[IMAGE: https://gateway.ipfs.io/ipfs/Qmbnr3zDuWoqe5d5c6eSU9qrd7SkYQZRdLFtUnUytRDbZU]
Introduction
Let's make no bones about it, cryptocurrency has been the best investment (or gamble) one could have done in the past 5 years. It personally lifted me up quite a bit and I think we haven't seen the end of it yet.
But, we have to be careful and learn from history.
High Risk / High Rewards
When I went to the financial planner, I was presented with the investor risk tolerance questionnaire. It's a standard operating procedure to understand how someone deals with the risk associated with investing. Then everyone is graded on a normal distribution scale.
[IMAGE: https://gateway.ipfs.io/ipfs/QmNfnEwT9T77LoqFqwXEijrYHWXr8zjbpe8cM16AbbG3KS]
If you are the kind of person that is able to deal with market swings of over 200%, you belong in that category. Not everyone can stomach that kind of volatility, that's for sure...but so far it has paid off.
Past Performance Are Not Indicative Of Future Results
That is where I (and people with a high-risk tolerance profile) have to be careful. It's easy to get cocky, believing that it can only keep going up and up. Only to realize 2 or 3 years later that you are back where you had started. I'm old enough to remember the 2000 Dot Com Boom and Bust.
Companies had crazy valuation without ever selling a thing or even having a product. Just having a cool name like "pets.com" was enough for people pore in over $300M dollars into it.
If that doesn't remind you of the current ICO situation, I don't know what is. I was looking at a project called "BYTOM" that mooned yesterday. This project is now evaluated at over 1 Billion Dollars. That's a lot of money and the website seems have been done by a complete beginner. Tons of grammatical errors and I really don't see any real-life application on it.
Fortunately, I have a mentor who himself was one of those companies that went through the DOT COM Bubble. He told me the story of how he went from a valuation $1 per share to almost $60 and then back down. He is a very successful businessman, but he is truly helping put everything in perspective.
Good Ol' Diversification
I know you've probably heard that one a thousand time and to be honest, it's really not sexy. There is simply no market like cryptocurrency. Steem alone in the last month went up by 78.41%. That's the kind of gains that make your palm sweat.
So what am I doing? I personally do not liquidate my position in any cryptocurrencies BUT I'm shaving off the top every month. I hold on to my principal like grim death, but I generate some extra tokens via curation and authorship and move that into the kind of investment that makes sense to me...things such as land and other real tangible assets.
Conclusion
If you have nothing to lose, I would say cryptocurrencies are your best bet right now. It has a crazy upside potential. BUT if you are heavily invested in crypto with almost no real life assets, maybe it's time to think of purchasing something like stocks, bonds, lands, gold or whatever is more stable over the long term.
Tell me your thoughts below.
I completely agree that you need to diversify your holdings.
I can imagine that a lot of people were left without anything, or without a large portion of their money, after DOT COM bubble like your mentor did.
But, what if your holdings are small and investing in stocks won't get you some serious profits because they're not as volatile as crypto.
Then, I'd suggest you to invest only in crypto, but only the amount which you can lose.
Just like you said, cryptocurrencies are the best bet right now.
I'm a young guy, only 20 years old, and my holding are small since I'm still on college.
So, I invested only in crypto.
At older age, if crypto blossoms, I'll most surely diversify my holdins.
Yes, I 100% agree - for those in a good place through their crypto investments, you'd be crazy to leave all your eggs in one basket.
I too think the crypto market still has a LOT of upside, especially over the next 5 to 10 years, but there's also a chance Bitcoin gets hacked/broken tomorrow and the whole thing turns to s**t.
Being a paper millionnaire means nothing - you might be an ex-paper-millionnaire just a fast. And all you have is a good hard-luck story to tell.
There's no need to cash out, but even moving, say 10% out of crypto into something else makes a lot of sense. It can still be invested, but just not in something as high-risk. You won't make the crazy returns, but you'll also have something safer to fall back on. And, you'll still have your 90% riding the crazy, crypto rolla-coaster.
Anyone who's read up on basic principles of investing knows the golden rule for making any investment portfolio work over the long term: diversification. When you invest in multiple types of assets, with multiple levels of associated risk, you spread your risk out and reduce the possibility for any one investment to crash the value of your portfolio disproportionately. You also increase your chances of finding a better-than-average return, and through rebalancing, you can adjust your portfolio to reflect your current risk and return goals as they develop.
Typical assets in the past have included stocks, bonds, index funds, and real estate, but with the rise of cryptocurrencies--especially Bitcoin--more investors and professionals are turning to new frontiers in their portfolios.
So is it a good idea to diversify your portfolio with a cryptocurrency?
In a nutshell, cryptocurrencies are electronic cash systems that rely on peer-to-peer exchanges. They're fully decentralized and have no central authority or central server to manage those transactions. Instead, they rely on a network of individual computers to recognize, validate, and record transaction data; every device on the network needs to agree that a transaction can be verified, and once it is, it's added to a permanent, unalterable ledger that exists on that network--as a new "block" on the chain of data (otherwise called the blockchain). Other than their method of exchange, cryptocurrencies function just like other currencies, rising and falling in value.
I like the concept of diversification, however, in this current era, everything you would have diversified in, is about to come to an end.
Stocks
The stock market is about to crash, and then crash, and then lose all credibility as the DTCC shenanigans are made known to the people.
And then the stock market is going to crash for good.
So, unless you register your stock with the company, which means taking possession from your broker (they hate this) then you don't own any stock.
Bonds
Bonds have been in super-bubble territory for a while. If... no, when, the derivatives market implodes, say so long to the bond market.
Gold
Gold is much more common than we are lead to believe. Further, it won't be long till we can vibrate gold out of rocks. And the supply of gold will jump. Then the supply of gold will be, go get however much you need.
Property
Property values are in the stratosphere (or in the tank) and they are only held up by the banks being able to lend more and more on a house. This is going to come to an end as cryptos knock out the last pillar holding up banking. Then there will be none who can buy a house at the high rate. No loans, no leverage.
So, if you do not live in it, and expect that place to be your fallback position when things go nuts as the dollar collapses, than it isn't a good investment.
Silver
Silver has a lot of new uses coming online. It will become the worlds most valuable industrial resource. And since all the stockpiles have been used up keeping the COMEX lie going, then the price of silver will skyrocket. (because the new technologies using it are going to be worth that much)
