The fundamental pillars of investing

There are time-tested concepts that transcend the crypto world and it can help anyone take a big step in achieving or attaining financial freedom in the world as a whole. Some fundamentals in which most if not all investors should keep in mind are; diversification, understanding what you are investing in, time horizons, compound interest and dollar-cost averaging (DCA).

*Diversification As a crypto investor, you must know how to balance risk because it’s very important when investing and also having a well-balanced portfolio can play an important role in achieving this. In simple terms, diversification is distributing your capital into different coins and tokens to reduce overall risk. In terms of crypto world, it involves combining different strategies to create a portfolio that is made of a wide range of different assets. Having a diversified portfolio will save you or reduce you from having losses. The best way to reduce risk and the best way of increasing your chance of achieving success is through diversification.

*Understanding what you are invest in, it’s also an important fundamental Before investing, understanding the assets is very important to achieve your goals because without a better understanding of the basics of technical analysis and the fundamentals you might run at loss. So doing a proper research before investing is very important.

*Another fundamental is time horizon The period in which you just trade or invest in assets before selling is what is referred to as time horizon and they are used differently depending on the trader or investors themselves. Some people hold crypto projects for a minimum of 3 – 5 years to allow the projects create value. So no matter the time horizon you chose to trade or invest, it is important to re-evaluate and stick to the time horizon because it helps makes decision without emotions getting in the way.

*Compound interest is another fundamental The compound interest works when an interest that was previously earned is added to the capital amount that was initially invested and this process is also referred to as interest earned on interest.

*And lastly is the Dollar-cost Averaging (DCA) fundamental When you have certain and assured time horizon you can decide whether or not you want buy a lot of assets at a go or whether to use the DCA to reach the position you solely desire over a period of time. So for a simple definition the Dollar-cost Averaging (DCA) can be said to be an investment strategy that usually involves purchasing investments in equal or small increments over a period of time and this method helps lessen the risks and reduce the effect of volatility on investments made.

*How it works If you intend to invest $1,000, so rather than invest it all at once you can invest it bit by bit like $200 every month. It’s also important to note that the price of investments will definitely change over time and when large investments is been made and the volatility is important. So Dollar-cost Averaging (DCA) fundamental can help level out the price and investing average.

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