Introduction
I am an old man who has decided to participate in the digital economy by investing in cryptocurrency. Not the kind of investment that is characterized by short term trades or extreme position-size, but instead by taking a careful, methodical approach to uncovering and using the best strategy to achieve slow wealth (3-5 years) with cryptocurrency.
I do not have a background in finance, cryptocurrency or coding. And although I do have a long history with business start-ups and investing, it is fair to say nothing has worked well enough for me to achieve financial wealth.
In the interest of documenting my strategies and approaches, I am sharing a few posts here in Steemit. I enjoy blogging and maybe others can benefit from the way I have tried to organize this work as well as offer better ideas and insights into cryptocurrency investing.
The posts will be loosely organized in the following way:
Introduction (this post)
Portfolio Objectives and Goals
Portfolio Composition, Position Sizing and Pruning
Other topics
Do you have a plan for investing in cryptocurrency? Or do you prefer just to “roll the dice”?
- Portfolio Objectives and Goals
If you are reading this, you probably get crypto.
One important question to ask yourself is: AM I AN INVESTOR OR AM I A TRADER? Or neither?
As an investor in crypto I am generally looking to hold longer and less concerned about ups and downs (volatility). As a trader I would be watching the price of the coin and very concerned about executing the right trades quickly and cheaply. There are other distinctions but I feel these are the two most important.
As a sixty-seven year-old man the goals of my portfolio might be very different than someone much younger or I might pursue the objectives with more persistence and a singular focus. In my case, I want to build a nest egg and provide my wife the option of not working as she nears retirement age - she is sixty-one.
I began composing my portfolio by asking one question: How much money did I want to earn with my cryptocurrency investments?
By most accounts, a couple in retirement might require millions of dollars to live without requiring assistance from friends, family or the government. Millions. But depending upon how long you live, it might require very much less money. No one knows, so lets start with something more reasonable, say ONE MILLION DOLLARS (after taxes - not discussed in this story).
How can we earn ONE MILLION DOLLARS by SPECULATING in cryptocurrency?
Too big.
I decided first to bring that goal within reach by setting my sights on earning ONE HUNDRED THOUSAND DOLLARS (USD).
I reasoned that only about 10 percent of coins reach a value equivalent of $10 USD within 3 years. Therefore my objective would be to invest in coins that held the potential to reach $10. If we look at the total number of coins on the exchanges, we can count about 1100. So my challenge would be to find a few of that 10% (or 100 coins) that theoretically hold the potential to reach $10.
Anyone will tell you that speculating/investing/trading cryptocurrency is more risky because there are so many risk factors associated with each blockchain technology team.
But the main risk factor for an investor is volatility (prices moving up and down by relatively big percentages).
Therefore, I decided to risk $1000 by SPECULATING. I will place a small amount of my portfolio on HIGHLY speculative, long-shot coins.
If my reasoning is correct, here are my options for the cryptocurrency portfolio:
Buy $1000.00 worth of a low-value coin (10,000 units of one or several currencies) at .10 cents which might increase in price 100X to reach $10.00. Sell it for a $100,000,00 gain.
Buy $1000.00 worth of a very low-value coin (20,000 units of one or several currencies) at .05 cents each which might increase in price 200X to reach $10.00. Sell them for a $100,000.00 gain.
Buy $1000.00 worth of super-low-value coins (100,000 units of one or several currencies) at .01 cents each which might increase in price by 1000x to reach $10.00. Sell them for a $100,000,00 gain.
Buy $1000.00 worth of ultra-low-value coins (1,000,000 units of one or several currencies) at .001 cents each which might increase by 10,000x to reach $10.00. Sell them for a $100,000.00 gain.
Combinations and permutations of units/currencies reach infinity here but one important question to ask is:
How do we select a cryptocurrency to invest/SPECULATE our $1000 in?
I decided an ideal portfolio - at least for me - would be to invest in 10 DIFFERENT CRYPTOCURRENCIES, by allocating $100 for each currency. Based on my objective of SPECULATING in one or more currencies that reach a $10.00 price with 3 years I could by the following:
$100 worth of a .10 cent currency, then 9 different currencies of a like amount. (10 total)
$100 worth of a .05 cent currency, then 9 different currencies of a like amount.
$100 worth of a .01 cent currency, then 9 different currencies of a like amount.
$100 worth of a .001 cent currency, then 9 different currencies of a like amount.
Have a made a fundamental mistake in my analysis?
Next time, my choices. (Please accept my apologies for formatting that is not as good as it could be.)