I often shout “Diversify!” when I speak about crypto, I even wrote a few posts specifically on that topic. I’m known for keeping a ridiculously over-diversified crypto portfolio that’s not very easy to track and manage (we’re talking way in excess of 50 cryptos here).
But is that all there is to diversification? Hold a lot of different cryptos – spread the risk and maximise the chances of finding something with good ROI – sell the ones that Moon and buy cheap (good) ones in their place?
Well – yes. That’s pretty much exactly what you should do.
I recently started placing crypto orders with fiat again. It is the first time in many Moons (regular lunar cycles – not crypto coins Mooning!) that I’m buying crypto with fiat.
It occurred to me that while I often speak of crypto diversification; I never speak about any other form of diversification. The fact is that there is a lot more to diversification than just crypto.
If you’re a seasoned investor then you already know that. That’s fine, this post isn’t for you.
Here’s the thing: People are easily influenced by the media – including crypto blogs like this one. Until you study this effect you have no idea how powerful it really is. It’s scary – and you had better believe that politicians and corporations know how to use it – know how to manipulate you. But this post isn’t about them. It’s about people who hear what they want to hear.
Say, for instance, you’re interested in Ripple. You go to the Ripple forums, you join a few Ripple groups and you read posts about Ripple. Because those places are all frequented by Ripple fans who write pro-Ripple articles/posts/comments etc – you get a very favourable picture of Ripple. What you probably don’t realise is that you’d already decided that you wanted to buy Ripple. You weren’t seeking an unbiased opinion; you were seeking confirmation. Such is human nature: “I don’t want to go into this alone, I want other people with me.” Tell me I’m wrong – I dare you!
What you should have done was to read my series on Ripple! ? If you’d still bought it after that then there is no helping you!
The same applies to crypto in general.
While I don’t recommend a Ripple buy, I most certainly do recommend crypto buying – especially now in the first half of 2019. I’m practising what I preach by doing so myself.
But I’m not only buying crypto!
As a crypto blogger I feel it is my responsibility to point out to less experienced investors – those who are here subconsciously seeking confirmation – that crypto is only a part of your greater portfolio. The crypto buys that I am doing now are certainly an investment, but I am also buying other things at the same time!
Buy some gold. Buy some silver (silver is still a very good deal for now). Buy property. Buy shares. You should even hold some money in high interest fiat accounts.
Please people – don’t rush headlong into crypto without diversifying elsewhere. Yes, crypto returns can be great, but you can also get slaughtered in this market. I have had numerous coins fail on me. I’m not talking about coins which did poorly in the bear market – all my crypto suffered that fate to some degree. I’m talking about coins which crashed outright and no longer exist! I lost a ton of money to the likes of Centra, Titanium, Envion and others. It can happen! Those were all legitimate cryptos – I won’t even mention all the BitConnect style scam coins out there (please avoid those too!).
I have often heard the advice “put 1% of your wealth into crypto”. I have no idea who originally said it, but I strongly agree with it. 1% is more than enough. The beauty of crypto is that it is still young and has so much growing to do – that 1% will sky-rocket without you putting vast amounts of cash into crypto (provided that you have invested well). In a worst case scenario all crypto goes to zero and you lose 1% of your wealth. Most people should be able to handle that loss. It would be a different matter if 50% of your wealth was in crypto, wouldn’t it?
So remember Bit Brainians: crypto is great, crypto is fantastic – but don’t spend too much on it! That’s gambling; and gambling is not clever investing.
Yours in crypto
“The secret to success: find out where people are going and get there first”
~ Mark Twain
“By this means (fractional reserve banking) government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.”
~ John Maynard Keynes