What is a portfolio allocation strategy?
In portfolio optimization, investments are selected and combined to maximize returns, given a certain level of risk. Diversifying your portfolio across multiple asset classes will likely result in lower volatility and higher returns than narrowing your holdings. To help you choose the most appropriate cryptocurrency portfolio allocation for your investment goals, we'll review CryptoSimple's cryptocurrency portfolio allocation.
Goal definition
The first step in signing up for CryptoSimple is an investment questionnaire that determines a user's risk profile in order to suggest the ideal portfolio.
Our portfolios are composed of various DeFi assets and protocols that our portfolio experts carefully select according to various criteria including security, volume, reputation, performance, etc.
We offer our clients only the safest assets to invest in (top 50 coins), among which stablecoins are included.
When starting their journey with CryptoSimple, users may have the following goals in mind:
- Retirement
- Education
- Housing
- Safety Net
Three portfolios according to risk/return preference
Our crypto portfolio is divided into three risk-averse categories. The portfolios are as follows:
Conservative Portfolio:
If you are looking for a portfolio that offers stability and peace of mind, a conservative portfolio is right for you. A portfolio like this is ideal for investors who want to protect their investments while earning decent returns. It consists of long-term coins that have strong fundamentals, top-class research teams, and great community support.
Asset allocation:
Volatile assets: 10%
- ETH ─ Allocation (48.65%)
- BTC ─ Allocation (39.68%)
- LINK ─ Allocation (6.27%)
- DPI ─ Allocation (5.25%)
Stable assets: 90%
- USDC ─ Allocation (44.7%)
- DAI ─ Allocation (55.3%)
Balanced Portfolio:
Our balanced portfolio is the perfect fit for those who can't make up their mind. For those who are looking to balance risk and reward, have a solid portfolio while still making larger returns than the Conservative portfolio.
Asset allocation:
Volatile assets: 35%
- ETH ─ Allocation (48.65%)
- BTC ─ Allocation (39.68%)
- LINK ─ Allocation (6.27%)
- DPI ─ Allocation (5.25%)
Stable assets: 65%
- USDC ─ Allocation (44.7%)
- DAI ─ Allocation (55.3%)
Growth Portfolio:
If you are ready to take the risk and potentially gain higher long term returns, based on past performance, the growth portfolio is made for you. This portfolio is adapted to investors with a high-risk tolerance and who don’t mind experiencing sudden changes in the market.
Asset allocation:
Volatile assets: 65%
- ETH ─ Allocation (48.65%)
- BTC ─ Allocation (39.68%)
- LINK ─ Allocation (6.27%)
- DPI ─ Allocation (5.25%)
Stable assets: 35%
- USDC ─ Allocation (44.7%)
- DAI ─ Allocation (55.3%)
Best practices
Risk Management
Risk management is the process of identifying, assessing, and prioritizing risks and implementing measures to mitigate or minimize those risks. At CryptoSimple we aim to minimize the likelihood and impact of negative events on an organization, while maximizing the chances of positive events. Risks can come in many forms, including financial, legal, operational, and reputational risks. We implemented internal policies and procedures to prevent risks from occurring, and reactive measures, such as contingency plans to minimize the impact of risks that do occur.
Portfolio Rebalancing
The goal of rebalancing is to reduce risk and make sure you’re staying on track with your investment goals.
As part of our rebalancing process here at CryptoSimple, we arbitrate the composition of our portfolios in a way that ensures each class of asset (stable and volatile) follows the same strategy over time.
Each investment naturally increases or decreases over time based on the value of those assets, changing users' portfolio balances and risk allocations.
Consequently, we perform a monthly rebalancing to get the best performance for our portfolios (stable vs volatile), by buying and selling assets to return to the predetermined strategy.
Conclusion
It will take time for investors to understand how best to approach and invest in the cryptocurrency market, which is still in its infancy. In the meantime, we've outlined CryptoSimple's optimal portfolio management strategy, a 3-portfolio approach that offers exposure to both stable and volatile assets, as well as a range of different risk/return profiles. This diversified investment strategy can help protect investors from volatility as well as provide exposure to some of this industry's most promising projects.
