Bulls vs. Bears. The long history of two animals battling against each other on Wall Street has now paved its way into the crypto markets. After a long reign, the bulls have taken a step back and the bears have taken over. That said, most of us are aware that the market conditions right now aren’t the most trader-friendly; stable coins have been destabilized and there’s a bloodbath with red candlesticks taking dips.
So, what could help a trader or an investor at this point? The simple answer is diversification, or the golden rule of never putting all your eggs in one basket. Striking the right balance in terms of diversification can sometimes be tough, which is why having the right mechanism or tool can help.
What is diversification?
Diversification is the strategy of spreading your assets across several asset classes to minimize your exposure to only one type. This method is intended to help minimize your portfolio’s volatility over time and maximize returns by investing in different assets that would react differently under the same circumstances. Some of the benefits of diversification include:
Loss risk minimization: Asset diversification reduces the risk of losing money in a single asset type. This occurs because if one asset or asset class performs poorly, another asset or asset class performs well. This helps to balance the outcome and decreases the risk of portfolio loss.
Capital preservation: Diversifying assets reduces the risk of capital loss. Debt instruments provide a set yield and capital protection, so including them in your portfolio ensures capital preservation.
Greater returns (at the same amount of risk): In institutional finance, diversification has been found to provide higher returns for the same amount of risk. There are times when particular asset classes perform very well in the market, and having a well-diversified portfolio ensures that you profit from this. On the contrary, especially during a bear market, some assets won’t…
Click Here to Read the Full Original Article at NewsBTC…
