Getting into cryptocurrency can be really exciting – for many people, it’s an opportunity to grow their funds while simultaneously supporting a new technology that’s disrupting traditional financial markets.
You could choose to dip your toe in by buying up some bitcoin or one of the other well-known coins. Or, you might want to get started as a crypto trader, using an app such as bitcoin buyer to buy and sell currencies and make a profit on the daily price fluctuations. Either way, it’s important to understand how to manage your cryptocurrency portfolio.
What is my ‘portfolio’?
The term crypto portfolio simply refers to the collection of cryptocurrencies that you currently own. Ideally, it should contain a range of different currencies, as this will give you resilience – if one coin loses value, you’ll still have back up.
Tracking your coins
A lot of seasoned investors choose to use a tracker to keep an eye of the performance of their various crypto purchases. You can choose from a range of different cryptocurrency trackers, or even create your own using an Excel Spreadsheet (there are templates available online if you choose the DIY route). This will become extremely helpful when it comes to tax time, as investors in the UK are required to have a record of their cryptocurrency gains for the tax man.
Your tracker will show you the transactions that you’ve made and ensure that you can see how the value of your portfolio is changing over time.
Plan for the future
Managing your portfolio isn’t just about keeping a good handle on the practical aspects of your investment – it’s also about knowing what you’re going to do with your money further down the line. In investment terms, this is known as an exit strategy, and it means understanding when you’re going to sell up. For instance, you might plan to move your money out of crypto once you reach a certain return on your original investment.
Your exit strategy should include the tax obligations that we mentioned above. Most investors need to pay capital gains tax on the money that they’ve made. You can do this by completing a self-assessment, or by using the government’s real time capital gains tax reporting service.
Think about what you’ll do with your crypto investments once you cash them out. You may plan to use them for a particular purpose, such as buying property or funding your investment. Or you may plan to move them into a less volatile investment market once you have made a reasonable profit. Choose whichever option works for you – just make sure you have a clear plan.
Consider taking financial advice
If you have quite a large portfolio and you think you need help managing it, then a financial advisor may be able to help. They can make sure that you’re using your money in a sensible way, which suits your lifestyle and your long-term financial goals. As cryptocurrency becomes more mainstream, there are many different advisers and companies out there that understand the market well and can help you make good decisions.