Yes indeed it is a very good idea to keep part of your portfolio in low(er) risk investments. That is why I keep a small portion of my crypto assets in stablecoins and even on centralized lending platforms. I even keep a chunk of my funds in savings plans by banks. Sure they aren’t just as exciting especially during a bull market like what we are facing right now, but it is exactly what you should be doing. You need to mitigate the volatility in your portfolio. If not, when things turn south, you might have no choice but to offload your assets at a huge loss. And not to mention, when the market is bear and everything looks gloom and doom with your portfolio, you might make irrational decisions and start selling out at the wrong time. That is how the market works against the retail investor. That is also why most of the time, it is the retail investors that are taking most of the loss.
If you are looking at how I try to mitigate risk, here are some of the things I do. I have part of my portfolio in stablecoins. They do get better interest from earnings, so they are actually quite decent to hold. At Nexo, the highest earning interest rate are usually those stablecoins. And having stablecoins in hand is good if you need to urgently purchase other assets as well. For example if you think that a certain crypto currency will moon, you might want to quickly take the opportunity and buy up some of the assets using your stablecoins to maximize your profits. Instead of waiting to sell your other lackluster cryptos and then buying it up.
And another another way to reduce the risk in volatility is to actually diversify your portfolio. That is to have a good number of different assets, preferably those from different classes. I hold on to some (not a lot) BTC & XMR which are basically old school proof of work cryptocurrencies. I also hold onto ETH, XRP, ADA and CAKE tokens as well. I also invested some in the Hi Dollar tokens. So if certain black swan events were to happen to perhaps the Defi sector, the rest of the cryptocurrencies might not be that badly affected. Sure your Defi tokens might take a hit but at least not all of them are down in the dumps. That goes the same for stablecoins as well. Try not to just keep USDT but keep other stablecoins just to be safe. Their value SHOULD NOT fluctuate that much, but you should be concerned that some government authorities might target a certain stablecoin. And you don’t need to look further than our favourite SEC and how they are now aiming at Tether. So basically don’t keep all your eggs in one basket.
Staking is can be considered another way to mitigate against risks. There are quite a number of proof of stake cryptocurrencies out there already. Staking do generate some returns but the more stable ones usually don’t have the kind of returns compared to those newer or small cap coins. So again, if you are looking for some lower risk investment, staking big cap tokens like ADA might be your best bet. There are also stuff like arbitrage trading which can be considered to be a low risk venture. However I am not familiar with them so I will not go into these. However I do use Kucoin’s trading bot. The returns are not fantastic but I do see them as lower risk. When the market turns south, they do help to mitigate some of the losses. Their spot trading bot is basically the same as arbitrage anyway.
Oh I am not a financial advisor. When you do investing, you should always do your own research. Please take care.