No matter how old you are you should be investing into something. The awesome thing about investing is that, unlike you, your money doesn't sleep. If you have a traditional job you are paid on an hourly or monthly basis, which is horrible, that pretty much puts a price tag on your life. Let's say you make $100K a year, a nice salary for most. That means your life is valued at around $4 million given a 40 year work life. The other problem with having a job is that you can only work on one thing at a time, you can't really be at multiple places at once. But you know what? Your money sure can. You can invest in a thousand different things from your friends' companies to globally traded markets. In this post we'll be looking at what would be the most efficient way to invest. We'll look at traditional investments like stocks and commodities and then we'll compare those investments to the new craze, Crypto.
Traditional Investments
When we think of traditional investments we most likely think of Wall Street. But Wall Street isn't the only place where financial markets can be traded. You can trade futures in Chicago, go to Tokyo to trade the Asian session, fly down to Sydney, Australia to get on the Aussie and then finish off your day in Europe in London. There are thousands of other exchanges in the world that you can trade in but those are the main ones. All these exchanges combined make our traditional financial markets. They trade in Currency Pairs, Stocks, Bonds, Derivatives, Commodities, and a whole lot of other instruments that are known by a dozen people in the world.
What makes those markets so attractive? It's the greed that we all possess as humans, really. It's the financial security we want, and the rumors that these investment bankers are making millions of dollars and we also have a chance to do the same. Some of us can be very successful in investing in those markets. You can chose good companies that you believe in, hold on to them for a while and see some great returns, but the days of putting money in a stock and waiting 20 years are almost over. Those were the 80s, and we are in a new era of finance now. Welcome to the 21st century. In the 21st century markets cycles seem to be sped up like they are on the cocaine that the investors were taking in the 80s. As fast as a company flies up it falls down. Many companies have gone bust and there is a lack of trust in the field.
So ok that's all good, I'll just invest in commodities. There will only be so much oil and gold in the world, so if I just buy it now there will be less of it in the future and I could make a profit. :) Well, not so fast. The commodities markets have been turned around and upside down by derivatives and futures contracts. These contracts are derived from a price of something else and combined with a bit of Wall Street magic in order to keep prices favorable to the investors. This creation of derivatives markets has also led to the ability to manipulate something that, in theory, should not be possible to manipulate. Gold, for example, went from an all time high of almost $2000 back down to a bit over $1000 in a few short years. It's going back up and probably will make a higher high than the $2000 it previously reached but, in theory it should have kept on going up.
The financial markets aren't as stable as they were back in the day. And even "back in the day" they weren't that stable. There is always someone that has to lose money in order for you to make money, for the most part. It's very complicated and it takes quite a bit of effort to get into, but it is worth it. Like we said earlier, your money never sleeps.
Crypto
Now let's take a look at this new schizophrenic market. I don't know what to call it. Is it a currency? Is it an asset class? Is it a commodity? Or is it just a scam? I personally think it's all of those things. Let's call it the only thing that it really is. A Blockchain. A blockchain is simply a way to prove ownership of a digital good and to make sure that when you send that digital good to someone else you cease having ownership of it. It solves the double spending problem of most digital items. Sort of like a database that you can't copy and paste.
What's the big deal with the blockchain? Well, the blockchain is a way to store information. We live in the information era and when there is a better way to store information that creates value in our lives. There aren't as many applications of the blockchain yet but there will be more and more that make sense to the layman. So hang on to cryptos and HODL right? Eh, not so much. These cryptos are so volatile that you might not be able to take the huge swings, mentally and financially. You can invest some money that you don't really need right away and ride the crazy waves for a few years and see what happens. That's probably your best bet and what most sane people would do with this.
But the fun in cryptos is trading. Traders look for volatility. Traders like to see the crazy bounces. They love that. There is no way to short the majority of the crypto market, which is one of the factors that makes it so volatile. And it also suggests that you can ride the wave up and sell then be almost sure that when it crashes it will go right back up.
The Verdict
So what should you do? I think it just depends on who you are. If you like to trade volatility then go for cryptos. If you have all day to look at charts, cryptos is your best bet. Just don't forget that there is a world outside of your office or apartment that keeps on going, and may be take a walk every once in a while.
On the other hand if you watch the news and have a pretty good grasp of current events but don't want to look at charts very frequently get some more traditional investments in your portfolio. Either way you gotta risk it for the biscuit, but the biscuit tastes so damn good you don't want to miss it.
And just so there is no bitching: I am not trying to give you financial advice.