Crypto or Stocks? Here’s what I’m doing with my money
I get asked this question a lot. So I thought I’d address it.
My asset allocation heading into 2018
~$1.35M total portfolio
13% real estate
Here’s my current asset allocation
~$1.32M total portfolio
13% real estate
So I’m down roughly $30,000 in the past few weeks.
The damage could’ve been greater but stocks are up quite a bit; and given that I’m a lot heavier tilted towards stocks, it offset the recent ~50% correction in cryptocurrencies.
As you can see, on the way down, I’ve upped my cryptocurrency allocation by about 4% to be a total of 12% of my total portfolio.
12% in crypto doesn’t sound like a lot, but 12% of $1.32M is still a good chunk of cash (about $160,000).
I’ve been selling some of my stocks (roughly 5% of my portfolio) the past few weeks, from my taxable account (non-retirement accounts) and moving them towards crypto and cash.
And I still have about 5% in cash (about $70K) in the bank ready to deploy if the markets drop further.
What I’m going to do, going forward
I will focus more on cypto going forward and less on stocks. Because to be quite frank, I see a lot more potential for upside in the cryptocurrency space. It’s still in its’ infant stages, and I think it’s just starting.
As time goes on, I see the global market cap of cryptocurrencies easily exceeding that of gold.
Gold’s global market cap is about $7.8 trillion whereas crypto is only at about $0.5 trillion (as of today, ~$560 billion which is only half of $1 trillion).
That said, I will continue to keep the far majority of my wealth in stocks, and not cryptocurrencies. I will further explain why and my thought process behind this.
My thoughts on Bitcoin versus altcoins (currently)
To go even further than this, I think Bitcoin, by itself, will have a global valuation that’ll exceed gold (so not even including all the other crypto’s); because Bitcoin is just a far better version of gold, and thus a store of value.
And having said that, I’m currently the most bullish on Bitcoin, versus any of the top 10 cryptocurrencies, or any of the other altcoins.
I say this because altcoins have had a tremendous run relative to Bitcoin. A huge amount of money has been made in altcoins, even with the recent correction. And given that I don’t see Bitcoin going anywhere, I see a lot more value in Bitcoin than buying other altcoins (at this current time) due to the pricing / market cap discrepancy between Bitcoin and the altcoins.
It’s also been noted in many places that Bitcoin serves as a pool of liquidity. And people use Bitcoin to trade from and into other cryptocurrencies, rather than fiat into altcoins. So it always tends to start with Bitcoin and end with Bitcoin.
This doesn’t mean I think there’s no future in other cryptos and tokens. As I’ve mentioned in previous posts, I am bullish on a slew of altcoins. And I’ve been looking at a few other ones like Siacoin and Batcoin aside from the others I’ve been investing in (Cardano, Neo, Icon, etc). What I’m saying is that currently, with the correction, Bitcoin looks like a good play due to the price variance between it and the rest of the market.
My thoughts on the Stock Market versus Cryptocurrencies (currently)
The stock market has been very good to me in the past decade.
I’ve always been a perma-bull in regards to the stock market, and I still continue to be highly optimistic about stocks in the long run.
The reason why I love stocks so much is that they’re ownership in real companies. Real companies that create value and products in society. Think about companies like Apple, Amazon, Microsoft, Samsung, Tesla, Berkshire Hathaway, etc.
These are all companies.
Buying into the stock market means that you have part ownership of these real companies and thus you get to take part in their successes and profits.
And that is why I will always keep stocks as my fundamental “anchor” for my wealth.
That said, increasingly, I am really enjoying and becoming fascinated with the world of cryptocurrencies and cryptocurrency technology. I think block chain tech will create internet 2.0, and we’ve only just started. Similar to stocks, I strongly believe that cryptocurrencies will continue to grow in market cap in the long term and I feel we’ve only just barely touched the surface.
The more money you have, the more you think about preservation
A lot of people, when they don’t have any money, try to do “hail mary” type passes and go all in on something hoping to luck out and strike it rich. This is one of the reasons why we’ve had such a tremendous run-up in altcoins the past couple of months.
But you have to understand the more you accumulate, the more your mind will focus on preservation, than wanting to get more. This is because every additional $1 has less and less utility the more money you have.
So the desire to YOLO and gamble on some highly risky plays become less and less of an enticement. And this is why as you accumulate more money, the more you should think about how to diversify your assets so that not one single catastrophe in a certain segment of the market can deal a fatal blow to your wealth.
Even if your’e just starting out in investing, I’m still not a big proponent of go-all-in type thinking, especially with a lot of these cryptos. Because if you end up being wrong, it was your one chance to go big or go home. And you end up going home. And in this case, home is a very sad place. I personally don’t like to gamble with my life. And that’s why I believe even if you’re just starting out, you should try to think of ways to increase your chances of succeeding.
This means doing your research and spreading out your bets so that not one thing can kill your chances. This means investing in yourself (self-education so you can generate higher and more consistent income, stocks, bonds, crypto, real estate, etc).
Sum up (tl;dr)
- I’ve been selling some of my stocks and moving into crypto, so now the total % of my crypto is 12% of my portfolio (roughly $160,000)
- I’ve increased my cash allocation by 1% to have some more dry powder on the side to deploy if the crypto market declines further
- I like crypto and am highly bullish in the long term prospects; I think we’re still in the infant stages of cryptocurrencies
- I like stocks (this is where I made most of my wealth), and continue to be highly bullish in the long term because big corporations and businesses run the marketplace
- I like both Bitcoin and the other altcoins; but at its current state, I’m putting more funds into Bitcoin due to the market cap discrepancy between it and the other cryptos
- Don’t have an all-or-nothing mentality because if you end up being wrong, the damages are irreversible; be thoughtful in your moves because you shouldn’t gamble your life
What do you think? Are you in both stocks and crypto, like me? Which one are you more bullish on? Has this post given you any thought to make some tweaks to your asset allocation or are you going all in on one or the other?