This principle suggests that the value of a dollar you receive today is greater than the value you will receive in the future due to the capacity to earn profit or return on investment. The time value of money is the foundation of many financial decisions, including investment strategies and loan repayment plans.

For example, if an investor buys a Bitcoin unit in 2017 by paying $10,000 and keeps it until 2021, the value of his property has reached $50,000, which shows a 400% return on the initial capital. This offers the time value of money because the investor has managed to earn a significant recovery by holding onto the asset over time.

Another example of the time value of money in the cryptocurrency market is the concept of equity. Some cryptocurrencies like Cardano and Ethereum allow users to profit by staking their assets. In this method, you will be rewarded based on the amount of staked cryptocurrency. This solution also shows the time value of money because shareholders can profit by holding and using their cryptocurrencies over time.

The principle of diversification is having several assets in your investment portfolio to reduce the risk of loss. Diversification is a way to protect the investment portfolio against the negative impact of financial markets.

If you have several assets in your investment portfolio, the risk of loss will decrease, and the probability of their profit will increase. For example, the value of one of your assets may fall; on the other hand, the value of the second asset will remain the same or even increase. Thus, the investor’s loss will be reduced or even compensated.

This principle means that the greater the potential reward of an investment, the greater its risk. Investors should evaluate their profit/loss ratio before deciding to trade.

As we mentioned, the potential profit ratio of an investment is often related to its risk level. Some traders may accept more risk in exchange for higher profits, but the level of risk tolerance and the investor’s goal is influential in this case. Since most governments or top officials of countries do not support cryptocurrencies and this type of digital asset has more volatility than the stock market, its investment risk is also higher.

This principle involves dividing the investment portfolio between different types of assets, such as stocks, bonds, real estate, etc., to improve risk management. Allocation of help is significant for creating an investment portfolio suitable for the investor’s goals and risk level.

An investor can allocate a certain percentage of his investment portfolio to stocks and another portion to cryptocurrencies based on his goals and risk level. For example, people who seek less risk will allocate a higher percentage of their investment portfolio to stocks, while risk-averse investors will probably give a higher rate to cryptocurrencies.

Compound interest is a powerful tool to generate impressive incomes, but it requires a lot of patience and consistency. This principle means the reinvestment of income from previous investments, which is done to earn more profit. By following this trend over time, people’s capital will grow exponentially.

Compound interest is applied to both the stock market and the cryptocurrency market. For example, a person who buys a stock with the profit obtained from his previous investment will achieve more profit in the long run. Thus, you can generate more income by reinvesting your profits.