Maximizing Returns With Risk-Managed Investments: A Complete Guide

risk-managed investments

There are currently more than 295 million cryptocurrency users worldwide, and that number is always going up. Crypto is becoming increasingly popular, but it’s still not something to rush into. While plenty of people have made sizable profits, plenty of others have made losses. If you want to succeed when investing in cryptocurrency, you need to manage your risk exposure effectively.

In this guide, we’ll explain the essentials of risk-managed investments in crypto. Keep reading for more.

What Is Risk Management?

Risk management is a strategic approach to investing that involves identifying, analyzing, and mitigating uncertainty. You need to build a strategy based on how much risk you’re willing to expose yourself to. Investors who take on too much risk are more likely to suffer losses.

Fundamental Crypto Risks

There are various risks that you may be exposed to when investing in crypto. Understanding what they are is the first step towards mitigating them.


This is more prominent with crypto than many other asset classes. Cryptocurrencies are highly prone to market fluctuations, and while this presents the opportunity for sizable gains, it also increases the risk of sizable losses.

Regulatory Uncertainty

The crypto market is still largely unregulated, and while this is changing quickly, it’s currently quite lacking. Many governments worldwide are still specifying their exact stance on cryptocurrencies. Changes in policies can impact the market, and therefore, your investments.

Cybersecurity and Hacking

Hackers are always looking for new ways to steal crypto from investors. They’ve been known to attack exchanges, wallets, and other platforms. Beginners are often at more risk as they don’t have as much knowledge of the potential threats.

Technology and Project Risks

Some crypto projects are more reliable than others, with many of the newer ones lacking a solid foundation, competent team, or suitable technology. If you invest in a project without first researching it properly, you could risk losing your investment.

Liquidity Risks

When cryptocurrencies face liquidity issues, it can impact their value. The risk here is typically greater with smaller projects, so be cautious when investing in low-cap cryptos.

Risk Management Strategies

Before investing, you should determine your risk tolerance. You can then develop a strategy that aligns with your risk tolerance and investment goals. There are several things you can do to reduce your overall risk of exposure.

Do Thorough Research

One of the biggest investment risks many people take is purchasing a crypto without looking into the project. Any experienced investor will tell you that you should always know what you’re purchasing. Make sure you understand a project and its underlying technology before adding it to your portfolio.

Diversify Your Portfolio

If you only invest in one asset (for example, Ethereum) and the value drops significantly, you’ll be sitting in the red. Portfolio diversification is a common practice to help avoid this.

In a similar situation with a portfolio that’s 20% Ethereum and 80% other cryptos, just Ethereum dropping in value won’t have such a significant impact. It’s best to invest in a range of assets such as stocks, real estate, gold, etc. When it comes to just crypto, investing in different types of coins such as Bitcoin, Solana, XRP, and more can be a good way to reduce your risk.

Stay Informed and Updated

The world of crypto changes fast, and there are constantly new events and market trends to be aware of. Staying up to date is one of the best ways to ensure you can make the best decisions.

Use reliable information sources to get the latest updates. Online communities can be great as there are other like-minded investors sharing their own insights. Monitoring regulatory changes is also ideal for keeping up with the cryptocurrency landscape.

Secure Your Investments

Many crypto investors have lost funds simply because they don’t keep them secure. Unless you’re planning on trading your crypto sometime soon, you should move it off of exchanges and into your own wallet(s).

Soft wallets are relatively secure, but hard wallets are the safest storage option available. Make sure you write down your seed phrase and keep it somewhere safe. Don’t save it on a digital device, as someone could potentially steal your crypto if they get it.

Use Stop Loss Orders and Take Profits

Market downturns can happen quickly, so it’s a good idea to have stop-loss orders in place. These will automatically sell your crypto at a set price if the value starts to drop, limiting the amount of loss you might experience.

Take-profit orders are similar, but will instead sell your crypto at a higher value as the price increases. You should regularly assess your orders and make adjustments if needed to keep things in line with your strategy.

Avoid Emotional Decision-Making

Emotional decision-making is something that causes plenty of investors’ issues with all kinds of assets, and it’s often worse with crypto. When paying attention to the market, you’re bound to see sudden spikes and drops in the value of different cryptos. This might tempt you into ignoring your strategy and making rash decisions.

When this happens, your disciplined approach may go out of the window. In almost all cases, decisions based on emotions are bad ones as they ignore logic and reason. You should always try to keep your strategy in mind and don’t let your emotions get the better of you.

Consider Long-Term Investing

Quick profits may seem nice, but you should always consider the long-term effects of your decision. When developing your strategy, you want to make sure it’s sustainable. Think about your long-term goals so you can build a strategy that won’t quickly fail.

Effective Risk-Managed Investments

Investing blindly is a surefire way to lose money, so you should always be careful. Risk-managed investments with a solid strategy in mind will help you build a diverse portfolio. Determine how much risk you’re willing to take on and research any asset before investing while keeping your goals in mind.

If you don’t want to invest in crypto directly, investing through a hedge fund like TrueCode Capital can be a great option. Our advanced algorithms allow us to make well-informed investment decisions based on the latest crypto trends. To improve your understanding of the crypto space, check out our educational content today.

Learn More: Take the crypto quiz

Take a three-minute quiz to learn how to become a more confident crypto investor.

When you take the quiz, you’ll get a 15-page PDF report summarizing your qualifications:

  • Do I understand my wealth objectives?
  • Do I have the knowledge to confidently invest in crypto?
  • What is the impact of crypto investing in my portfolio?

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