Worried about what cryptocurrency is going to become dominant in the future and that you might be in the wrong one? Well then creating a "Virtual ETF" of the different cryptos could be a great investing strategy for you. ETF stands for "Exchange Traded Fund" and is popular way to buy baskets of stocks in the stock market; and you can apply a similar strategy here with cryptocurrencies:
- First, just go to coinmarketcap.com or similar website that shows the market cap of the various cryptos.
- Pick 5 to 10 various cryptos that you think have a good chance of being around in the future.
- Add up the market caps of those 5 to 10 cryptos. That will be your base number for your percentages of each crypto you will buy.
- Then for each individual crypto, divide its market cap by you base number to arrive at the percentage of your total investment that should be in that crypto.
- Now that you have your percentages, take the total amount you intend to invest and buy the corresponding percentages worth on the cryptos you chose.
- The market caps will vary a lot after you buy, but once you buy your cryptos with the percentages you calculated, just sit back and wait at least one year.
- At the end of the year, recalculate the percentages again and rebalance your portfolio of cryptos by trimming the ones that have gone up past its percent allocation, and adding to the ones that have gone down below its percent allocation. Or, if you want to oust a certain crypto and add in a new one, go ahead and do that.
That's it! This is what is called a market cap weighted investing strategy. This is similar to many ETF's out there. Now you can have exposure to multiple cryptos and enjoy the appreciation in value in the aggregate. This way you get good upside from the overall rise of the crypto market without having "all your eggs in one basket!"
Cheers