Do you keep balancing your portfolio or let huge imbalances develop? Which is better?
I have the following strategy.
I identify all the potential investment opportunities I know of, which show long term promise. Long term because I don't have time to watch charts all day long. I read white papers, check out the communitie's engagements, look for key-people's track records, and think of the product/vision from the perspective of a possible future "client" or "user". I look at market caps, not in absolute terms but relative to each other. From these things I form an opinion on the potential of each.
Out of them I choose the ten best. I invest most in the project I believe has the greatest potential, and the least in the last one.
I watch some grow massively, and some decline slowly. Because I believe in all the projects I have invested in, I sell some of the profits and invest more in the ones that haven't taken off (read: bitshares). I keep balancing my portfolio like this. I don't realize losses, only profits.
What's the result
I have a nicely balanced portfolio (not big but balanced). In an bull market like this, I would have made many times more profit by holding coins like ETH. I sold them on the way up, and bought coins that keep going down. I still believe in those projects long term, so I don't worry too much.
I don't know how this strategy works in a bear market. Because I don't want to realize losses, I probably would have to invest more FIAT.
Is it better to let imbalances grow or even realize losses?
What's your strategy? Have you sold all the rest of your bitshares and NXT and jumped into the latest bandwagons? Are you buying eth now, or are you exited about the low prices of Bitshares? Do you try to balance to minimize risk? Has your strategy worked? Do you have different strategies for bull and bear markets?
@bajanboost's strategy is to realize profits when the asset price doubles, after which he rides the price to infinity. Article here.
Cryptocurrencies seem to have a strong momentum component, so selling winners sometimes cuts deep into potential profits. Tough call, though. Staying diversified is a great idea, but rebalancing in this type of market is not an easy optimization problem.
To be honest, I have been selling at the bottom and buying at the top. It works really bad. Don't do it.
But what does your "nicely balanced portfolio" consist of?
In order by weight: BTS, SJCX, STEEM, SC, SAFE, BTC, LISK, ETH
I think DASH could be a good addition for the balanced portfolio.
I am more a BTC boy :-) as Bitcoin is most convenient gateway to enter the cryptoworld. So I buy BTC with fiat, then think if it is worthwhile to exchange it for any alt.
I also use cloud mining (BTC and ETH mostly) contracts as an alternative way to move funds into the cryptocurrency.
Thanks! I've been thinking about DASH, especially because people are so enthusiastic about Evan Duffield. I'm just not entirely convinced about the long-term potential, as it competes quite directly against the mighty BTC. If I become convinced, I will wait for a downhill first.
We should start a conversation about the long term potential of DASH :-)
I dumped all my nxt and bought Eth when it was at like $1.
apart form that, I still hold my BTS and tend to buy in some short amount in interesting ICO's
So realizing your mistake and taking the losses was a good thing. Do you think it works in general?
depends on your personality. if you can't take a loss you'll burn eventually :)
I diversified a bit of my BTC in some alts... 5 days before the current surge in price of BTC...
That's my problem too, which is why I'm trying to find some strategy. If I act without a plan, I sell when it's low and buy when it's high.
But 20% isn't that much in cryptospace.