2011 - $5
2013 - $728
2015 - $235
2017 - $13,865
2018 - $3694
2021 - $58,784
2022 - $16,642
2024 - $70,000
2025 – who knows?
Summer of 2017 I am in Houston Texas with a former college teammate driving around the Third Ward looking for a late-night spot to eat.
Somehow the conversation turns financial, and he informs me how his friends are making money (and apparently laundering it…) “flipping” this cryptocurrency called Bitcoin.
Then, I had no concept of how to buy Bitcoin – nor had the money to afford it, but unbeknownst to me the crypto-asset was fully into its bull market and was beginning to capture the attention of mainstream media.
I’ve always been an advocate for Bitcoin and other alternatives to have a place in an investment portfolio (not financial advice).
I believe alternatives are a way to diversify, and diversification typically lends to a better investment experience (even if it creates a drag on outcomes).
Yet in my years of providing investment counsel, I’ve come to realize that what you invest in isn’t nearly as important as how you do it.
According to Russell Investments from 2008 – 2022 average retail investors underperformed the stock market by 2.5%. (see Value of an Advisor Study)
Anecdotally we’ve all had the friend, family member, or colleague tell us about how they got into an investment late, sold it early, and ultimately paid a bunch of fees (or unknowingly gave their data) to their broker.
In reality we are all better served spending time thinking about why we’re investing (what do we really want), how much we are planning to invest, what are the investment returns required to create desired outcomes, and what do we need to do to ensure the uninterrupted compounding of our assets.
This can be neatly summarized with the following formula.
What do we want ($ amount or monthly income) = What do we have + how much will we save/invest + how long will we save/invest x required rate of return on investments
You can literally apply this framework to anything.
Thinking about retirement?
Plug in what you want, what you got, what you’re going to do, how long you’ll do it for, and what you need to earn.
Thinking about college?
Same thing.
Thinking about anything that costs money (so everything).
Same thing.
How does all of this relate to Bitcoin?
The next time somebody recommends that you purchase Bitcoin, NVDA, or the hottest latest thing, take a step back, evaluate what you want, do some math, and determine whether this investment will help or hurt your current endeavor.
Cheers,