How to make more money on long-term crypto investments?
Long-term investments are investments of both tangible and intangible assets for the period exceeding 3 years, and for some classifications exceeding 1 year.
It is crucial to properly assess the economic efficiency of long-term investments in order to make optimal decisions. The costs of an investment project should not exceed the total profit. Otherwise it is necessary to refuse from investments.
Distinguishes between discount indicators of economic efficiency of long-term investments, complex and indicators without taking into account the time factor. The majority of modern companies uses at the investment analysis simple methods of an estimation of profitability of long-term investments without taking into account time factors.
Procedure for long-term investments
General procedure for an investor wishing to invest his or her own funds for a long-term period:
- Cryptocurrency choice for investment. The investor determines the desired investment qualities that he would like to see in the investment object. Based on this, a list of suitable digital assets is made;
- Per-asset data collection/analysis;
- Final selection. Based on the information collected, the investor makes an analysis, calculates costs, efficiency and planned income from future investments. As a result, preference is given to several coins.
- Buying of chosen asset or pool of assets;
- Investment activities. The investor continuously monitors the prices of assets and compares them to meet its investment interests.
How to make a better long-term investment portfolio?
Almost all of 2018 Bitcoin and the rest of the cryptocurrencies were in a prolonged downward trend. Most of them have reached their bottom and will not go below, which provides an excellent opportunity to create a crypto portfolio for medium- and long-term investments. First of all, let’s analyze what a crypto portfolio is and why it is needed, as well as what advantages it provides.
A portfolio is a set of investment areas that helps diversify risks and ensure a return on investment. This approach in the crypto field is very relevant due to market volatility. The right percentage is a true art that you can and should learn. The first step towards becoming a crypto investor is choosing a portfolio management tool.
All you need to do as a management tool is to make a simple table where all the coins you buy will be included. Next, the table should include: the purchase price, the number of coins purchased, their value, the percentage of the coin from the total portfolio, as well as, if desired, historical price peaks and minimums.
For starters, the wider the portfolio, the greater the diversification, respectively, increases the security of investments. But there are some difficulties. In addition to the drawdown of the price, there is a high probability of a coin scam, in this situation it becomes unnecessary for anyone and it can be removed from the exchange, as a result it will be difficult to sell it. Also, coins are sometimes removed from the exchange for other reasons, such as due to legal requirements (for example, the Japanese authorities have a negative attitude to anonymous coins) or in the case when the coin stops meeting the stringent requirements of the exchange.
As we can see, the portfolio offers certain protection guarantees. But that’s not all, with wide investments you can “catch” more sharp rises, which will allow you to reinvest and increase profits many times. This is due to the fact that cryptocurrencies often grow one by one while one flies up in price, the other may trade at one level for really long period of time.
Managing cryptocurrency portfolio
Let’s assume that 30 different coins were bought, 10 of them rose sharply in price within 2–3 weeks, there was a good profit, it is possible to transfer the profit to the other 20 coins, provided that they did not rise in price too much or (even better) by that time fell in price.
Let’s take a closer look at this by reducing the number of coins to 3. You bought 10 A coins for $1 each, 10 B coins for $1 each and 10 C coins for $1 each. Coin A has gone up in value by a factor of 10 (up to $10), and you are taking profit. Now there is an extra $100. The prices of B and C have not changed, we buy both coins equally, now there are 60 coins each. A few days later, coin B rose sharply by 8 times, the recorded profit was $480, and coin C has not changed in price. Now we have 540 C coins ($540), which grew to $5 each within two weeks, now our portfolio is $2700 and we have invested $30 — a 90-fold growth.
In practice, this is more difficult to do, but the portfolio should consist of 30–40 coins, not three. As you can see, portfolio investments not only provide security, but also, if managed correctly, increase profits many times due to rapid reinvestment.
At portfolio drawing up there will be a number of problems to solve:
- Distribution of available funds;
- Deciding on the terms of investment;
- Planning of target profit and the moment of fixing of all portfolio;
- Selecting the parameters of coins, on which the portfolio will be made;
- Preparing for force majeure.
Distribution of funds is the main factor that will help to avoid loss of deposit. It is necessary to invest only the money that will not be sorry to lose, at the same time it is not necessary to invest everything at once in cryptocurrencies, you can leave one third of the amount in the bank account for further replenishment and averaging of the portfolio.
Rules for long-term investments
There are a number of principles that will help an investor focused on long-term investments to shape his or her investment strategy.
Get rid of losing assets and multiply the profitable ones
Time and again, investors profit from the sale of their growing coins, while continuing to hold on to the loss-making ones in the hope of restoring them. If an investor is unable to determine when to get rid of hopeless asset, in the worst-case scenario, they will find themselves in a situation where they simply depreciate. Of course, the idea of keeping high yielding coins and selling bad ones is good in theory, but difficult to implement in practice.
Do not trust insider information
Before you invest, you must be clear about why you are doing this; do your own research and analysis of any business before you even think about investing your money in it. Relying on a piece of information from someone, you not only choose the easy way, but also turn your investment into a gambling game. Of course, a little luck, and the tip can give the desired result. But it will never make you an informed investor, which is what you need to become if you want to succeed in the long term.
Do not panic
As a long-term investor, you should not panic when your cryptocurrency shows short-term fluctuations. As you monitor the dynamics of your assets, focus on the big picture. Remember that you should be more confident in your investments than nervous about their inevitable volatility in the short term.
There is no doubt that active traders will use daily or even momentary fluctuations of prices in order to make money. But long-term investment returns come from a completely different market movement — a movement that has been going on for years — so focus on developing your investment philosophy through education.
Don’t be tempted to buy “cheap” coins
There is a common misconception that there will be fewer losses when buying cheap cryptocurrencies. But whether you buy a coin for $5 or $75, if any of them are devalued, your losses are 100% of your initial investment. An unreliable startup with a $5 token has the same downside risk as a doubtful cryptocurrency company with a $75 coin. In fact, investing in cheap coins is even more risky than investing in expensive shares because the issuing companies must meet more requirements.
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