Portfolio Rebalancing – Mitigating Risk & Seeking Alpha

Finding The Balance
One of the best strategies in a bull market is to add to your winning positions. However, it’s important to exercise this strategy during market corrections. On the other hand, risky investments that experience significant gains are primed for a little pruning. I don’t always exercise this discipline, a lot depends on the risk profile of the asset. However, I have recently gained exposure to some memecoins on the Fantom Network.
This is in line with my “layer 1 effect” strategy, which seems to evade some, judging by some of the ignorant comments across various blogging platforms. It’s an incredibly powerful strategy. However, it appears many Crypto investors are still a little wet behind the ears, regarding how this market functions. What many are also unable to understand is that a majority who are out of sync with the market are the “mechanisms” of profit.
In other words, a profitable minority is dependent upon a clueless majority. The moment the scale tips the other way, we have a problem, which is why traders like myself who inform and educate readers are essentially doing ourselves an injustice. Yet another dynamic that evades the average Crypto investor. Back to the matter at hand, adding to winning positions is primarily done within the blue chip and mid-cap sectors.
Skimming the cream is reserved for riskier plays, or investments that have significantly outperformed the altcoin benchmark and are likely primed for a decent correction. This is exactly what I am waiting on when it comes to my memecoin exposures. As mentioned, I avoided Solana and Injective Protocol, regarding memecoin exposure. I chose to position myself ahead of the market and in projects with strong community support.
Micro-caps that establish themselves within the Top 100 are perhaps a different story. With a move like this comes a reduction in the risk profile, and will likely require investors to re-evaluate their outlook. A strong move can warrant a little profit-taking, while a severe correction opens the door for additional exposure. However, additional exposure must be modest, relative to the existing investment.
How Is As Important As When
An overly aggressive deployment of capital will ultimately compromise your early entry, which simultaneously increases the risk profile of the investment. Two investors can add to and reduce an investment at exactly the same time. However, one can be successful while the other is unsuccessful. How you deploy capital and execute moves in the market is equally as important as when you do it.
Rebalancing a fraction of profit from an enormously profitable trade or investment provides additional capital for seeking out alpha. It’s all about alpha in this market… beating the benchmark is how you stay ahead of the market, and ultimately secure stellar returns over time. I have spent a lot of time over the past few days looking at where I want to deploy profits as soon as they reach the “harvesting” phase.
It’s not a case of closing the entire position, but rather that of shifting capital from an exhausted investment vehicle to one that is fresh and ready to run. Essentially, I continuously seek to have a portion of capital that is hard at work, regarding bringing home the bacon. I understand that there are times of “stagnation”, even in a bull market. However, there is always an asset or asset class that is primed for, or busy generating alpha.

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Final Thoughts
Rebalancing in such a way keeps things fresh. It’s very easy to become complacent with your long-term bags. Many investors miss out on amazing opportunities because they are unable to “travel” with the market. They simply sit on the side of the road, while they wait for their investments to perform. Action-based strategies are not only more profitable, but they keep you in touch with the market.
Always looking for the next opportunity as other investments mature, is an investment approach that maintains and improves your momentum, and ultimately, your profitability in the market. Anyway, that’s it for this one. I hope readers were able to benefit from the flash crash earlier today. Until next time, stay strong!

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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.