Before investing in cryptocurrencies, it’s important to understand your risk appetite, create a plan and appreciate the value of portfolio diversification.
Components of risk assessments often include asset allocation, qualitative analysis, quantitative analysis, liquidity and time horizon.
There are many risks associated with cryptocurrency investing, the main ones being:
The importance of planning is commonly overlooked by first-time cryptocurrency investors. Failing to plan can be the main reason why you may not achieve your financial goals.
You should be constantly reviewing your investment decisions through the framework of your plan. To help ensure you remain accountable to your plan, consider implementing methods such as documenting your plan or forming an ‘accountability partnership’.
Whilst creating a realistic investment plan can improve the likelihood of reaching your financial goals, remember: a plan is only as good as your ability to stick to it.
Creating and executing an investment plan in 6 steps:
Asset diversifaction is a strategy which encourages investment across multiple industries or asset classes. Having a well-diversified portfolio is important as it can reduce portfolio risk and volatility.