Investment Diversification. Are you willing to take risk for maximum output?
I was listening to Raol Paul the other day on RealVision. I listen to his podcast whenever I find time because I like the way he thinks about humanity and our financial future. Well, who does not like to listen to a billionaire who is good with words. And, he loves crypto and he talks about how the technology could potentially disrupt the existing systems.
The one thing he shared during his recent podcast on investment made me think about my investment strategy. He said that investment diversification is not ideal if you want high rewards. I pondered a lot and I think he is right.
For example, I have been investing in crypto for almost a year now. My investment strategy so far has been to explore coins and invest a couple of hundred dollars in each project. I never invested more than 200 dollars in any project despite the fact that I have spare money available. I have not been investing more than a certain limit to lower my risk of losing that investment.
While doing that I missed out on great opportunities like Leofinance, Thorchain, Travala, Orion protocol and many other projects that are doing amazingly good right now. As I mentioned, I was all about finding the right projects and put in a small pot of investment money. By doing that, I managed to significantly reduce my risk. Yes, I diversified my portfolio and yes that was the ideal thing to do while investing in a significantly risky asset group like crypto projects.
But, as Raol mentioned in his podcast, the diversification also significantly reduced my risk rewards. Had I invested more on projects that I discovered through my research, I would have gained more rewards. In retrospect, I was right about the project potential. I should have focused on one project that I was sure about and invested an amount that would significantly benefit. I made profits with Rune, Ava and other tokens but they are not life changing. All the effort and time I invested in the space, I expect the reward to be higher.
The learning-- Go all in when you know the true potential of a project. You will either reap the high reward or will fail significantly. When you are convinced about a project, there is a very little chance that you will fail.
So, what I started doing recently is to identify projects to invest in and put a significant amount (from my standard) rather than distributing tiny amounts in multiple projects. It will not diversify risk but will also maximize gains if/when that happens.
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