{"id":771,"date":"2024-05-09T20:39:06","date_gmt":"2024-05-09T20:39:06","guid":{"rendered":"https:\/\/henryov.com\/ian\/?p=771"},"modified":"2024-10-06T13:40:33","modified_gmt":"2024-10-06T13:40:33","slug":"building-a-crypto-portfolio","status":"publish","type":"post","link":"https:\/\/henryov.com\/ian\/building-a-crypto-portfolio\/","title":{"rendered":"Building A Crypto Portfolio – Modern Portfolio Theory and Standard Deviation"},"content":{"rendered":"\n

Understanding Your Investment Personality<\/h2>\n\n\n\n

Every investor has a unique tolerance for market fluctuations and their impact on their portfolio. There are investors who lose sleep when their portfolio fluctuates, and there are investors who sleep through it all dreaming of long term gains. Taking lessons from Harry Markowitz’s modern portfolio theory, there are three things you should consider when making an investment decision: your financial goals, your time horizon, and your risk tolerance. It is also helpful to be aware of statistical tools to quantify risk. Standard deviation of returns, or the range that an asset’s price will vary from its mean value, is one of the most common measures of risk. Additionally, you should consider being active with crypto twitter and other social spaces that can provide insight for your crypto journey.<\/p>\n\n\n\n

Evaluating Investment Decisions<\/strong><\/h2>\n\n\n\n

Do you want to replace a savings account for better returns or do you want financial freedom to quit your day job? There is probably a spectrum where most of us would fall somewhere in the middle. It is nonetheless important to identify your expectations. A crypto portfolio can easily surpass the return rates of any savings account out there but the time frame of significant returns would probably be a long term investment. However, there are investors who deal in derivative trading, meme coin pumps, NFT flipping, and many more short term strategies that can result in large profits. Regardless of your strategy, the crypto space always comes with risk. Remember: never invest more than what you’re willing to lose.<\/p>\n\n\n\n

Standard Deviation<\/h2>\n\n\n\n

The standard deviation of returns draws from statistics of normal bell curves. If the average value, or mean, of a bell curve is 10 and its standard deviation is 5, then 68% of the time a randomlly chosen entity from the sample will fall between 5 and 15. Five is one standard deviation to the left of 10, and 15 is one staandard deviation to the right of 10. Due to the way normal curves work, 95 percent of the time a random sample will fall within 2 standard deviations of the mean., so between 0 and 20 for our example.<\/p>\n\n\n\n

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For example, take a stock that has an expected return of 7% and a 5% standard deviation of expected returns. There is a 68% probability that this stock will yield returns between 2 and 12%.<\/p>\n\n\n\n

Web3 & SoFi<\/h2>\n\n\n\n

Crypto twitter is not the only place to find culture and community. Farcaster, FriendTech, Stars Arena and many other spaces are changing the way we interact with each other in the crytpo space. Stars Area is my highest endorsement. It’s free to join, unlike warpcast (farcaster) and even though you’ll need Avax to be involved, other people might start buying into your profile right away. Use my referral to join:<\/p>\n\n\n\n

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The Arena product roadmap for Q4 is live.

Below you will see a list of features, presented in the order we plan to release them over the course of Q4, broken down into 2 phases.

All features will be described in more detail as they are rolled out. This isn\u2019t everything btw.\u2026 pic.twitter.com\/oaiMh4kIVs<\/a><\/p>— The Arena (@TheArenaApp) October 3, 2024<\/a><\/blockquote>