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Why you must rebalance your crypto portfolio!

by , 09 September 2019
Why you must rebalance your crypto portfolio!
I'm sure you've heard of portfolio rebalancing. Almost every investor does it.
It's a simple, but extremely important ‘tool' where an investor periodically buys or sells different assets (stocks, bonds, etc) within a portfolio.

Rebalancing helps reduce the risk an investor suffers from the changes in returns of various investments. And it also helps ‘restore' their desired asset allocation and risk level.

While rebalancing is a common tool used if one has a portfolio of stocks, bonds, property, gold etc, it's equally important for crypto investors who hold a portfolio of different coins.

Let me explain…
       
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Crypto rebalancing can be the difference between making and losing money
 
In the crypto world, you can have a rebalancing cycle as short as a couple of hours to a few weeks or months.
 
A crypto trading company made a comparison of how well crypto rebalancing performs, when compared to a ‘buy and hold’ strategy.
 
In total, over 20,000 back tests were analysed.
 
What you can see from the results, is the positive correlation between performance and a shorter rebalance period.
 
Overall, portfolio results tend to improve with shorter rebalancing times.
 
And in all of the cases, rebalancing your crypto portfolio regularly, can significantly improve your crypto returns.
 
You can see in the table below the relative performance improvement based on the number of coins (assets) held and the time period of the rebalancing…
 
 
Here’s a real-life example…
 
Let’s assume that between February 6th to August 6th of 2018, your portfolio was worth R10,000 and was split between Bitcoin (50%) and stable coin, Tether (50%).
 
If you had rebalanced daily, by August 6th, your crypto portfolio would be worth R10,326.
 
Had you NOT rebalanced during this period, your portfolio would have been worth R9,838.
 
That’s around R500 difference — around 4.9% of your portfolio value, over the six months. And you must remember, this was during a crypto ‘bear market’. So, a positive return during a bear market is a great feat.  
 
So how can you rebalance your crypto portfolio?
 
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Two free crypto rebalancing tools you can try today
 
Fortunately, there are crypto websites that have designed free rebalancing tools.
 
1) 3Commas
 
When you sign up, you can create a new portfolio or copy a winning portfolio of someone else. Then, you can apply the rebalancing feature and decide how often you want to rebalance your portfolio. 
 
3Commas offers $10 as a joining balance which is good enough to help you get started. Once you have seen the result of a portfolio building and rebalancing feature, you can grab any of its subscriptions.
 
There are a number of crypto exchanges that support 3Commas. The most popular, Binance, Poloneix, KuCoin and Bittrex. You can check it out here.
 
2) Shrimpy
 
Shrimpy is a completely free portfolio and tracking application used by cryptocurrency traders looking to automate their cryptocurrency portfolio. 
 
With Shrimpy, you can create a crypto index and implement an automated strategy and an automated crypto index fund strategy, in just minutes.
 
You can also keep track of your entire cryptocurrency portfolio, including several exchange accounts and cold wallets, from a single unified dashboard. All you need to do is sign up
    
See you next week.
Joshua Benton,
Managing Editor, The South African Investor 
 
P.S. Sam Volkering, author of the best-seller Crypto Revolution, is backing ONE crypto king to blast past bitcoin and hand investors life-changing gains, over the long-term. Find out which crypto he’s talking about here.


Why you must rebalance your crypto portfolio!
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