Variety doesn’t only spice up your life.

If used correctly, it can protect and improve your investment portfolio as well. And it’s nearly a God-given gift for people who are delving into the Cryptocurrency industry.

Why?

Well, the world of Crypto is pretty volatile and unpredictable. Therefore, if you don’t play it strategically, you might end up losing a lot of money.

That wouldn’t be a desirable sight, would it?

That’s why many other investors and I tend to focus solely on diversifying their investments to ensure a safer approach. Keep reading to know how you can do the same as well.

Why is Diversification Important?

Crypto diversification is an investment strategy that involves you dumping your cash in more than one Cryptocurrency module. This way, it becomes easier for you to earn money from lots of different sources. And even if one side of your investment fails, the others will pick it up.

Additionally, by putting all of your eggs in a single basket, you risk losing money from other opportunities. This, in turn, can affect your investment portfolio even more.

How to Build a Better Cryptocurrency Portfolio?

Yes, diversification is, indeed, the key to succeeding in the world of Cryptocurrency. But it’s not the only thing you should focus on. In addition to that, you must choose a decent trading or exchange platform. So, don’t forget to do a lot of research on that. To learn more about it, read more here.

Anyway, here’s how you can diversify your Crypto portfolio.

1: Invest with Different Use Cases.

Currently, there are more than 12,000 different Cryptocurrencies available out there. Most of them are created differently and, therefore, have a diverse array of use cases too. Thus, choose one Crypto from a specific use case and then opt for something else that has a different one.

For example, you can select one coin that’s used to make a payment. Then, go for another one that can be used for smart contracts or supply chains.

2: Focus on the Industry Selection.

So, you have invested in two different use cases, right? Well, then, leave that and focus on an industry-based Cryptocurrency option. For example, if you want to go all-in, select something that’s being used in the healthcare segment.

If you wish to play safe, the transportation and supply chain industries can be excellent too. It might seem a little risky to invest in the field of entertainment. But it can also be rewarding.

3: Tap into the Potential of Asset Class.

When it comes to the asset class, you can choose between three different options - stocks, real estate, and bonds. Amongst these, the bonds seem to be a safer option, as they are tied to a specific organization. So, your risk of losing money will be less.

Stocks are a high-risk-high-reward option that can be an option if you have spent a large part of your investment into something else. Or you may opt for the real estate segment too.

Can Diversifying be Risky?

When it comes to Crypto trading, diversification is often considered to be synonymous with -

  • Lower price-related volatility.
  • Rebalancing your former Crypto holdings, and
  • Learning more about the Crypto economy.

However, in some cases, it can be a little risky for you as well. For instance, if you had ended up choosing the wrong options, your investment return would be pretty low. Also, selecting different niches for your diversification dream can be quite time-consuming. Finally, trading or selling a Crypto-based asset can also generate a tax liability for investors.

So, Should You Do It?

Absolutely!

As mentioned before, the world of Cryptocurrency is quite unpredictable. So, the risk of you losing your money will be pretty high.

Yes, diversification can sometimes get you a smaller profit on the investment you have made. But it can also ensure that you are not losing your money for some absurd reason.

In my opinion, no matter where you are investing your money, diversifying it properly will be important for you. Now, if you don’t have any idea about how to do it, talk to an experienced investor. They’ll tell you about the tricks that can get you gold through this strategy.