Tag Archives: Investing

Risk or Reward: How to Balance Investing In Crypto

Posted on July 29, 2024 | Leave a comment

In investing, it’s essential to find a “sweet spot” for risk — as well as reward. With cryptocurrency sweeping the world of finance, both fantastic returns and high levels of volatility are there for all to see. So… What should you be wise to if you’re thinking of adding cryptos to your investments? The question has suddenly re-emerged as digital currencies go mainstream. Let’s unpick some critical factors for those contemplating whether we need Bitcoin or Litecoin in our portfolios.

Understanding Cryptocurrency’s Role

No longer just a pastime for geeks or those who see technology’s potential, crypto’s getting taken seriously now. As digital assets have come into their own, it’s not just tech-focused investors who are starting to think about how these assets can shape their overall investment strategy.

I still remember when I first hit the button to add cryptocurrency to my portfolio. There’s a kind of magic in this experience! But to be honest, it’s important not to be led astray by this excitement. One fascinating aspect of the crypto world is its many different applications – it’s anonymous, it’s secure, and it’s fast. This makes it perfect for a whole range of uses, including things like online transactions, playing crypto online casino games (where privacy is a major factor!), and even buying goods in physical stores, as is becoming increasingly common! These things show how wide-ranging and adaptable cryptocurrency is, making blockchain crypto tech — in general — an exciting option for investors who want that bit of extra pizazz in their portfolios.

Evaluating Your Risk Tolerance

Before you decide how much cryptocurrency to hold — and I can’t stress this enough — you should assess your risk tolerance. This is absolutely necessary. Cryptocurrency is undeniably volatile; sometimes coins go through a whole plethora of up-and-down movements within just a handful of days. If you’re one of those people who can’t stand the tension as your investment swings back and forth, you may want to steer clear of crypto.

It is a good idea to think about your financial circumstances as a whole. Are you comfortable with investments that are high-risk, high reward? In that case, a larger portion of your portfolio in cryptocurrencies could make sense. On the other hand, if you seek stability and predictable returns, keeping cryptos to be a smaller part of your investments may better fit the bill.

Diversifying is Essential

Diversifying is an old and true method of lowering risk. It could be called the financial equivalent of not putting all your eggs in one basket. After I began putting my money into a range of investments, I found that anything bad that happened was more than offset by the good. That goes for cryptocurrency, too. Owning a variety of different crypto assets will spread the risk. No, that doesn’t mean you need to buy every coin going, but by spreading your investments across a few carefully chosen cryptos, you can protect and grow your money.

Moreover, integration with traditional investments such as stocks, bonds, and real estate can help balance your portfolio. The idea is to utilize the high-growth potential of crypto to complement stability in other assets. When one market segment is underperforming, others may be able to balance overall investment returns.

Keep Up with the Changing Market Situation

The market is always moving fast — and the cryptocurrency market is no exception. Knowing what’s happening out there now is crucial — the first thing I did when I discovered cryptocurrency was to start looking for news and forums to join. I have kept in close touch ever since with other investors who missed out on that learning phase.

This article on how much cryptocurrency to have in your portfolio is a good resource. It gives more thoughts and directions, which may help shape up your investment strategy.

Remember, investing should not be something you can set and forget — regularly review your portfolio to see how it’s doing (and make adjustments as necessary).

Long-Term Perspective

Be aware: cryptocurrency is best treated as a long-term investment. In the early days of any currency, there’s frequently a lot of fluctuation, and you may need to ride this out.

The key is perseverance. Don’t become obsessed with daily price changes in the market. Pay more attention instead to the core technology behind the coin. If you have a long-term vision, that can help you when the market has flurries, and makes it easier to make sensible decisions.

Final Thoughts

The amount of cryptocurrency in a portfolio is a matter of personal choice that depends on risk tolerance, investment goals, and your financial condition. If you handle the cryptocurrencies in your portfolio effectively — diversifying investments and carrying out comparative analyses, maintaining a long-term perspective, etc. — then you can make correct judgments to balance the risk and reward.

So in this ever-evolving landscape of finance, cryptocurrency presents enticing opportunities. Whether you are new to the game or have an existing strategy to adapt, the key is to approach it prudently, with curiosity and thorough planning. Happy investing!

How Much Cryptocurrency Should Be in Your Portfolio?

Posted on September 11, 2023 | Leave a comment

The rapid rise of cryptocurrency in investor adoption is truly astounding. An April survey by GoBankingRates involving 1,037 investors revealed that more than 40% of those who invest in cryptocurrency have dedicated 11% or beyond of their investments to it. Around 12% of the participants expressed their aspiration to hold cryptocurrency for retirement. Meanwhile, 22% seek to incorporate cryptocurrency into their investment portfolio as a diversification strategy.

It’s wise to determine the optimal proportion of cryptocurrency in your portfolio for existing cryptocurrency owners or those considering an investment in this sphere. Given cryptocurrency’s inherent volatility, achieving a balanced investment mix is crucial. Here we delve into the perspectives of some industry specialists on maintaining equilibrium in your investments amidst the unpredictability of cryptocurrencies.

How Much Crypto Should You Own?
A study conducted by Yale in 2019 suggests that dedicating between 4% and 6% of your portfolio to cryptocurrencies could be a suitable strategy. This research encompassed various cryptocurrencies, highlighting bitcoin, XRP and ether specifically.

More and more financial advisors, certified financial planners, and other finance professionals endorse a 1% and 5% crypto allocation. Notably, Rio de Janeiro in Brazil has recently invested 1% of its treasury reserves in cryptocurrency, providing a significant case study at the governmental level.

An allocation of 1% is often seen as an ideal balance. While it’s a small enough percentage to minimize the impact of a market downturn, it also allows investors to double their returns compared to portfolios without any crypto allocation. While the growing institutional investment in cryptocurrencies appears to be reducing the likelihood of a total market crash, it’s understandable that both consumers and advisors remain cautious.

Is Crypto a Risky Investment?

Most financial strategists and investment specialists concur that cryptocurrencies, including Bitcoin, pose a greater risk than conventional investment avenues. Unlike the securities available in the stock market, Bitcoin and other cryptocurrencies tend to be more hazardous investments. The inherent volatility of crypto is one reason for this. Given its relatively short existence compared to the stock market, there’s less historical data available for investors to leverage for smart portfolio building. Regulatory policies concerning crypto also remain a topic of ongoing discussion and uncertainty.

Certain cryptocurrencies can be considered a “highly unpredictable and greatly risky investment.” This characterization largely stems from the common occurrence of sharp spikes in crypto prices, often followed by abrupt depreciation in value. While these swift price movements can provide opportunities for substantial gains, they require perfect timing and can equally result in significant losses for investors.

What Makes a Good Crypto Portfolio?

An effective cryptocurrency portfolio should mirror the fundamental principles of your broader investment strategy. It ought to be diverse and align with your comfort level for risk. Invest in cryptocurrencies that you’ve thoroughly analyzed and feel confident about. It’s crucial to peruse the whitepapers of these digital currencies to gain a deeper understanding of their functionality and goals.

A well-constructed crypto portfolio allows you to weather bearish and bullish market cycles without causing undue stress or sleepless nights. Beware of overexposure or speculative bets on altcoins, as this could lead to “paper hands”, a phrase that describes investors who panic and sell at the first hint of a market downturn. You should also consider using exchange platforms that will ensure seamless currency conversion such as BTC to USD

Managing Your Crypto Portfolio

Maintaining your cryptocurrency portfolio requires a long-term outlook spanning years or even decades. Given the inherent volatility of this nascent asset class, it’s crucial to prioritize potential profits over an extended period rather than short-term gains over weeks or months.
Cryptocurrency investments are typically profitable, particularly those held for four years or more. These investments should be viewed as a commitment to a burgeoning technology rather than a quick way to amass wealth.

Frequently checking your portfolio or attempting to impeccably time the market often leads to undue stress and poor decision-making. Instead, periodic reviews and adjustments of your assets, based on your changing perspective of the market, are recommended. This approach is quite similar to managing a stock portfolio.

Endnote

If you’re considering jumping on the cryptocurrency bandwagon to profit from its popularity or seize a “once-in-a-lifetime” chance, it’s crucial not to rush. Given its unpredictable nature, most financial experts and advisors suggest allocating only a modest portion of your overall portfolio to crypto. However, some people are more at ease with the associated risk, so it all boils down to your personal risk tolerance.

Tilson/Tongue Hedge Fund Boot Camp

Posted on March 13, 2018 | 9 comments

FREE CLASS in New York City

Whitney Tilson through www.kaselearning.com will be teaching value investing and hedge fund entrepreneurship to the next generation of investors. His programs are aimed at experienced investors and are very hands-on, so they aren’t cheap ($1,500-$2,000/day), but for beginners, he is offering a free two-hour seminar, An Introduction to Value Investing, in midtown NYC (57th and 7th) on Wed., April 4th from 5:30-7:30pm, followed by a cocktail hour. If you’d like to come, just email wtilson@kaselearning.com and Whitney will send you details.

Investing and Hedge Fund/Entrepreneurship “Boot Camp” And other Courses.

I attended Whitney Tilson’s and Glenn Tongue’s February 6^th – 8^th Boot Camp. I was initially skeptical but pleasantly surprised.

Overall, I was impressed with the learning materials, the organization, and most importantly, the participants who attended. Whitney and Glenn were brutally honest and forthright in showing the rise and fall of their business. One can know the lessons of Munger, Buffett, Graham, and behavioral finance but still fall into a pit. Our main enemy is likely to be ourselves. There were many lessons taught, but my promise of confidentiality prevents me from giving details. The course would not be appropriate for a rank beginner, but for an entrepreneur who wishes to launch their own fund.

The main value–besides the lessons taught–would be to cultivate relationships with the participants including Whitney and Glenn. I wouldn’t go to Whitney to help you get a job, but if you do a rigorous analysis of a company, I am sure Whitney or Glenn could give you honest feedback. And if they liked your work, they might suggest how you could reach a larger audience. Also, your classmates could help. The opportunity to build strong relationships with knowledgeable investors and hedge fund managers would be invaluable for someone beginning their fund.

Each day was ten hours long with meals and cocktails afterwards, so you had plenty of opportunity to develop relationships.

60% of the course was how to improve as an investor, 20% life lessons, and 20% how to build your hedge fund.

See details here:

Upcoming dates are April 29th to May 1st

and June 12th through 14th.

There are other courses available as well.

See http://www.kaselearning.com/

Make sure you receive at least a 10% discount on the course or other courses by using “CSI10“ when you register.

If you want details on my experience of the course and what you might expect, please don’t hesitate to email me at aldridge56@aol.com with BOOT CAMP in the subject line. I will be happy to discuss with you.

Here are my notes of the comments from the other attendees:

“Regarding last week, I was super impressed by the material. I liked the practical nature of the lessons they taught – a lot of courses exist that cover investing philosophy, but this was unique in its applicability to a start-up manager like myself.”

“The main lesson I learned from the course was to keep it simple. Look for the easy investments.”

“I actually really liked the emphasis on short selling, because it tends to be one of the great struggles of hedge funds that need to be long & short to justify the carry but have difficulty executing on compelling short ideas in the midst of a bull market.”

“I would have liked more on portfolio construction because that is what I am struggling with. Ditto for risk management and small funds. Things I loved – the interaction of our group, the LL case, the mea culpas of what Whitney and Glenn did right and wrong.”

All the participants told me that they both enjoyed the boot camp and found it useful in developing their fund.

Future Boot Camps

Whitney solicited feedback each day, therefore, Whitney and Glenn should improve their course offerings.

I give a thumbs-up. To learn more about the boot camp/Kase Learning programs you can go to www.kaselearning.com.

Also, view a video

Update:

I will periodically update information on Kase Capital for interested readers. If you learn anything from reading this post it should be to KNOW THYSELF! The market is an expensive place to find out. John Chew

The hedge fund founder explains why his fund was “sucking the joy” out of his life — and why he’s turning its failure into a teachable moment.

By Michelle Celarier
March 20, 2018

https://www.institutionalinvestor.com/article/b17f19gwp3595r/the-last-days-of-whitney-tilson’s-kase-capital

Whitney Tilson’s Facebook friends surely thought he was on top of the world last summer.Photo after photo posted on the social media site tells the story of a rich, exciting life: There’s Tilson watching whales off the coast of Iceland. Next, he’s on the canals of Amsterdam with his wife and daughter. Just a few days later, he’s checking out Lenin’s tomb in Moscow. Last August he even climbed to the top of the famed Eiger mountain in the Swiss Bernese Alps, photographing every step of the arduous journey.

But to hear Tilson talk today, the reality was grim. After 18 years in the hedge fund business, his firm — Kase Capital Management — was losing money, and Tilson found himself dipping into hissavings to keep it afloat.

“I had lost my passion for the game,” Tilson confided in a two-hour, soul-searching interview about the events that led him to shut down his hedge fund last September. After gaining 184 percent, net — when the broader market was up only 3 percent — during the first 11 and a half years of his hedge fund’s existence, Tilson’s returns had been floundering. Since 2010, Tilson says, he trailed the Standard & Poor’s 500 stock index, and in 2017 he had lost almost 9 percent on the year by the time he shut down his fund. “In an ironic twist, I always built my firm to survive the worst storm, but it was a nine year bull market — complacency and sunshine — that took me out.”

Tilson is one of several veteran hedge fund managers, including Eton Park Capital Management’s Eric Mindich, Hutchin Hill Capital’s Neil Chriss, Eclectica Asset Management’s Hugh Hendry, and Blue Ridge Capital’s John Griffin, who called it quits in 2017. Small hedge funds come and go with great regularity, but the inability of the industry’s stars to profit as the stock market soared to new heights has raised questions about the viability of the model. Tilson was a much smaller player than the others — at his peak he managed only $200 million — but his experiences are a window into the headwinds that have faced these former masters of the universe.

What distinguishes Tilson from many of his peers is his willingness to talk about the long, excruciating road down. “It’s hard, after seven years at sucking at something, to wake up and tap-dance to work. So, I found myself getting distracted. I wasn’t physically getting out of shape; it was the opposite. I was going and climbing mountains. This one part of my life, I was miserable at; I was having no success. It’s hard to have the self-discipline to focus all your attention like a laser, and all your spare time on a particular part of your life in which you’re getting so much negative reinforcement.”

Last year, as his fund’s losses began to mount, Tilson says, “I didn’t feel like I could look my investors in the eye and say, “˜Look, I’m losing you money, but I’m not doing anything else, 18 hours a day that I’m awake, the only thing I am doing is trying to turn performance around.’ ” The vacation photos notwithstanding, Tilson says he even felt guilty attending his daughter’s soccer games. “My hedge fund was sucking all the joy out of my life.”

Tilson’s introspection is uncommon for those in the hedge fund business, where selfconfidence and salesmanship are as important to success as any investing prowess. As Tilson readily admits, managers cannot afford to be frank while they are going through turmoil, lest they further hurt their business — and their investors. “The last thing you want to do is air your dirty laundry. That will further shake the confidence of your investors.”

But there’s another reason for Tilson’s uncommon openness: His experiences, both positive and negative, have led him to create a whole new business, turning Kase Capital into Kase Learning (Kase stands for the first letters of the names of Tilson’s wife and three daughters). From a small conference room at the New York Athletic Club, Tilson has started teaching the perils and profits of investing in general — and running a hedge fund specifically — to aspiring youngsters who don’t come out of big seeding platforms like Julian Robertson’s Tiger Management or a multibillion-dollar hedge fund.

“Unless you are the lucky 1 percent who has the chance of learning in an apprenticeship, how are you supposed to learn how to do this?” Tilson says. “Nobody teaches the next generation. There is not one business school on the planet that teaches anything really usable to starting up your own hedge fund.

“It’s so rare to talk to a manager who is injected with truth serum, isn’t it?” he asks as he details his long bumpy journey through hedge fund land. “But I don’t give a crap anymore.”

9 Comments

Posted in Free Courses

Tagged Boot Camp, Hedge Funds, Investing, Tilson, Tongue, valuation

Surprise! Inflation Rising and One-Half of the Investment Equation

Posted on October 18, 2011 | Leave a comment

Predicting the Market

God developed a computer to determine the IQ of the human race. The computer would be able to tailor a question based on the IQ of the respondent.

The most difficult question was, “How does Stephen Hawkins’ Theory of Relativity compare to Einstein’s?

The question of moderate difficulty was, “Who do you think will win the World
Series this year?”

The question designed for the lowest of intelligence was, “What do you think of the stock market?”

Inflation & Debasement and a False Boom

Predicting the direction and timing of the market is a fools’ game, but not to be aware of the underlying forces in the economy will hurt you as an investor. Right now, (October 18^th, 2011) the Federal Reserve is hoping to ignite a (nominal) boom in asset prices. The stock market may go up, but the real return relative to other asset prices may not be as great. If you understand the
Austrian Business Cycle Theory, and you observe the Federal Reserve’s actions,
then the boom in producer prices is not a surprise. For the past 39 years the
world’s currency system has not been anchored to something of intrinsic value. We live in a world of fiat currencies (the PhD Standard) and fractional
reserve banking—Ponzi Finance—so not to be aware of what is occurring is financial suicide.

Half of the Investment Problem

As you take a dollar out of your pocket to invest in a company, you hope that when you sell your investment, the share(s) of stock, the dollars that you receive
will purchase a similar or greater basket of goods and services. You spend
hours studying a company as an investment, but why not spend a minute thinking about what gives value to the dollar in your pocket? What effects that dollar is one-half of every investment decision.

Today Producer Price Index rose 0.8% or 9.6% annualized. How would you like to own 30-year government bonds generating 3.5%? Ouch! How could anyone be surprised if you saw these statistics from the Federal Reserve:

Pct. Chg. at seasonally adj. annual rates M1 M2

———————————————————————————-

3 Months from June 2011 TO Sep. 2011 36.6 21.4

6 Months from Mar. 2011 TO Sep. 2011 24.9 14.8

12 Months from Sep. 2010 TO Sep. 2011 20.0 10.2

The growth in money supply is just one-half of the equation, the other half is the
demand for money based on loan demand and banks’ ability and willingness to
lend. However, seeing half the cards while you opponent sees none is an
advantage. More importantly, you need a theory to understand economic laws of cause and effect that will give you understanding of where you are in an investment cycle.

Inflation & Debasement and Investing

I have been warning about inflation here: http://csinvesting.org/2011/09/19/current-inflation-charts/

I posted an article on investing and inflation here: http://csinvesting.org/2011/09/16/inflation-hyperinflation-and-investing-with-klarman-buffett-and-graham/

Learning About Austrian Economics

Oh how I wish when leaving the University with a BA in Economics I was told to unlearn every lesson and study Austrian Economics. It’s what you think that’s so that isn’t so which KILLS YOU.

The best way to learn about how the economy works, booms and busts and what affects the value of your money would be to go here:

A course in economics: http://www.tomwoods.com/learn-austrian-economics/ An incredible learning resource

I consider one of the finest books on understanding how the world really works is http://mises.org/Books/mespm.PDF and Study Guide: http://mises.org/books/messtudy.pdf

If you are ambitious, then further study here: http://www.capitalism.net/

More on Inflation

For an update on inflation: www.economicpolicyjournal.com)

The Producer Price Index for finished goods rose 0.8 percent in September,
seasonally adjusted, the U.S. Bureau of Labor Statistics reported today.
Keynesian economists polled by Reuters had expected prices to increase 0.2 percent. The PPI climbed 6.9 percent for the 12 months ended September 2011.

In September, the increase in the index for finished goods was broad-based,
with prices for finished energy goods rising 2.3 percent, the index for
finished goods less foods and energy moving up 0.2 percent, and prices for
finished consumer foods advancing 0.6 percent.

The index for finished goods less foods and energy moved up 0.2 percent in
September, the tenth straight increase. Prices for finished consumer foods climbed 0.6 percent in September, the fourth consecutive monthly increase.

Price inflation continues to intensify, something that Keynesian economists
can’t explain with their models. Only an understanding of money flows and its
impact on the economy, something only understood by Austrian economists, can
explain what is going on now. Note to Keynesians: The price inflation is going
to get much worse.

Currently, Bernanke is printing money (M2) at very aggressive double-digit rates. It is this money printing that is fueling the manipulated boom. Since Keynesians don’t watch or understand the role money creation causes in the Fed created boom-bust cycle, they don’t see the manipulated boom coming until it is actually reflected in the economic data. That’s why, at present, the data are surprising them to the upside. The new Fed created money is pushing the economic data higher, but since they don’t understand Austrian Business Cycle Theory or “ABCT”, they won’t understand what is going on in the data until months of data role in showing the change in trend.