A finger in every pie: why smart investors diversify their portfolios with crypto assets
Now, diversification of assets is nothing new for portfolio managers. A well balanced mix of assets must represent a combination of conservative positions that possess low risk with a moderate addition of more risky assets that provide growth opportunities.
An old market proverb says: “When you’re 30, keep 70% of your portfolio in stocks. If you’re 70, keep 30% of your portfolio in stocks” establishing the first rule of balanced investments. The basket must reflect investor’s lifestyle and income/spending expectations.
Matthew Cochrane did a good job laying down basic parameters of a safe and prosperous portfolio: “The aim of diversification is to avoid each extreme, allowing investors to achieve high returns while reducing volatility along the way and making it unlikely that they will suffer from a permanent loss of capital. The primary means of accomplishing this is through asset allocation, the practice of dividing investment money into different classes of assets — such as stocks, bonds, real estate, and cash — that will act independently of each other. Some more exotic asset classes include cryptocurrencies, gold, fine art, commodities, and much more.”
Potential share of each asset class depends, as we have learned earlier, on every investor’s profile and level of risk aversion. However, it is fair to say that the balanced portfolio must have at least 50% in low risk interest accruing positions (like bonds), no less than 30% in more volatile but cash generating positions (typically, high class dividen bearing equities) and about 20% in frontier assets that provide room for significant appreciation.
The market has been clear and straight about most recommended frontier class: crypto. Financial Times column title says it all: “Wall Street starts to dip its toes in crypto” proving that the smartest money on the planet turn their heads in this direction. After decades in top investment moguls, their senior executives drop everything to pursue this new investment field. The idea is widely confirmed by refined scientists; Yale professor Aleh Tsyvinski said in an interview that “When you invest in your retirement, Vanguard or whatever platform you use … you should hold 6% of your portfolio in Bitcoin” and some more in other cryptocurrencies.
Some Wall Street professionals articulate the call loud and clear: stop ignoring the promising sector and add cryptocurrencies to your portfolios. Respected Canadian newspaper Globe and Mail has put together a notable list of top financial professionals advising to get invested in digital assets. And those are conservative asset managers! More prominent adepts of crypto are saying same things as Mike Novogratz who used to run a well established fial hedge fund called Fortress Investment Group: the prices will go up as “financial institutions will transition from investing in cryptocurrency funds to investing in cryptocurrencies in the first quarter of next year.”
Having established that, let’s try finding the best picks in the sector. Over 2016–2018, the market has demonstrated good taste for altcoins. Their total market share has increased to over one third currently hitting as much as 50% at the late-2017 peak. Autonomous NEXT data shows that the demand has been shifting from pure tech stories to more value backed and cash generating ones: new items that meet investors’ demand come from financial, industrial and consumer sectors.
We have talked a bit about pros (which prevail) and cons of asset backed tokens. The best solution for the balanced investment portfolio, thus, shall lie within an overlap of those segments: an asset backed token which is consumer oriented and has opportunities for rapid value growth but in the same time is protected by its core, collateral. As you remember, we stated that before asset backed cryptocurrencies (we’ll cover those later) leveled the playing field, there were mainly four investment vehicles for value based investing outside of stocks, bonds, and options: precious metals, real estate, diamonds, and collectibles.
Let us share a couple of examples where investors received benefits from holding asset backed tokens in their portfolio. Several early investors took part in real estate token sales and other asset backed projects widely discussed on the market. Other notable attempts are made by Tiberius Group which plans to introduce a metals-backed cryptocurrency (the Tiberius Coin) tied to copper, aluminum, nickel, cobalt, tin, gold, and platinum.
D1 Coin fits this description perfectly: it is designed to open a new option previously unavailable on the market with this scale and simplicity: investment diamonds. It is secured with a pile of stones stored securely in a tightly guarded vault, and it is wrapped in a digital form of a token, thus enabling unlimited and fast circulation between millions of investors across the globe.
This is definitely a frontier asset to add to your basket.
Thank you all for joining us today! We barely were able to scratch the surface with our brief overview, so be prepared for an amazing adventure in your research. If you enjoyed the article, don’t forget to leave a clap!
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About the D1 project:
D1 aims to be one of the top asset-backed crypto tokens accessible by everyone, backed by the valuable and rare investment-grade natural polished diamonds.
Investors from the ultra-rich to the retirement-minded can purchase and trade these coins with the peace of mind knowing that each holds the value of 1/1,000th of a carat of hand selected quality polished diamonds.
