Buy! Buy! Buy! HODL! HODL! HODL! Sell! Sell! Sell!

The common strategy behind investing into crypto-currencies is buy&hold. This involves a long-term investment in assets you believe in. I would not say this is a bad strategy, however market condition change and for sometimes your investment can be put at risk due to lack of liquidity. Let's say your bitcoin tanks and your car broke down so you can’t get to work - if you sell now, then your investment will take a disproportionate hit. Also due to inefficiency in the market, it is easy to take some high-profit opportunities if you have the cash and likely be able to beat the buy and hold strategy. If you buy red and sell gree you should turn a bigger profit, right? Wrong! If you start day trading and you are new to it, you will find yourself longterm that you are constantly losing money, due to lack of discipline and you will find yourself in a constant worry about what the market will do next which will affect your daily life and your discipline even further, which can cost your capital. What can be done about this?

Enter capital risk management: instead of day trading you can subdivide your capital into several risk groups:

1. Fiat Currency - Base Risk
2. Large capital low volatility, such as Ethereum, Bitcoin, Etc. - Low Risk
3. Solid future potential, such as IOTA, Kin - Medium Risk
4. Large speculation potential, for example, Verge, Tron, ICO’s - Huge Risk

Once you are happy with your asset classes you assign a percentage for each class, depending on how much liquidity you can tolerate up to 100%. For example, this could be a balanced risk portfolio:

1. Base Risk 30%
2. Low Risk 30%
3. Medium Risk 30%
4. Huge Risk 10%

and then buy associated classes using the fraction of capital that you allocate to a risk class. For example, my portfolio could look like this:

Crypto	Risk Class	Class Fraction	Ticker Fraction	Amount (USD)
USD	Base	30.00%	15.00%	150
Euro	Base	30.00%	15.00%	150
Bitcoin	Low	30.00%	15.00%	150
Etherum	Low	30.00%	15.00%	150
IOTA	Medium	30.00%	15.00%	150
Kin	Medium	30.00%	15.00%	150
Verge	Huge	10.00%	3.30%	33
Tron	Huge	10.00%	3.30%	33
[ICO]'s	Huge	10.00%	3.30%	33
			Total:	1000

 

Naturally, these fractions would fluctuate as the market conditions change and you would need to rebalance them periodically. To rebalance you would sell any investment that goes up and buy the investment that goes down without exceeding the thresholds. You might also need to move the investments risk classes in the portfolio if they change, but that should not be done too often. Ideally, you don't want the rebalancing too often as well as it can affect your sanity, but doing it once a week should be enough. So that is it - your sanity and your portfolio are finally safe!