Investment withdrawal strategies – why is it important?
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When buying cryptocurrency whether it be for a coin, an ICO or a platform you should always have a strategy when going into any purchase.
Whenever coins are not in your own wallet, where you hold the private key, means that you do not truly hold the coins. Platforms, businesses, coins – in Cryptocurrency or not – regularly fail. It is important to protect your assets and to regularly grow your core coin portfolio.
Whatever strategy you choose, it should take into account a number of factors and include your personal risk tolerance, your confidence in the business and its model, the value of the coin involved and the length of time. Knowing yourself, your goals and what works for you is critical when starting out. For more information check out my blog here.
How and when to withdraw.
Once you can understand the details on those aspects you can determine if you tend towards conservative strategies, steady strategies or aggressive strategies.
No one strategy will work for every coin or platform. All strategies work on a continuum and there is no right or wrong. You will be able to adjust your strategy to match your changing variables.
Remember, the aim is to grow your core account, so don't leave your capital in any platform or coin for too long, mitigate risk by withdrawing seed in a reasonable time that way you are growing pure profits in a platform.
Another thing to consider is reviewing your balance and imagining how you'd feel if it was wiped out tomorrow. If it makes your heart skip, or feel nerves, it's time to withdraw more profit.
This is also why I recommend reviewing your portfolio at least every 3 months.
Different types of strategies
Platform types vary considerably, to see my take on the types of platforms available check out my blog post here. When withdrawing it generally operates on a continuum – conservative to aggressive.
- A conservative strategy might result in you withdrawing your seed (starting capital) very quickly, perhaps before even compounding.
- A more moderate strategy might be 1 withdraw, 1 compound.
- A steady strategy would be where you reinvest (as an example) at a rate of 70% to 30% withdrawals.
- An aggressive strategy might involve compounding for an extended period before withdrawing anything.
- After a predetermined period to steadily and (potentially) slowly withdraw seed plus.
Many people like using the popular 70/30 or 80/20 split (the first figure is the amount that is compounded relative to the amount withdrawn).
For coins you hold for a short profit or ICO's the withdrawal strategy will differ.
You may decide to hold the coins for a certain period of time then determine how it has performed. From there you can decide how much to sell or to whether to wait.
Remember, at least half of all ICO's fail within the first year so don't delay in taking at least some profits unless you are extremely confident in the project and happy to wear the risk.
Remember you will use a different strategy for different situations. For very high risk platforms you should get seed out early or at least half seed out as soon as possible so that you can play and earn with profits. For platforms you are extremely confident in you may wish to compound at 100% for 6+ months before dropping to a 70/30 strategy for example. This is popular in many of the long term platforms. As you can imagine there are almost endless ways you can withdraw capital from a platform. The best person to determine which way is right for you is you. You should know yourself so to maximise your returns and minimise stress.