I am writing this article as the stock market suffers its worst week in about two years. S&P 500 is off to its worst start since 2016! Tech stocks are hit hard. Bitcoin and Ethereum are not doing great, causing a ripple effect throughout the crypto space.
All that happens as the central bank of the US pulls back its massive stimulus programmes. Programmes launched in the early days of the pandemic to address the enormous uncertainty but resulted in a bull market.
Yet I couldn’t help it, here I am, writing an article on investing. Writing down my reflections on wealth creation has been on my mind for a long time. But I took it a step forward and dug deeper. The end product covers why I started to invest so late, my investment strategy, portfolio, and tools.
While all markets are taking a beating, things will get better; they always do.
We all have regrets in life. One of my biggest ones is not investing earlier. So I want to take my learnings from the past few years and share them as transparently as possible.
I hope that by sharing my thoughts, I will be helpful to others in their investing journey. Yet, please take into consideration how this is not investment advice.
- Does the business demonstrate economies of scale? Companies where the unit cost declines as production volume increases. Think of Netflix.
- What about network effects? A network effect occurs when a product or service becomes more valuable to its users as more people use it. Think of Uber and Airbnb.
- Is there a counter positioning play? This occurs when a newcomer adopts a new, superior business model to what incumbents are offering. At the same time, the legacy company refuses to mimic the model due to anticipated damage to their existing business. Think of personal (disruptor) VS mainframe computers (disrupted).
- Are there any switching costs? A dynamic where transitioning from one tool to another results in considerable costs for the user. So competitors will need to compensate consumers for the switching costs. Examples include SAP and Oracle.
- How strong is the brand power? Apple is perhaps the most famous example here. Anything carrying the apple logo can be sold at a higher rate than alternatives.
- Are there any cornered resources? Of course, the most common cornered resource is intellectual property like patents. But it could be extraordinary founders like Elon Musk and Steve Jobs. That’s why I am a believer in founder-led organisations.
- What about process powers? The best example in this category is Toyota’s production system. Their process required many years to be developed, and the company let competitors study it. Many books have been written on Toyota’s lean manufacturing process. Yet, the company remains the second most valuable car automaker globally (after Tesla).
Having one of the seven powers is sufficient. The more powers a business has, the higher the probability of consistent growth in the years to come. Therefore, the more power a company can demonstrate, the higher my conviction to invest.
But above all that, I ask myself, am I using this product, and how does it make me feel?
If the answer is positive, I understand the value proposition and how the product works. That naturally results in an even higher conviction to invest. So you can argue that my philosophy boils down to investing in things you use and understand.
Also Read: Why the Philippines is set to become the crypto capital in Southeast Asia
Investment portfolio
This year, I plan to add my first investments into startups and real estate. Anyway, given how much I have to learn, I plan to take my time when writing big cheques. Today, my investment portfolio is diversified in the following way:
Stocks
I started with investments in individual stocks of companies I know, use, and understand. Then I drifted into taking small positions in companies I do not use but have read a lot about them.
In such scenarios, I consider the seven power framework. Over time, and as I started managing some of my girlfriend’s money, I have added ETFs to reduce the risk.
I have tried a lot of things and made a ton of mistakes. But, perhaps the most significant mistakes were:
- Not having a clear reason why I am investing in a company
- Selling during the market crashes
- Using the wrong investment platform.
Thanks to those mistakes, I have learned to control myself better. As a result, while I expect more mistakes to follow, I feel more comfortable with my portfolio.
Breakdown of my stock investment returns
Crypto
Once I felt confident enough with my stock investments, I added crypto.
Bitcoin and Ethereum make up most of the global crypto market cap, representing 51 per cent of my crypto portfolio.
Additionally, I am bullish on Solana, so 21 per cent of my budget is in SOL. Next, I have invested in other layer-one blockchains like MATIC and AVAX. The remaining has been allocated to stablecoins (so that I can readily invest) and a few other experiments. Last but not least, I have started playing with NFTs too.
Overall, I stay away from meme coins that follow the sentiment on Twitter and Reddit (e.g., SHIBA and DOGE). My schedule does not leave me with any time to stay on top of such hype. I prefer to put money into projects with high utility.
Next, I plan to allocate a bit of money into more layer one blockchains. Think of the likes of Polkadot and Polygon, plus some DeFi protocols like AAVE, Chia, and a few others.
In general, I prefer to have fewer positions with more conviction than a messy portfolio.
I started tracking my investments via CoinTracker in April. Unfortunately, the product makes many mistakes, and I constantly need to fix discrepancies.
Tools
When assessing what platform to use, I pay attention to two things, UI/UX and fees. When I am new to a field, I prefer to have intuitive UI and UX over fees. In my mind, the high fees are an investment in education. A better UX/UI gives me the confidence to invest without being confused half the time.
Also Read: Inside the changing landscape of Asian cryptocurrency exchanges
That was precisely the case with crypto. First, I started with Coinbase because it was the easiest platform I tried out, despite its high fees. Then, as I got more confident, I started using Binance, Crypto.com, FTX, and a few others.
Next, as I started investing more and more, I started thinking of security. That led me to move my assets in what the industry calls hot wallet, aka software wallet.
To begin with, I got Coinbase Wallet. Over time, I have added Metamask and Phantom (the latter precisely for SOL). The wallet acts as your bank account and identity on the blockchain where you can store your assets. In addition, it gives you self custody.
But with great power comes great responsibility. Since no third party manages your wallet, you need to avoid losing your keys. Otherwise, your funds will be lost forever.
A few months ago, I started shifting my crypto investments to what is often referred to as cold storage, aka a hardware wallet. I use Ledger Nano X as it’s one of the most popular wallets out there (plus I received it as a birthday gift). In the same way, your hot wallet requires you to be very cautious with your keys; you need to be very careful with the cold storage.
For analytics purposes, I use Cointracker, the free version is not perfect, but it’s good enough. Under the paid version, the platform helps you estimate your crypto taxes, too (if any).
When it comes to stocks, I have tested several platforms and narrowed down my choices to:
- Revolut – for individual stock investment
- Gotrade – for ETFs
To summarise, I hope this article comes in handy when planning your investment strategy. As discussed above, I am new to wealth creation, and there is much to learn. However, writing all that down has helped me better understand my process and what I need to improve.
At the same time, if more people would share their investment journey transparently, that could be a fantastic educational asset.
Unfortunately, there is plenty of generic advice on the web that pisses me off. I prefer tactical over vague advice, but it’s hard to find credible, transparent, and well-intended content.
Also Read: 5 reasons why crypto exchanges need to be decentralised
Having said that, nothing beats having skin in the game, so the earlier one starts, the better. That’s why my brother’s gift for his graduation was me coaching him to invest while providing the necessary resources.
That definitely taught him a few valuable lessons. Nowadays, he is texting me weekly to ask for guidance on how to invest, and he is only 23. I wish someone had helped me the same way when I was his age.
Lastly, I want to thank all the people who have been writing great content and guiding me over the last few years.
Disclaimer
None of the information contained here constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy.
This article does not take into account your personal investment objectives, specific investment goals, specific needs or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here.
The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by the author.
The author also does not warrant that such information and publications are accurate, up to date or applicable to the circumstances of any particular case.
Any expression of opinion (which may be subject to change without notice) is personal to the author and the author makes no guarantee of any sort regarding accuracy or completeness of any information or analysis supplied.
The author is not responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained here. The contents of these publications should not be construed as an express or implied promise, guarantee or implication by the author that readers will profit or that losses in connection therewith can or will be limited, from reliance on any information set out here.
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