In 2017, Bitcoin made headlines when it skyrocketed in value from about $960 to over $19,000 for a return on investment (ROI) of over 1850%. For reference, it took the S&P 500 — an index tracking 500 of the most valuable companies trading on the U.S. stock market — 36 years to achieve the same return for investors (153 points in 1983 to 3000 points in 2019). The explosion of growth was unprecedented and life-changing for the relatively few people who were invested in Bitcoin before its rise.
But this is only half the story, because while Bitcoin performed tremendously during 2017, the rest of the crypto market launched into the stratosphere. During that time, Bitcoin’s incredible growth was dwarfed by the value of the altcoin markets — altcoins are generally considered to be any crypto token other than the original Bitcoin — which grew in value from about $2.25 billion to over $347 billion for a total return of over 15,300%. So while Bitcoin’s investors were certainly celebrating their decision to get into crypto, it was their altcoin-investing contemporaries who were enjoying their decision to the greatest extent.
The Principle At Play
At the heart of portfolio-based investing is one of the most basic, core tenants of investing: diversification.
Diversification essentially refers to the practice of mixing a wide variety of assets within an investment portfolio. It allows you to simultaneously dilute your risk that any single asset introduces, while also giving you a greater likelihood of benefiting, at least in part, from a particular asset that experiences unusually superior growth.
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So how does this work? If, for example, you wanted to invest in the stock market, you would be encouraged to spread your money over not just a series of companies, but a diversity of sectors. In other words, you’d likely be better off investing in Apple, Disney and Ford, than in Verizon, AT&T, and T-Mobile. This would allow you to minimize not just the impact that a particular company’s struggles would impose on your portfolio, but also the negative effect that an industry-wide change would have on your investment standing.
Diversifying Your Crypto Portfolio
Collecting a highly diversified stock portfolio is as simple as investing in one of the many ETFs or Index Funds that are offered by many of the largest stock brokerages around the world. But your options are quite so plentiful or simple in the crypto world. It used to be that owning a diversified crypto portfolio would require purchasing each token individually, before securing and tracking them manually. However, since 2017, a number of services have entered the space, including Elevatyr, that aim to provide a greater degree of convenience and simplicity to this process.
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However you choose to manage your crypto investments, owning a diversified portfolio of tokens can help you achieve long-term success, as you responsibly manage your risk and take advantage of the many opportunities that the markets present.
If you would like to learn more about diversified portfolios or a better way to invest, visit https://www.elevatyr.io/.
Disclosure: This article does not represent cryptocurrency investment advice, and is for informational purposes only. Trading decisions should be made on an individual basis, and be informed by independent research. Elevatyr makes no recommendation as to trading behavior that should or should not be taken. The author of this article owns a small stake of a variety of cryptocurrencies.
