Best investment strategy: How much to diversify?

[Hughesy26]

I have been in crypto for about a year now, and have been picking up various coins along the way as I hear good things about them. I've not really sold any along the way as my original reasoning for buy each coin/token generally still stands, and I am trying to be patient and wait for each project to (hopefully!) come good.

However I've now got 56 holdings that make up 20% of my portfolio, and the rest is in BTC and ETH

My question is, is 56 coins too many? Do you think I would be better selling some to increase my holdings in the other coins?

I remember hearing a theory in the stock market there was no mathematical decrease in systemic risk by diversifying into more than 20 companies. However, this is crypto so in my mind that theory isn't worth paying too much attention to! Or do you disagree?

[1715090088]

1715090088

[LoyceV]

My question is, is 56 coins too many?

Let me give you a counter question: are you storing them in your own wallet, or on an exchange?
If you don't have your own wallet for each coin, I'd say you have too many of them.

[Oulay]

Sometimes the whole cryptomarket moves in the same direction. So there is still a risk no matter how many coins you invest in. My advice is to diversify by investing in assets other than cryptocurrencies.

BTW I think you are confusing things up, check this article for the difference between Systematic and Unsystematic risk: https://keydifferences.com/difference-between-systematic-and-unsystematic-risk.html

[stantpro]

Crypto currency itself is an asset.It shortcomings its hinged on its volatility.
I think if you diversify your investments by picking the crypto currencies based on
expertise advice, you shall profit from it.Don't invest in every crypto currency, you need
to ask questions from experts who shall guide you to invest in CERTAIN crypto currencies
with a brighter chances of growth than others.The criteria to choose may base on utility
value of the coin, market cap volume,demand and supply forces and all.It is worth while
if you make calculated investment.

[Hughesy26]

My question is, is 56 coins too many?

Let me give you a counter question: are you storing them in your own wallet, or on an exchange?
If you don't have your own wallet for each coin, I'd say you have too many of them.

Thanks for your reply. I guess you are talking about the risk of exchanges getting hacked etc. I'm OK from that point of view I think; the vast majority of my holdings are in ledger nano. I have a few wallets and some on a shared masternode. I do have a lot of coins on exchnages but not worth a huge amount of value, and spread over quite a few different exchanges, so I think that's OK?

[paulmaritz]

I have been in crypto for about a year now, and have been picking up various coins along the way as I hear good things about them. I've not really sold any along the way as my original reasoning for buy each coin/token generally still stands, and I am trying to be patient and wait for each project to (hopefully!) come good.

However I've now got 56 holdings that make up 20% of my portfolio, and the rest is in BTC and ETH

My question is, is 56 coins too many? Do you think I would be better selling some to increase my holdings in the other coins?

I remember hearing a theory in the stock market there was no mathematical decrease in systemic risk by diversifying into more than 20 companies. However, this is crypto so in my mind that theory isn't worth paying too much attention to! Or do you disagree?

It sounds like a solid, well diversified portfolio. Don't take it as financial advice, but I would keep it as is. Only sell a token when you're original reason(s) for buying it is no longer valid. That being said, if you're looking to further diversify, you might want to look into something such as CombiCoin.

[odolvlobo]

My question is, is 56 coins too many? Do you think I would be better selling some to increase my holdings in the other coins?

I think it depends on your goals and your resources. Is diversification sufficient or do you want to select and manage individual investments, or something in between? Are you investing for the long term or the short term? How much time do you have to spend on your investments?
 
In terms of diversification, there is no "too many". If you are going for diversification, then more is always better. However, most cryptocurrencies are highly correlated, so the benefit of diversification is limited after some number of coins.

In terms of managing individual investments, I don't think anyone has the time to follow 56 coins, unless you do it professionally, perhaps. If you invest in 56 coins, you are effectively investing in random coins. In my case, I don't think I have the time and patience to follow more than 2 or 3.

As for looking for something in between, I believe that in the long run there will only be a few big winners, but many big losers. By weeding out the big losers (many of which are obvious), you can get better returns with only a small impact to risk.

In my case, I feel that investing in the 5 (or less) highest quality and least correlated coins is better than investing in 56 (or more) random coins.

[pooya87]

My question is, is 56 coins too many?

the real question is, did you handpick each and every one of these 56 coins?
do you have a solid reason for choosing each of them? for example if i ask you to give me at least 10 reasons why you chose each coin will you be able to give me 560+ reasons? or did you just pick them because you thought they may go up and make you rich?

that is what diversification means, you invest in multiple good investments that you know will go up. for example when you diversify your money, you buy bitcoin, you buy gold, buy stocks of some good company, invest in a business that you or someone you know runs,... that is diversification of your money.

[Archibaldos123]

how much better to have coins in the case?

[MintDice]

There's no rule of thumb for investing in the cryptospace, not yet. Holding that many coins might make it hard to manage, but if you are able to and are able to keep them secure, there shouldn't be a problem. As another user mentioned, it's always good to believe in what you invest! If you ever start losing interest in some of the projects you can always consolidate into a few that you truly like--later down the road, of course.

[Thefrolly]

56 is quite a number especially if they are stored in Exchange, it might be fine if you are storing them in your own wallet but i still think that's a large number. you may want to slightly reduce the number and invest  more on coins showing greater promise in the market.  i still think you've done quite a good job though.

[jelly_july]

I sure don't know the market as well as you, since you've obviously gathered some experience, but I'd say maybe it's time to take a step back and think out of the box a little and diversify yes, but not in the way you're thinking about it. Why not try investing in other types of assets? Just a suggestion, if you're open and interested in other markets as well.