Greetings and welcome, dear Hivers, to another installment of this space for the dissemination of knowledge.
Image courtesy of: Nattanan Kanchanaprat
"Do not put all your eggs in the same basket, or you could lose them all" the above phrase seems to be a classic that our grandparents and even our parents used to tell us, referring to the need to reduce risks as much as possible, since in a stumbling scenario we could run out of eggs since all of them would break.
In this sense, if we extrapolate the previous sentence to our financial system we realize that we must be intentional and learn to diversify our investments, knowing that times are changing and what works today may not work tomorrow, which implies a stagnation of our financial opportunities.
If we approach the term diversify, we realize that it was coined for the first time by the American Harry Max Markowitz, who revolutionized the approach to economics and finance since 1952, since it was based on the fact of providing the same opportunities and importance to profits and risk, since both are present in a financial system.
Now, unquestionably the key to the matter is to learn to reduce risk levels and among the most appropriate strategies is the process of diversification, which is nothing more than learning to choose several options instead of just one, in economic terms this means dividing our resources in different assets, so that with the arrival of setbacks only a part of our capital is put at risk.
Consequently, learning to diversify is learning to identify and create a balance between profitability and risk, always thinking of reducing the latter as much as possible, and although there is no ideal way to do it, diversification is still the best alternative to achieve it.
At this point, there are different variables that we can take into account to diversify our capital, among which we can highlight:
1. Identify your profile as an investor, as well as the risk you are willing to take in your investments.
2. Analyze the behavior of the markets, since through this analysis we will be able to invest in different assets with greater confidence, likewise, we will be able to combine sectors to make our investments in order to improve our profitability.
3. Learn to value the investment terms, since this is one of the ways to evaluate the return on invested capital and allows us to make timely decisions based on our investment.
As you will see, the diversification process at a theoretical level seems to be very simple to execute, however, in practice it is difficult to execute it, due to psychological processes associated with people's emotions, so that we make erroneous decisions based on the previously executed analysis.
If we take the above to our reality, it is valid to ask, at this moment in history is it better to invest only in Bitcoin or is it necessary to diversify? To answer this question, we must perform a prior analysis of the behavior of the price of this asset and its impact on the price of other assets associated with the sector. Consequently, according to the technical analysis, we are at a point where market manipulation is pressing and where the bearish strength at the weekly level outweighs the strength of bullish investors, so that we can establish a considerable fall in the coming weeks. Hence, I would dare to say that investments should only be executed through Bitcoin and we should look for other markets to finish diversifying our capital.
DE INTERÉS
