Rebalancing your Portfolio [OC]

With the recent hype and uptrend happening around crypto, I thought this time would be a great reminder to rebalance our portfolios.

Rebalancing, to put simply, is the process of changing the weight of each asset in an investment portfolio (with the asset being crypto in this discussion). Think of it as preventive maintenance or a tune up for your car: it allows us to keep risk levels in check and minimize risk.

Of course there are many factors that affect how you should approach your rebalancing method but it would mostly depend on:

1. How often you buy/sell.
2. Your personal preferences.
3. Long term vs. Short term insights.

Here are some typical guidelines that would make rebalancing easier for you, maybe you're already doing some of these points which makes you even less exposed to risk:

• Record EVERYTHING - Always keep a record of the total cost of everything, from the gas fees, bridge fees, conversion fees, and most especially the total cost of the portfolio. The values from this datasets will give you a historical chart of your portfolio, so in the future you can compare them with current values.
• Compare their Performance - Is there any significant change? If not—and if you have no need to sell in the short term—it may be better to just hold. Compare the weight (percentage) of each crypto you are holding in your portfolio and compare how each one of them has performed in your personal timeline.
• Adjust Accordingly - If you think that adjustments in your portfolio have changed the your exposure to risk, take the current total value of your portfolio and multiply it by each crypto. The figures you calculate will be the amounts that should be invested in each crypto in order to balance your original allocation.

One short example would be to sell $2,500 worth of BTC and buying $2,500 worth of ETH to achieve the target adjustments. After the rebalancing, the portfolio will have the desired weight of coins according to the target percentages.

Another example is you got lucky in a memecoin that exploded to by 1000% and now has made you wife changing gains. It would be wise to sell everything but the capital cost of said memecoin and convert the gains to a solid alt or even Ethereum.

In the wild west of finance, it's important to manage risks and look at our portfolios from a bird's eye view. I know how amazing these times are and how sometimes it clouds our judgement with unnecessary emotions but we should all be aware how relatively young crypto is and how it should be able to manage the storms.