Diversifying Cryptocurrency Investments with Stocks
Posted On July 18, 2018
I am, without apology, a so-called Bitcoin Maximalist. I believe that within a few years Bitcoin will be the most used currency on planet earth. That being said – I don’t believe in putting all of my eggs in one basket. There are many places where you can put your money, if you choose – you can buy municipal bonds that have high risk but pay only moderate interest, US bonds that do the same, a high yield savings account – but none of these investments keep pace with inflation. The good old stock market is one place where you can beat the devaluation of your money – mainly because prices reflect the value of your dollars. Take for instance, shares of Amazon – they are far too overbought for my tastes and it seems likely that at some point they are going to plunge – Amazon is ripe for an anti-trust suit from the government – the only reason it isn’t happening right now is because it would plunge the US economy into a spiral of death from which the investment banks, the commercial banks, and the government would probably never recover.
Still, there are stocks worth buying out there. Traditionally there are three types of stocks that I prefer to look at.
1) Dividend stocks like IBM which pay you a quarterly dividend. Owning a share of IBM (currently at about $143) pays you about $3.50 per quarter so in a year you are earning $14 which means that over 10 years the stock has paid for itself and is pure profit. Good dividend stocks are hard to find and generally expensive. The P/E or price to earnings ratio gives you most of what you need to know.
2) Growth stocks. These are stocks like Amazon which ideally you buy when the company is young and fresh for $10 per share and which grow over time to be worth $1840 (like Amazon today). Obviously that growth is profitable. Good growth stocks (like Amazon) often also pay a dividend.
3) Value stocks. Someone once told me that the stock market is like a crazy uncle. Over time, he is just fine, but once in a while he wakes up and comes out of his bedroom in his underwear offering his gold coins for pennies. That’s a value stock – the stocks that are being beat up over news, events, or presidential tweets. Again, Amazon was a great value stock when President Dumbfuck was making empty threats at it because he drove the price down – the danger was that he might follow through.
Typically, I think a combination of the three stocks is a good way to go. You can go through a broker (and pay fees every time you buy and sell), you can have a 401k or IRA which manages your buying and selling for you but limits your ability to be involved in decisions, or you can download the RobinHood App and buy and sell without paying commission, have full control, and (like me) let the most obsessive parts of your personality go completely hog wild.
Get the Robinhood App here – and as a bonus for using my affiliate link, both of us will get a free stock out of the deal.