Sunday 6 March 2022

Diversify or not to diversify | How are you structuring your portfolio?

In 2021, I allocated a rather substantial portion into cryptocurrencies as we saw more acceptance from both the retail and institutions. Also, because of the lower entry barrier and possible higher upside growth, I find that I am slowly allocating funds to cryptocurrency.

Even as I allocate a portion to cryptocurrencies, I still find it important to have stocks in my investment portion and to diversify accordingly. With the limited funds I have, I DCA into both stocks and crypto.

Is cash still needed in a portfolio?

A lot of crypto platforms both centralised and decentralised provide amazing yields on your stablecoins and it seems that holding cash is pretty detrimental to your whole network as it depreciates in value considering the inflation rate that we are facing. Although of course, our main medium of exchange right now is still fiat, I find it equally important to have sufficient or substantial cash. Even though, I am usually low on cash in terms of not having enough war chest to deploy in the dips, I always try to ensure that my emergency funds are there.

Read more: How I change and transfer my fiat (SGD) to UST via the various exchanges to earn 19% interest on Anchor Earn

What I do is that I still allocate a portion of my salary to cash savings which I automate it to stash away in an account. Whenever there is a dip, I would deploy some of it and if there is no dip, I would at the end of the year evaluate and decide if I would invest it according to my spending needs for the new year as well. Having liquidity (available fiat) is important and so even though stablecoin yields are attractive and I am also hoping to increase my exposure to it, having fiat is also essential based on your needs and commitments.

More into crypto or into stocks?

I buy both stocks and crypto but I would say my positions are not very diversified. As a rough guide, in my stocks portfolio, Tesla takes up 50% of my total stocks portfolio followed by index funds (VT, VWRA) which takes up about 21% of the stocks portfolio followed by other small positions like Palantir and AMD. This shows a concentration into Tesla, similarly with my cryptocurrency portfolio, Bitcoin is 19% and Ethereum is 35% of my crypto portfolio. Which means about 50% are in Bitcoin and Ethereum followed by Fantom and Terra. I still am increasing my Ethereum and Bitcoin positions and do feel more secure in adding them compared to the rest. So I am actually not as diversified but mainly due to the lack of funds as my total portfolio is not a huge amount either.

Read more: End of Year Portfolio Review & Reflections | Inching real close to $100,000

When you are building up your portfolio, you can choose to concentrate the positions to ensure growth and once you have reached a certain amount that you are comfortable, take profits and you might want to diversify depending on your preferences.

Finding that balance, it fluctuates but plan for your needs accordingly

It’s important to structure your portfolio to your risk appetite and make sure you understand the companies and things that you are putting your money in. For me, I am currently still buying into Tesla because I do have a target amount of shares that I want to hold and once I have reached it, I will most likely revert back to DCA-ing into index funds as I do like having them in my portfolio where the fluctuations are not as huge and is diversified. And for cryptocurrency, I do tend to invest in the top 10 mainly Bitcoin and Ethereum with the next 2 being Terra and Fantom. I will still continue to DCA into them. How do you structure your portfolio and in this time of uncertainty, how are you positioning yourself?

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