What I have learned in the last few years:
Seek out differing opinions – specifically people who are 180 degrees opposite to your personal conviction. I respect the OGs on this board greatly – they understand companies and financial reports way better than I ever will. However, IMO this board is somewhat of an echo chamber where there are not a lot of differing opinions on the overall strategy. (There are lots of differing opinions on the individual stocks, and that is good.) I think it’s important to find people that have differing opinions on macro and really listen to their reasons and understand them.
Everyone is a scammer until proven otherwise. A few years ago I started getting more serious about investing. One of the places I went to try to get more information was StockTwits. I got outright scammed several times by listening to people there. There are paid scammers on all public message boards that are trying to convince you to buy or sell a certain stock. Assume everyone is lying to you and do your own homework. I would say the same thing is partially true for many people who are on media outlets giving interviews. Do you really think they are trying to help you make money in the market? Or is it more logical they are telling you a story to get you to do what they want you to do?
Bitcoin (not “crypto”) is the biggest asymmetric bet I know of. IMO it is a once in a species invention – like the wheel, printing press, computer chip. It has the greatest potential to transform our world. Spend some time learning about it in early 2023. The best resource I can recommend for this is the following podcast series - Bitcoin Fundamentals: A Podcast on Bitcoin - The Investor's Podcast Network. Start at episode #1 and listen to every one of them. If you want a second source, listen to the “What Bitcoin Did” podcast starting a couple years ago (this one has a fair amount of non-Bitcoin content you will need to filter through). 2022 was painful to be invested in BTC, but I have been continually adding the entire time. And yes, you should assume I’m a scammer trying to convince you to buy BTC, and you should do your own homework. Invest 20 hours learning about it, then decide if you want to keep going or not.
Downturns can go on a lot longer that you think they can. I will use ARKK as the poster child for the current downturn. It peaked in February 2021 – almost 2 years ago – and it just hit a new 4-year low last week. IMO this is caused by emotional extremes in both directions. People get euphoria on the way up and think that their stocks can never stop going up – and large players help drive that behavior even further and then use it as exit liquidity to dump on retail investors at the peak. Then the large players mercilessly short those same stocks all the way down until retail is in despair and eventually capitulates because they can’t take it anymore. Then the cycle repeats. It goes farther than it rationally should in both directions.
The FED has way more impact on stock prices than I ever understood. I had heard the phrase “don’t fight the FED” - now I think I understand it better. We were at an extreme of 0% interest rates when our stocks were at their peaks. I respectfully disagree with the thesis that it was impossible to foresee this downturn.
I don’t need to make “all or nothing” decisions. I don’t need to be 100% in or out of stocks. I can adjust my % allocation based on probabilities and my personal convictions. Just because others whom I trust follow a certain method, I don’t need to 100% follow what they do. I need to make my own decisions based on my personal circumstances and goals.
My personal allocations (rough %):
75% Cash – split between SoFi bank and CDs. SoFi bank has 3.5% interest right now. They also split your savings between 3 banks, so for high net worth people you can get FDIC insurance for larger amounts than if you are in a single bank. Schwab has short term CDs yielding ~ 4%. I have a weekly CD ladder out to 6 months that I am rolling over as each CD matures.
5.5% Bitcoin. Self-custodianed in cold storage. Was over 10% at one point, but you know what happened…. I also own a small amount of ETH – about 10% of what I have in BTC. My conviction on ETH is much, much lower.
19% in stocks. TMDX is a “3x full position”. I have “full positions” in CRWD, TTD, DDOG, NET, SNOW, SWAV. I have “1/2 positions” in PINS, NVCR , XOP, INTC, and TDOC. I have “¼ positions” in MSTR, UPST, LMND, TWLO, SOFI, DOCN.
Reasons for my allocations:
I am NOT trying to maximize my returns – I am trying to minimize my potential to lose a lot of money - but still own enough stocks to retire on if markets suddenly go up and never turn back. I am 52 years old. I have enough invested (I think), that if the market has bottomed right here and starts going back up at 8% per year, I will have more than enough to retire on in 15 years.
Bitcoin is my highest conviction investment, but I know the risks with it. If it does what I think (hope) it will, then it alone could fund my retirement. Over the last 3 years I have researched BTC more than anything else – literally over a thousand hours of reading and listening to Podcasts. I could be wrong, but this is the “investment” I have chosen as my primary.
You all know my thoughts on TMDX. Unless they have something unexpected happen, I expect to hold this one for 5 – 10 years, or maybe forever. I also think this investment alone could fund my retirement.
For the last 6 months, I have been DCAing into growth stocks. In the last 2 months I have increased my investing of cash by quite a bit. I don’t know when things will turn, but I think the risk has lowered to a point where I would be kicking myself if I had not stepped up my purchases and the market suddenly took off next year. I have changed my approach for the “full position” stocks, and I have been trying to pick ones with the cream-of-the-crop management and business quality. I hope to hold all of these forever. These are the ones that I can see possibly doubling in stock price every 4-5 years for the next 10 to 20 years. If they do that as a group, they could fund my retirement.
Smaller holdings. I like taking bets on high risk companies that could be big winners. I use SoFi myself and really love the product. The CEO has been buying a lot of shares recently. I think the price is being held down because people think SoftBank is going to be a forced seller at some point. NVCR has data coming out soon that will make or break the thesis. If the data is good, this could be a 10 bagger from here. If data is bad, it will be cut in half. UPST, LMND and TDOC – I can’t defend my decision to keep these – I just have a hunch that one of the 3 is going to survive and be a big winner on the other side – I have added small amounts to all 3 in the last month. MSTR is an extension of my bet on Bitcoin - I just added this Thursday when it retested the 2022 low. INTC and XOP - I’m starting to buy some dividend paying stocks.
Cash. Right now the interest rates are high enough that I feel comfortable having a very high amount in cash. I will continue to DCA small amounts every week or 2. If there is a big dip, I increase the rate of investment. If things are going up, I tend to stop, or slow down, the rate.
So, I have 4 different buckets of things that could fund retirement if any one of them works – BTC, TMDX, “growth stock basket”, “moon shots”. And I have cash to invest if things drop more.
Watch list – if things drop more I would like to get some NVDA and ASML. Computer chips are eating the world. I’m also watching MDT as a possible bottom fishing dividend stock addition.
Peace (and investing success) to you in 2023.