This is part 1 of a 4 part series on finance for the rest of us.
This series is going to be a break away from my normal writing style in order to talk to any other Joe Sixpack who is considering investing in crypto or digital currencies and all things considered, I thought it would be most approachable if I used a Fantasy Football analogy to get my point across.
A football team cannot be comprised of just one position, a financial portfolio likewise cannot be comprised of just one position.
When seeking to create and balance a portfolio I find it helpful to think in terms of each position I hold as a position on a football team and to evaluate the strengths and weaknesses of each position and how they interoperate. By doing this, you can have a portfolio which is able to generate solid consistent wins in the form of returns, in the face of any adversary.
This begins to make sense if you start to think of your nestegg as ball in a football game. Each position you hold is a player on your team and the entire team is working together to protect the nestegg from "the other guys" and at the same time, score as many touchdowns as possible in order to grow the value of the nestegg.
Who are the other guys?
The other guys are anyone who wants to take your nestegg / football away from you.
How Does This Work?
Let's back this up a moment and look at each position.
A football team is comprised of really, 3 different teams.
You have an offensive line up, a defensive line up and a "special team", that is called out only under exceptional circumstances.
And just as in football, a well managed portfolio will have good mix of offensive, i.e. risky and aggressive positions, as well as defensive positions in case the aggressive positions drop the ball, and special positions you go into and out of depending on the immediate near term circumstances.
To put this in perspective let's build a fantasy football team of people who inarguably were the very best in their positions that the game has ever seen.
| Offense | Defense | Special teams |
|---|---|---|
| Quarterback, Running Back | Tackle, End | Placekicker, Punter, Kickoff specialist |
| Wide receiver , Tight end, Slotback | Cornerback, Safety, Halfback | Long snapper, Holder |
| Guard, Tackle, Center | Nickelback, Dimeback | Punt returner, Kick returner, Jammer |
| Gunner, Upback, Utility |
For the purposes of brevity we're going to limit this to the 4 most crucial positions on each side
OFFENSIVE LINE
CENTER: The center is the innermost lineman of the offensive line on a football team's offense. The center is also the player who passes (or "snaps") the ball to the quarterback at the start of each play. According to Baltimore Ravens general manager Ozzie Newsome, "you need to have somebody who can neutralize that nose tackle. If you don't, everything can get screwed up. Your running game won't be effective and you'll also have somebody in your quarterback's face on every play." Without a great center, your offensive line, and subsequently your entire offense, won't go very far.
Travis Fredrick spent his career so far with the Dallas Cowboys and helped pave the way for rookie running back Ezekiel Elliott to become the NFL rushing yards leader and his first Pro Bowl while protecting rookie quarterback Dak Prescott to his first Pro Bowl as well. He was named to his third straight Pro Bowl and was named First-team All-Pro. He was also named the #1 Center of all time by Sports Illustrated in 2016 and just to seal the deal he also double majored in computer engineering and computer science at the University of Wisconsin.
QUARTER BACK: Line up directly behind the offensive line. In modern American football, the quarterback is usually considered the leader of the offensive team, and is often responsible for calling the play in the huddle.
Steve Young would be my pick for this. During his time with San Francisco 49ers, he changed the game from one of crushing and bruising your way through to a nearly elegant "chess like" strategy game. Relying heavily on his running backs, and being left handed, lent the game a whole new way of playing. Literally he changed the game forever.
RUNNING BACK: Member of the offensive backfield. The primary roles of a running back are to receive handoffs from the quarterback for a rushing play, to catch passes from out of the backfield, and to block. There are usually one or two running backs on the field for a given play, depending on the offensive formation.
Hank Bauer holds the NFL single season record for most special teams tackles with 52. As a short-yardage specialist and often referred to "Hank the Howitzer" or "Hank the Hammer" for his explosive, unstoppable running. During his career with the San Diego Chargers, Bauer finished one season with 18 carries for a total of 28 yards, scoring 8 touchdowns and achieving 9 first downs. Bauer was forced to retire in 1983, after playing six games with a broken neck. So this is the guy we want for our running back.
Wide Receiver: Is the key player in most of the passing plays. They get their name because they are split out "wide" (near the sidelines), furthest away from the rest of the team. Wide receivers are among the fastest players on the field. The wide receiver functions as the pass-catching specialist.
Jerry Rice is the all-time leader in most major statistical categories for wide receivers, including receptions, touchdown receptions, and receiving yards, once being the leader for total yards in a season. He spent a long time with the San Francisco 49ers and it's likely that no one will ever be able to match him in terms of skill, style or longevity. He's the guy we want for wide receiver
What you'll notice about all my picks here is that they are not just tough, but also very smart and agile. Each one has contributed to the game in critical ways and together they would be intelligent enough to counter any team you might want to throw at them. So now we have a team let's begin planning how these guys would react and find a mix of portfolio positions that would match them.
Starting with the position of Center, to play as center, you must be strong and quick. In our world, this represents your least volatile assets. Because the Center's job is to "whether the assault", your Center position should be 50-65% or more of your capital and it should be in a mix of resilient assets including fiat pegged instruments. These include SBD, bitUSD, Golos Gold, etc. The Center should be used to "hike" the ball (no more than 10% of your net asset value), to the quarterback on a regular basis such as daily, weekly, monthly. The schedule doesn't matter so much as the fact that you do this regularly. Just like you can get a penalty for hold the ball too long, you incur a penalty in the form of missed opportunities if you hold the ball too long.
Your Quarter Back position represents your mid range volatile assets. This can be anything in the Coinmarket Cap Top 10. Bitcoin, Litecoin, Ripple, ETH, DASH etc. Your QuarterBack positions should represent around 20% of your portfolio. It's highly recommended that you use "dollar cost averaging", i.e. investing the same amount in dollar terms in each currency and do so on a regular basis, regardless of that currency's near term performance, so long as it remains in the top 10.
A good strategy I've used that works well is the shotgun approach where I toss 10% of my hike in dollar terms to each coin.
What you are working on here is the dollar value of your entire portfolio and as such you want to be able to ride the ups and downs. But at some point the QB has to pass the ball or again the whole team will suffer a penalty, again this penalty is in the form of a decline in value and lost opportunities.
From here you have a choice of high volatility strategies. You can choose to play a running game or a passing game.
Either way, you take 100% of the gains earned by your QB positions and reallocate it to more risky positions.
These are the riskiest moves you can make and which ever you choose to do, you need to follow it through to a touch down every time. A touchdown for our purposes is a 200x increase in net value in dollar terms.
You can play either a passing game, or running game.
A passing game, involves hail mary passes with strategies like finding coins outside the top 10, such as steem.
My own passing game strategy has been to find currencies which have suffered the largest setbacks of late and take up positions in the 10 worst performers again using a shotgun approach. You will regularly see losses, but periodically you see 300%-400% gains.
A running game is different. In a running game you take funds and use them to buy into ICO and Pre-ICO assets such as VIVA. These assets have the longest road ahead, but also the most potential in many cases. Just like a running back has a long road ahead where he must run sometimes the entire length of the field with obstacles coming seemingly out of nowhere, trying to stop him in his tracks.
There is no greater satisfaction, than seeing your Hank Bauer coin, plow through the defense and score a touch down.
Yet touchdowns eventually happen with nearly every coin especially if you buy in during ICO or Pre-ICO and hold long enough, I've seen some coins post >1,000% gains.
Now they say that the best defense is a strong offense, but we haven't covered all of our bases with this team yet.
These strategies work remarkably well when the overall market is an uptrend. This upmarket scenario is idyllic and over the course of time, the market has posted some pretty extreme gains. But there have been times where the other side pushes us back so hard that we're stuck trying to defend our own endzone against seemingly insurmountable odds.
When the market does that, we obviously cannot use the same positions, same strategies, or even the same players.
We have to rely on our defensive lineup to get us out of this mess.
To Be Continued....