“Investors should purchase stocks like they purchase groceries, not like they purchase perfume.”
~ Ben Graham[1]
A few weeks ago, I journeyed out across eighteen states to celebrate my sixtieth birthday and to shake off this past year, the surreal one that was two thousand and twenty.
It was a time to visit with family and friends, in person… and to clear my mind and reflect on who I am and what I want and how I intend to live the rest of my (inspired!) life… and, unexpectedly, it also became a catalyst for a shift in my investment strategy. It’s that unexpected part that I want to share with you today.
During those two weeks of travel, the value of Bitcoin fluctuated from up to over $40,000 and down to below $30,000. Just a few months earlier it had peaked at over $63,000 per coin.
I was also getting a steady dose of Bitcoin news on the financial shows I listen to. At some point along my journey, a decision just came to me. It said that it’s time for crypto currencies to become a component of my long-term financial strategy. So, then I began thinking about how I should invest (the process) and how much (as a percentage of my total financial portfolio).
I decided the process I’d use is to dollar-cost average (DCA[2]) my purchases. That’s a strategy where I’ll invest a total sum of money in small increments over time instead of all at once. It’s commonly used as a more conservative alternative to trying to time the market by buying low and selling high. With DCA, you buy steadily and hold. My goal is to take advantage of the volatile price nature of cryptos without risking too much money at any given time. So, I decided that I’ll take four years, investing a fixed amount every week, until my crypto currency investments is equal to ten percent of my net worth[3].
At first, my plan was to use Bitcoin alone as my crypto of choice. But then, when my son Kyle was editing this post, he smartly suggested I diversify my buys.
He suggested I create my crypto strategy with Bitcoin, Ethereum, Litecoin, and Ripple.
Ratio:
50% Bitcoin (most stable, least upside, best chance to steadily grow)
30% Ethereum (If a coin takes over Bitcoin it will be Ethereum)
10% Litecoin
10% Ripple
Kyle says this gives me all the original coins that are the main coin of their branch. i.e.: Other coins use the block chain technology of these four which creates more value for the originals.
I’m using the “Repeat this purchase?” feature in Coinbase to automatically buy my targeted fixed amount of each coin, each and every week. Coinbase is a fully regulated and licensed cryptocurrency exchange that my bank has also authorized as safe. I researched the best day to buy Bitcoin and decided to set my purchasing day for every Monday.
Now, it’s all set. All my decisions have been made and my crypto currency strategy is underway. I’m not going to worry about the wild swings that will certainly continue to occur in the crypto markets. I’m just going to steadily and patiently let my strategy work its magic.
If you’d like to join me, click here to open a Coinbase account today, and if you buy or sell $100 or more of crypto, you’ll receive $10 worth of free Bitcoin!
[1] Benjamin Graham was a British-born American economist, professor, and investor. He is widely known as the “father of value investing” and wrote two of the founding texts in neoclassical investing: Security Analysis with David Dodd, and The Intelligent Investor.
[2] DCA is designed to help offset any negative effect on an investment caused by short-term market volatility. If the price of an asset drops during the time you are dollar-cost averaging, then you stand to make a profit if the price moves back up. If you’re not a professional market watcher, DCA can save you the effort of trying to time the market to get the best stock prices. It’s a tool for investing slowly and consistently that aims to protect against the human tendency to want to gain all at once.
[3] What makes up net worth? Net worth is simply the total value of assets you own minus any liabilities or debts.
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