Diversification of Investment Portfolios with Nexo
Mar 27, 2019•4 min read
As the world’s most advanced and trusted crypto lender Nexo’s value proposition is to offer clients best practices from the traditional finance world adapted to the new realities of blockchain technology and decentralized finance.
Following the ‘smart’ money has always been a particularly profitable investment strategy and is one of the many avenues Nexo gives clients so that they can diversify and leverage their portfolios.
All it takes is for clients to receive an instant crypto credit line from Nexo without having to sell their digital holdings so that they can use funds be to spread across domains.
For crypto enthusiasts investing in traditional equity markets, bonds, commodities and real estate is an efficient tool for maximizing returns and minimizing risk.
This utility of the Nexo model of allowing effortless diversification across asset classes is of paramount importance. If there is one thing in common among magnates in the finance industry, it would be their penchant for diversification. Bridgewater’s Ray Dalio opts for diversifying as his favorite way to immunize his wealth from turbulence in the economic cycle. Investment titan Carl Icahn has amassed a fortune with his high-profile strategic moves based on across industry bets. And curiously enough, Warren Buffet is planning to bequeath his estate in low-cost ETFs as his way of ensuring diversification and superior returns.
It all ultimately comes down to -“don’t put all your eggs into one basket.”
This basic rule is something all investors should follow and with Nexo, investors can easily achieve this by investing their loan proceeds in a mix of fixed income products, commodities or stocks to achieve better and sustained results across extended periods of time. Life is a marathon after all.
Strongly correlated portfolios move in the same direction, leading to severe losses when this particular asset class underperforms, so negatively correlated portfolio mix is preferable.
The fast-moving environment of blockchain and crypto provides a completely new portfolio of financial products available for investment. Nexo is complementing those opportunities by offering cutting-edge solutions to establish well-balanced portfolio structures, by giving clients the means to invest the value of their digital assets in other asset classes while retaining the crypto as well.
Diversification with Low Correlation
A study conducted by Cointelegraph found that cryptocurrencies have the ability to increase your average return on investment while lowering the standard deviation (risk level) of the portfolio. And if we were to take portfolio diversification to the next level, holding a basket of traditional securities alongside your basket of digital assets is likely to increase your average return and spread the risk even more effectively.
According to a recent report by JP Morgan, cryptocurrency markets have a low correlation with traditional equity markets, and for this reason, could be an extremely useful tool for diversification for people who are invested in traditional assets only but also for crypto fans who can via loans from Nexo invest in traditional assets.
Since the cryptocurrency markets share a low correlation coefficient with the traditional markets, the combination of traditional equities and cryptocurrencies is likely to mitigate some of the risks of your portfolio while increasing expected average return. And historically, this is exactly what has happened in the past 10 years since Bitcoin’s birth.
Diversifying Through Nexo: The Best of Both Worlds
The Nexo community members have found the Nexo enterprise to be a great tool for diversifying their financial portfolios and spreading the risk over different asset classes.
Users simply transfer their crypto on the Nexo platform as collateral against Bitcoin (BTC), Ether (ETH), XRP, Nexo Tokens and the Binance Coin (BNB) and instantly get access to a crypto credit line which requires a minimum loan amount of $500 and goes up to $2,000,000 per client.
Additionally, Nexo has recently become the only crypto lender to offer insurance on custodial assets for $100M.
All of these solid accomplishments have enabled Nexo to process more than $300,000,000, gaining the trust of a rapidly growing user base of 180,000+. The ‘Earn Interest’ product which gives the clients the opportunity to earn up to 6.5% in interest on their idle crypto assets was introduced as an instant way of scaling the enterprise. Nexo further made history on December 15th, 2018, when the first dividend payout gave close to $1M to the NEXO Token Holders.
Here is a quick guide on how the most seamless lending experience works: