thousands of cryptocurrencies in today's market. You can set a personal crypto investment plan by picking up the best ones from the market, which is possible only through thorough research. To begin with, start small and only invest in money you can afford to lose, and gradually you can increase your limits.
(The author is the CEO and co-founder of Mudrex, a global crypto-investing company)
Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.