Are you positioning for a 100x in the Next Bull Market? Learn to craft a winning portfolio by avoiding these 8 Mistakes.
1. Not Knowing the Right Crypto Investment Amount.
- Finding the optimal investment varies for each individual based on factors like age, risk appetite, and circumstances.
- A practical guideline I adopt is [100 - My Age].
- For instance, at 30 years old, it would be 100 - 30 = 70.
- Considering my higher risk tolerance in my early 30s, I allocate 70% of my wealth to crypto and 30% to safer options like Stocks, Funds & Gold.
- Remember, your crypto investment size shouldn't disrupt your Peace of Mind & Sleep.
2. Unsure About Wealth Preservation vs. Growth
Our portfolio can have two primary objectives:
a. Safeguarding Our Wealth
b. Expanding Our Wealth
a. When our focus is on preserving wealth:
We should diversify across Stocks, Bonds, Funds, Gold, Crypto, etc.
In this scenario,
We can anticipate
- Minimal decline
- Modest returns
The key aim of this portfolio is to achieve returns that outpace inflation while encountering the least possible volatility.
Until recently, my priority was safeguarding wealth rather than pursuing growth.
b. However, I now opt to amplify my existing wealth
Thus, my emphasis is more concentrated on Crypto rather than excessive diversification.
Crypto has the potential to increase in value by 100 times from its current level in the next decade
To me, it seems sensible to allocate a greater percentage to Crypto in the upcoming years.
3. Spreading Too Thin Across Projects
Focusing on just an asset class isn't sufficient. We should also be more certain about a handful of projects.Start by identifying your expertise.
For example, ZK Rollups, RWA & AI
Then pinpoint projects within that area.
Sticking to your Expertise offers several benefits:
- In-depth Sector Knowledge
- Staying Current with News
- Easier to Explore Further
This enhances the ability to identify potential winners and get in early on a project.
Most substantial gains come from early involvement in a Narrative & Project.
4. Unrealistic Return Expectations
Have you ever invested in actively managed Mutual Funds?
If so, you must be familiar with the term "Benchmark."
This index is used by most Funds to gauge their performance over a year.
For instance:
In 2022, let's assume the S&P 500 had a 10% CAGR . The fund you invested in had a 12% CAGR. This means the fund outperformed its Benchmark, the S&P 500, by 2%.
Likewise, I now have a Benchmark for Crypto investments.
Imagine
In the next Bull Market, Ethereum achieves a 10x increase
But my portfolio only grows 5x
Wouldn't it be wiser to invest in ETH and allocate that time to other income sources?
The aim should be to surpass ETH's returns through active portfolio management.
5. Not Understanding Bull and Bear Portfolios
A portfolio should lean defensive in a Bear Market and aggressive in a Bull Market.
During a Bear Market -> Money typically flows into BTC, ETH & Stablecoins.
In a Bull Market -> Money tends to move towards Altcoins
Take a glance at coinbureau's Portfolio. Early 2022, they held around 19 projects
Their Portfolio featured various Altcoins and NFT projects.
An exemplary Bull Market Portfolio.
However, Look at their current Portfolio (Bear Portfolio)
They've shifted funds to
- Bitcoin
- Ethereum
- Stablecoins
Plus a few high-conviction low-risk projects, potential Bull Market contenders.
Currently, I've allocated most of my wealth to Bluechip assets and Cash.
6. Improper Portfolio Allocation
Ideally, one should divide the Portfolio among
- Bluechips
- Low Risk
- Medium Risk
- High Risk
- Degen Plays
I once had over 60% allocated to high-risk projects alone
It's wiser to allocate at least 50% toward Bluechips
The remaining 50% can be distributed as follows:
For example:
Low Risk - 20%
Medium Risk - 15%
High Risk - 10%
Degen Plays - 5%
If any category becomes unbalanced
We can shift profits back to Bluechips to restore balance
Balancing might be required more often during a Bull Market than a Bear Market.
7. Unaware of Crypto Cycle Psychology
Each cycle will showcase its favored Coins
In 2017, we saw XRP, NEM, DASH, etc.
In 2021, Solana, Avax, Sandbox, MANA, etc. took the spotlight.
The upcoming Bull Market will introduce a fresh set of Projects.
Many older projects might not revisit their previous ATH.
Why?
Retail investors often favor newer projects.
Having funds for these new projects can significantly impact our Portfolio
I erred last year by repeatedly investing in older projects during dips.
8. Zero emergency Fund
You might wonder, what does an Emergency Fund have to do with Crypto?
Believe me, it matters.
It serves as a safety net during unforeseen events like Income Loss, Covid, or Accidents.
Having a 6-month Emergency Fund offers peace of mind and aids in making rational choices during challenging times.
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