When cryptocurrencies are in a bear market, prices may look attractive compared to the highs they have fallen from — “for sale,” you might say. But some investors may be skeptical buy dipNote that price rebound is not guaranteed. Others may be content to do just about anything.
It is impossible to say how certain cryptocurrencies will perform in the coming months. But using battle-tested investment strategies can give your portfolio a better chance for long-term success.
1. Average cost in dollars
This strategy embodies the principle of “You can’t time the market” investing by emphasizing neutral consistency on waiting to publish your assets at the optimum moment.
Instead of relying on luck to guess whether the market has bottomed, Average cost in dollars Sticking to a routine means — buying $250 of bitcoin on the first day of every month, for example — that doesn’t take market conditions into account. You buy on time whether the price is going up or down.
This strategy is not good for maximizing short term gains. But, over time, this consistent buying can mitigate the effects of volatility – and the cryptocurrency is noticeably volatile. A little bit of the Best cryptocurrency exchanges It will average dollar cost for you if you set up a recurring purchase.
2. Review your asset allocation
Asset Allocation It refers to a combination of all your investments, including stocks, bonds, and real estate. Having investments of many types of assets is another way to diversify. Since crypto is so volatile, NerdWallet recommends investing only what you can afford to lose; As a general rule, don’t invest more than 10% of your portfolio in risky assets like these.
You can set your personal goal customization for stock bonds And other assets to match take risks And the time horizon. In general, if you need this money soon, it is a good idea to have a larger proportion of conservative investments, such as High yield savings accounts Or short-term bond funds, to avoid large swings in value.
3. Rebalance your wallet
Let’s say you start with a certain asset allocation – say 75% in stocks, 20% in bonds, and 5% in crypto. These ratios will change over time as the values of your investments change. To return them to the target allotment, you must Rebalance your wallet.
Portfolio rebalancing means selling over-represented assets and buying under-represented assets in comparison to the target asset allocation. For example, if your cryptocurrency investment loses money and drops from 5% to 2% of your portfolio, rebalancing will involve selling other parts of your portfolio to bring the crypto to the 5% allocation target.
Some financial platforms have automatic rebalancing, but you may need to manually rebalance if your investments are spread across multiple accounts or institutions.
4. Diversify your coding
Many people got burned when Encoder crashed in 2022. But if all your money is invested in Terra (LUNA), which basically become worthlessYou have been burned. If you are investing heavily in a single cryptocurrency, this is a good time to consider diversifying your portfolio to avoid the same fate.
diversification It means distributing your money to different investments. It eliminates the possibility that a single investment can reduce your entire portfolio. Buying several cryptocurrencies that represent a set of use cases is a more diverse approach than putting all of your money behind one coin.
5. Harvest Loss Taxes
If you have underwater crypto holdings – now worth less than when you bought them – you might use a tax strategy called loss tax harvesting to reduce some of the damage.
If you sell an investment for a loss, you can offset the taxes owed on gains from other investments. If you don’t have any gains to make up this year, you can do so in future years. You’ll want to review Tax Loss Harvest BasicsLike if you have owned the cryptocurrency for more than a year.
Neither the author nor the editor held positions in the above investments at the time of publication.
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