Even Passive Portfolios Require Management
The motivation behind creating a portfolio of assets operating within smart contracts and other interest bearing accounts is that you don't have to spend time trading, speculating and managing them. It is very much the idea of "set and forget" while you carry on with your life, leaving the machine to churn out profits in the background. However, even passive portfolios require some management but how often should it be and to what extent?
I can only share my own approach in attending to this requirement and how often I exercise it.
Portfolio Design Plays An Important Role
Depending on your investment vehicles, there may not be that much need to make many adjustments at all. Utilizing services such as BlockFi, Celsius and Crypto.com will reduce portfolio management to nothing much at all but any portfolio that is going to grow is going to also have riskier vehicles incorporated into the mix.
In my opinion staking is actually the safest investment because you are securing the network and the network is rewarding you by design. However, this is traditional staking known as proof of stake, not like many of these platforms inviting you to stake your coins. Technically, that is not staking but the term has been adopted and used in a similar way.
I would consider your lending platforms such as BlockFi in the second tier, followed by smart contract platforms and farming. This is my current view, which may change as the space matures.
Farming and smart contracts may require frequent adjustment as yields drop and liquidity dries up. If you are utilizing any of these to generate passive income then you need to watch the liquidity pools, contract balances and user participation.
Don't Make Adjustments Unless It Is Imperative
This is a good rule to follow as you will always find a "valid" reason to move funds around. The longer that you commit to any project, the more profit you stand to make! This is especially true in DeFi smart contracts, frequent moving of funds can not only slow your growth, it can actually result in loss.
In the case where the returns have dropped significantly, consider finding a new home for those funds. In the same breath, lower but consistent returns from a trusted earner should not simply be replaced. This is why you have a portfolio.
Some vehicles will offer higher returns than others and you should have a well distributed spread as the lower returns are generally the safer vehicles. To have a portfolio made up entirely of high risk projects is not the wisest approach.
At the end of the day it is pretty simple, don't move funds unless the market dictates it. Stick with your choices until they have matured and you have found and researched alternative projects. The following 4 points negate this rule.
The project is showing signs of an exit scam.
Returns no longer justify the investment.
Liquidity is dropping and you want to move with ease and not get stuck!
A really great opportunity comes along from a trusted source.
In regard to the final point, it is best to withdraw small amounts from other investments and decrease multiple holdings slightly, as apposed to shutting down your cash cows in the hope of higher returns elsewhere.
You never know what may happen, regardless of how great it appears.
