The violent fluctuations on the crypto market show once again: risky asset classes should only be an admixture in the portfolio. How to set up your portfolio cleverly, but do not have to do without high-opportunity investments.
Elon Musk has once again lived up to his reputation as a crypto whisperer. On Thursday night, the Tesla CEO sent the Bitcoin and other cryptocurrencies on a downward slide via tweet – and destroyed $300 billion in market value. The reason: Tesla share now no longer accepted Bitcoin as a means of payment. Within a few minutes, the price of the best-known cryptocurrency plunged by more than 15 percent to less than 47,000 US dollars, taking other currencies with it.
As a reminder, it was only at the beginning of February that Tesla had announced it would accept Bitcoin to buy its electric cars and had invested $1.5 billion in the currency. That had sparked a rally. In mid-April, Bitcoin even marked its current record high of $64,863, nearly 40 percent above its current price.
With hypes, opportunities and risks are close together
- This roller coaster ride is definitely not for the faint of heart. Cryptos may be extremely exciting, but they are also quite risky: what rises high can also fall low.
- Investors who had bet on the hype surrounding hydrogen shares also recently became painfully familiar with this phenomenon. Former high-flyers such as Power Cell PowerCell Swed shares, Nel Asa NEL shares and Ballard Power Ballard Power Sy shares have lost between 30 and 45 percent since the beginning of the year.
- As is well known, hype means exaggeration. Opportunity and risk are particularly close together. Therefore, such topics should only be an admixture in your portfolio, and with the best possible risk diversification.
A core around which many satellites are buzzing
You can achieve this relatively easily with exchange-traded index funds (ETFs). There is now a wide range of theme and sector ETFs. Megatrends such as digitalization, demographics or mobility of the future, sectors from A as in alternative energies to Ö as in oil and gas or special topics such as cannabis, gaming & sports and, of course, blockchain – there are actually no limits to the imagination.
Never forget to take profit and spend some of your hard earned bitcoins for something pleasurable. With the providers listed at www.cryptodebitcards.com it is easier than ever.
The stock market expert
Jessica is a financial journalist, bestselling author and long-time observer of the global stock market. German stock culture is a matter close to her heart. Most recently, her fifth book “Damit sie sich keinen Millionär angeln muss …” was published. She writes every two weeks about investments and financial trends that complement a broadly diversified basic financial investment. You can reach her on LinkedIn, Twitter, Facebook and Instagram.
Just what’s the best way to use them, how do you build a portfolio with megatrends? I’m a big fan of the “core-satellite” strategy. To do this, imagine your portfolio like a planetary system:
In the center is a relatively large planet, the core, around which orbit a number of smaller planets, the satellites. The core consists of basic investments, while the satellites can be more creative, innovative and even a bit riskier. While the “core” is rather boring, the satellites provide excitement – and hopefully also a yield turbo.
It all comes down to the right weighting
This strategy is relatively simple to implement: For simplicity’s sake, let’s assume a pure stock portfolio. The core should make up at least 50, but preferably 60 or 70 percent of your portfolio. You could invest this share globally in as broadly diversified a manner as possible.
Investments in ETFs on the MSCI World and the MSCI Emerging Markets would be possible. But it is also conceivable to put some of the money on the dividend strategy or quality stocks. Read more at www.fool.com/investing/how-to-invest/etfs/.
You then distribute the remaining capital – 50, 40 or 30 percent, depending on the size of the core – among several satellites. These could be five or ten percent “big”. But be careful: the weight of the individual satellites should not be too heavy, however, with a view to risk diversification.
Blockchain shares instead of cryptocurrencies
Conversely, however, you should also consider: If there are too many smaller planets, then your depot becomes quite confusing. However, you can have five or six satellites. In the end, of course, it depends on your risk type, how large your core is and how many, and above all, which satellites you choose.
Which brings us back to Elon Musk and cryptocurrencies: They, too, can be such a satellite, of course. If the price capers of Bitcoin and Co. are too wild for you, but you find the topic fundamentally exciting, you could also think about investing in blockchain stocks.
The blockchain is the technology behind bitcoin. This future technology can do a lot more than just “mining” Bitcoin and Co. Blockchain networks enable the use of autonomously running business agreements, so-called smart contracts, for a wide variety of purposes. Read more in our other article here: www.bitcollar.io/bitcoins-and-blockchain.
In addition to cryptos, there are numerous other megatrends
There is also the possibility of creating digital assets – not only alternative assets such as cryptocurrencies, but also by tokenizing physical objects, events or concepts. Entire supply chains can be mapped using the blockchain.
There are many industries that will benefit from this technology: Insurance, logistics, food, industry and, of course, banks. However, only two dedicated blockchain ETFs are listed on the Frankfurt Stock Exchange so far: the Invesco Elwood Global Blockchain ETF Invesco Elwood Global Blockchain and the VanEck Vectors Digital Assets Equity ETF VanEck Vectors Digital Assets Equity. They provide access to global companies that participate or could participate in the blockchain ecosystem in the future.
What is clear in all of this: Blockchain technology is certainly one of the megatrends of our time – keyword digitalization. But there are plenty of other exciting future topics in which you are already investing with the help of ETFs: Demography or mobility of the future, infrastructure and smart city, automation and robotics, cloud computing and cyber security, not to forget alternative energies.