Disclaimer: To modify a quote from Tim Ferris, “I am NOT a financial advisor, and none of this advice should be taken without speaking to a qualified professional first. Also, my results [are most likely] due to pure luck and zero skill.” But…this is working for me.
In a recent article I wrote entitled “Investing in Cryptocurrency — Warren Buffett Style,” I outlined four questions I always ask myself before investing in any crypto:
- Do I understand the tech/company?
- Would I use the tech/company myself?
- Do I see other people using this tech/company in 3 years?
- Do I have any type of advantage investing in this token?
I came up with these questions based on wisdom from Tim Ferriss’ book Tools of Titans and the investing genius of Warren Buffett. A few readers of my last article wanted to hear how to use these questions practically, so I thought I’d walk you through them on a token I’ve recently invested in: SingularDTV’s SNGLs.
Question 1: Do I understand the tech?
During this stage of research I’m trying to find out everything I can about the company in which I’ll be investing. I start at their website. I want to know in under 30 seconds who they are, what they plan to accomplish, and how I can get involved. Put into words, that may look something like this:
SingularDTV is a decentralized, on-demand video distribution, rights and intellectual property management platform that aims to compete with Hulu, Netflix and Hollywood.
Once I have a firm grasp on who they are, I dive into the specifics of the tech itself. I’m not technically or mathematically gifted, but I want to know the basics. What type of blockchain consensus do they use? What exactly does their token represent? How easy would it be for me to acquire their token and store it? Do they facilitate a robust and vibrant community?If you can put into one sentence who the company is and what they aim to accomplish, you’re ready to move on to step two.
Question 2: Would I use the tech/company myself?
This one has often been the deal-breaker for me. If I can’t say with certainty that I’d personally use the tech or company, I believe I have no right to invest in it. For me, being involved in the company community helps further my understanding of the tech, and that makes my investments feel personal. If you have a personal interest in the company or tech, you’re more likely to make smart investment decisions.In our SingularDTV example, I’m excited to watch their show “Singular,” and I see huge potential in the CODEX platform they’re developing. For me, answering question two was a no-brainer, which is what we’re shooting for. If you can’t answer an emphatic “YES,” then maybe you should start looking into a new token.
Question 3: Do I see other people using this tech/company in 3 years?
Perhaps you answered question 2 with an emphatic “YES,” but you’re an obsessive nerd like me. In the case that you’re a part of a tiny percentage of people who plan on using the tech or company in question, maybe you should reconsider your investment. If you expect to turn a profit on your investment, you had better not be the only user.I see SingularDTV being widely used in under three years. Their show “Singular” should be released within that timeframe, and I expect the on-demand video platform to be operational then too.I’m also one of those millennials that hates cable and has a difficult time stomaching the prices (and content) of Netflix. And I know that many of my fellow millennials would agree. I believe, then, I can safely answer “yes” to question 3.
Question 4: Do I have any type of advantage investing in this token?
This one is the icing on the cake. Who or what do you know that will give you a leg up by investing in the token you’re considering? Some tokens offer an incentive during their initial coin offering (or “token launch”) — for example, if you traded some SNGLs for TKN, you would have received 5% more than if you used a different token.Some tokens offer “interest” called “proof-of-stake mining” just for being involved in the community. This can be a huge advantage if you hold a decent amount of that token, but not all tokens do it.Or maybe you have a personal connection with the leadership of the company. You have an informational advantage. I had the privilege of connecting via phone with SingularDTV’s CEO, Zach. After hearing about his vision and plans for the company, I was completely on board.
Only invest after YES.
For me, it’s important that all four questions are answered with a resounding “YES.” My cryptocurrency investment philosophy is that I’m investing in value. I believe that the market (no matter how volatile or bullish) will eventually reward the hard work of good companies; and, so far, this four-question-system has proven that belief to be right.What cryptocurrencies are you investing in? Are these questions working for you? Let me know in the comments!