This investing advice is bad for crypto investors
Diversifying your investments is a bad thing. You must be thinking I’ve gone crazy, right? I mean, diversification, that’s like Portfolio Management 101, isn’t it? It’s the most basic safety tip everyone gets if they want to start investing.
But it’s the wrong advice for crypto investors. Because actually winning in the market – coming out far enough ahead to move yourself up in the world, change your whole standard of living, create financial security and improve your daily comfort – means doing something that very few other people are doing.
Now, I’m not saying to go all “maxi” and put all your money into one single asset; you can’t get ahead just by doing the opposite of what everyone else is doing. You need to outsmart them. Everybody wants to buy low and sell high, but it usually doesn’t work out because most people don’t really get the news until its too late. The earlier you are getting to a good idea, the more of the wealth that idea generates you’ll be able to claim.
And, lucky for us, cryptocurrency and digital assets as a whole are still very new ideas. So new that they could still go up in value overall by 4000X times over. With my investing strategy, I go for gains of at least 10x on each asset. With the overall potential of the asset class, that’s conservative.
That’s why diversification can be a very serious weakness in crypto. Because, in order to get ahead, you need to beat the crowd. The more different assets you buy, the harder it is to do that.
So, here’s what to do instead…
How to Achieve Ho-Hum Returns Every Time
It’s like this: If you own every single asset on the market in exact proportion to their market caps, then your portfolio will grow or shrink at an exactly average rate. In other words, you won’t outpace anyone with your investments – other than people who are specifically falling behind.
And that’s the principle of too much diversification. You want to invest in just the right amount of assets to get the highest possible projected gains. That means, basically, investing in more good assets can offer some stability or round out your odds, but if you start reaching for mediocre assets, gambling they’ll go higher, it will start to water down your profits.
Let’s say I have $100 to invest. I pick my top 100 tokens in terms of what I think will do well, and put $1 in each of them. Then let’s say 97 of them double in value (okay) and three of my holdings 10X. In that case, I’ll have $224. That’s not all that much better than a simple double.
Let’s cut out the chaff. What if I only picked my top 10 tokens, and portioned out $100 in $10 chunks to invest in each? Well, the three assets that did 10X were my best, and assuming my system for appraising them works, I would still have those. So, that’s three tokens returning 10x each on a $10 initial investment, and seven coins which only doubled. That leaves me with a total of $440, almost double what I’d have under Top 100 strategy.
The numbers don’t lie. It’s not worth diversifying if that just means putting some of your limited capital (and make no mistake: capital is always limited) into mediocre assets.
Here’s How You Make a Killing
Diversification creates stability, but the thing is, stability is the opposite of both gains and losses. That’s why you need to be careful and choose your assets for the most reliable growth potential you can get your hands on.
Once you have them in hand, balance them regularly, putting your gains to work. Last year, I released a video that shows you exactly how to invest in crypto and balance a portfolio for maximum gains – you can watch it here.
There’s really no substitute for just having good assets. It’s impossible to be certain, so that’s why I use the 5T’s system to balance the need for winners and the need to have enough diversity to avoid gambling.