While trading in cryptocurrencies certainly has its benefits, as the top crypto wallet, bitinfocharts, with its 124,178 Bitcoinsreveals, it helps to diversify a wealth portfolio. The combination of real and virtual commodities allows this diversification, which allows investors to spread their risk. But simply splitting capital isn’t the only way a portfolio enjoys diversification, as numerous investment strategies can be used to make the most of crypto trading and other commodities.
Asset Allocation For The Win
If you’re new to investing, the term asset allocation should top your list when it comes to devising the ideal investment strategy. JP Morgan recently undertook the largest asset allocation project since 2011, with another 10% of their funds channeled into fixed-income funds. The concept of not putting all your eggs in one basket stems from asset allocation, and will mostly rely on the risk tolerance of the investor. For instance, those who have a propensity for a lower risk will lean towards mutual funds and fixed income products, but only a ratio of their funds will fill each category. Those who happen to invest in commodities will find that these go far beyond gold bars and petroleum. Cryptocurrencies are also classified as a commodity and are a great way to diversify a portfolio.
Making It Big On The Short
Perhaps two of the biggest examples of investors making it big on the short took place in the sub-prime mortgage crash in 2008 and the UK currency crash in 1992. While the first made a few top brokers who bothered to look at the classification of the mortgages a lot of money, the second was an investor who knew something about the currency markets at the time. In both cases, however, these investors took a chance on the short position,or the notion that the asset would devalue. This means that the investor is banking on the chance that their chosen asset is going to sink or drop in value. While silver manipulation is currently suspected short of the big four in the banking world, it creates a pocket of opportunity for investors. Investing in a short position in commodities can mean a solid return if the markets are in favor of this short position, and traders who stay on top of market indicators tend to suss out the shifts that will tilt the scales in favor of the short.
ETFs For Those Who Desire Diversity
One of the best ways to invest in as wide a field as possible is choosing the Exchange Traded Fund (ETF) route. There are a number of assets that can be traded this way, and both traditional and crypto commodities are amongst them. For the investor, they get the benefits of various trading methods such as short selling and trading on margin, while having the diversity of range such as mutual funds. By investing in ETFs, traders gain more exposure to a vast range of options which they may not have been exposed to if they’d approached these funds one by one. It also adds another layer of wealth building that spreads the risk of trading somewhat.
It’s common for investors to want to lump crypto into the currency bracket, often associating it with forex. In fact, many forex trading sites offer crypto trading as well. However, investors who want to make the most of crypto trading will find their strategy improves when they trade it as a commodity instead, and apply commodity investment strategies.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
Passionate about Blockchain and has been researching and writing about the Blockchain technology for over a year now. Also holds expertise in digital marketing. follow me on twitter at @sagar2803 or reach out to him at sagar[at]coingape.com