Saturday, August 26, 2017

Thoughts on speculation and diversification and what I did today.

Yesterday after work a few of us went to a bar near the office to celebrate a coworker's birthday. Since this place has expensive and limited drinks as well as not very accurate service I didn't drink anything except a sip of whiskey and left when my desire for supper was too strong around 10:30.
One of the topics was cryptocurrency or blockchain currency speculation like with Bitcoin and Ethereum.  At least two of my coworkers "invest" or speculate in those new currencies and of course they are very happy with their performance this last year. Of course investing in cryptocurrencies is like real estate around 2006, very in.

I personally don't have a problem with it as a concept, but since I've always thought of it as being more like gambling or trading than "real investing" I've been hesitant to experiment with it, just as I've been hesitant to buy gold coins or commodities. Even when I went to a conference in Las Vegas I had no desire to gamble.

After getting home I had something to eat and I went to bed. 
Today, Saturday, I was fortunate to not have to work from home. I started thinking about 1. I could try a little speculation with a very small amount say what I could save in one pay period. In other words an amount I wouldn't really miss if the experiment became worthless once the cryptocurrency of choice's bubble bursts. and 2. I should really work on diversifying my savings more especially considering Trump's efforts to disrupt trade, human dignity, etc.

I know you must be wondering how I'd think about speculating a tiny bit and increasing my diversification more. Well, in a very broad sense, to someone who has made perhaps a lot of money in Bitcoin in the last year or last few years, putting savings in a fund that invests in the IPC or S&P 500 or even treasure bills would be speculation!  The difference of course is in risk and strategy.  Investing in a single anything is very risky, remember Enron? Whenever someone tells you that something "always goes up" in value, just try to recall the tech bubble and later the real estate bubble. Most things are cyclical and real estate usually more or less follows inflation once you subtract taxes and repairs.

We don't know what will happen tomorrow, in the next 12 months or the next 10 years, which is why I don't want to become a stock picker or a day trader. It makes a lot more sense to use low-cost ETFs and just go for the ride's ups and downs.  I figure that if I can spread out what little I have (and in American terms it is very little!) as much as possible, it will be more stable if NAFTA renegotiations don't go well or whatever the next world crisis happens to be.

My advice is to only experiment on no more than 10% of your savings and only do that if you know you won't miss it if the experiment (or speculation) doesn't work out.

I spent a few hours going through Blackrock and Vanguard ETF lists looking for global low-cost funds that invest in multiple counties so I wouldn't be so heavy on North America. If I were a trader, I'd say this isn't a good time to invest in international funds since they've gone up so much, but I'm looking to diversify, not time the market. Eventually market sentiment will change. Valuations will go up and down in different areas. Perhaps we will all be using Ethereum or perhaps we'll all be using silver coins!  I just hope you don't put all your eggs in one basket.

What did I do for my artistic side today? I only processed some image for upload. It was a stressful week.


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