How Diversified Is Your Portfolio?

A Sometimes Sensitive Topic
Establishing the perfect portfolio, in terms of allocation and risk management is an almost impossible task. This is largely due to one very important aspect that is often ignored. The structuring of a good portfolio comes down to who’s managing it. In other words, skill, knowledge, and experience all play a vital role in the decision-making process. Essentially, newer investors are unlikely to make good decisions when it comes to altcoins.
I am often called upon in the heart of a bull market by new and greedy investors. Greed, alone, is a dangerous vice when it comes to investing. Compound that further with a lack of experience and knowledge, and you have the makings of a disaster. When it comes to new investors, I always advocate having a majority exposure to BTC and ETH. A modest allocation to top-tier altcoins, and then minimal exposure to more high-risk projects.
In my opinion, new investors should only allocate 5% of their portfolios to high-risk investments. Many newcomers are blind to the possibility of risk. They choose to focus on the aspect of reward, and fail to consider what would happen, if the market were to turn on them. At the end of the day, the risk profile of a portfolio is relative to the person managing it. Essentially, this points to one very important aspect, and that’s honest assessment.
Accurate Assessment & Rebalancing
If investors can honestly and accurately evaluate and assess themselves, in terms of skill, knowledge, and experience… they are likely to come away with a fairly solid portfolio in place. That being said, the rebalancing of one’s portfolio is also very important. I remember how in the previous cycle I had a fairly modest exposure to Ethereum. However, once ETH shot off from $80 to $4500, my ETH exposure was pretty much 40% of my portfolio.
I began to rebalance at approximately $4500, with the majority being adjusted by the time ETH hit $3200. I think the average was in the vicinity of $3800. Depending on which assets perform, your portfolio could look somewhat different 12 months down the line. Once again, knowledge and experience should dictate an investor’s approach. A new investor is unlikely to know anything about rebalancing a portfolio.
However, more experienced investors will look to securing gains, as well as maintaining or adjusting their risk profile, depending on the state of the market. As you can see, effective portfolio construction and management is not a once-off event. It requires a lot of thoughtful planning and execution. There’s no single perfect portfolio… a one-size-fits-all approach. Your portfolio should match your abilities and experience.

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Final Thoughts
If you are a new investor with a high-risk portfolio it might be a good idea to re-evaluate. One can always have a stroke of good fortune. However, the majority of the time, it tends to be the obvious outcome that prevails, and that is getting REKT. At the end of the day, every investor needs to make their own investment decisions. These are simply my viewpoints after years of experience, and by no means, investment advice.
As 2023 draws to a close the window is beginning to close. These are the final moments of preparation, allocation, and execution. Things will begin to accelerate in 2024. All the best for your portfolio planning, and I hope you manage to put together a winner! All the best!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.