So the Asset Allocation is the implementation of an investment strategy and this is one of the cryptocurrency strategies.
They attempts to balance risk and reward by adjusting the share of each asset in portfolio in accordance with the acceptable level of risk, objectives, and terms of investment.
So let’s see below different type of cryptocurrency strategies of asset allocation:
Strategic Asset Allocation
The cryptocurrency strategies involves the proportional distribution of assets, risk assessment and investment horizon. As well as asset rebalancing in the portfolio. In general, the strategy involves diversification, in order to reduce risk and increase profitability.
For example: Bitcoin for the last year brought 27%, and Litecoin – 38%, then the distribution of BTC – 50%, LTC – 50% brought 31%. At the same time, rebalancing was not taken into account here. For example, when rebalancing once a week, the result will be 33%**
Tactical Cryptocurrency Asset Allocation
This is a more active approach in which the investor distributes his portfolio in those cryptocurrencies that show a great potential for possible profit. The initial set of assets may be similar to a strategic approach.
Tactical strategies usually trade more actively and are free to change major classes of assets in order to maximize potential profits.
BTC portfolio 50%, ETH – 25%, BCH – 25% from the beginning of the year for 6 months brought – 110.1%.
With this distribution BTC 50%, ETH – 25%, BCH – 25% increase was 8.16% for the first 3 months, for example, it was decided to change the distribution for BTC – 25% and BCH – 75%, portfolio growth was 128.4% for the remaining 3 months.**
Cryptocurrency Asset Allocation with Lead Satellite
The strategy assumes the presence in the portfolio of the main strategic asset with a larger share in the portfolio in contrast to the rest.
Remaining assets that constitute a smaller share in the portfolio.
Investors can apply a strategic or tactical strategy for the main asset.
This strategy is a combination of strategic and tactical asset allocation strategies.
Let’s talk about cryptocurrency strategies in the next articles… You can read article about “How to create cryptocurrency portfolio”
**The examples above are not a recommendation or investment guide.
Holderlab.io is a service for automated crypto portfolio management with automatic rebalancing of assets (threshold or periodic), searching for efficient frontier and analysing assets using a correlation matrix and other crypto investments tools.