Too Hot Investment Thread

I would say real estate, but that is already pricey. Some other commodities might do well though. For stocks, Value over growth. And TIPS bond funds.

 

I know I said I wouldn’t post about it, but wanted to make one point on bubbles.
Bitcoin is currently trading at around 29k. It’s all time high was 64k. So as of now (and by the end of the day, heck the next hour it could change), more money has been lost with Bitcoin all time than made. And given that many of the coins were mined when prices were high, it’s even more loss than the number suggest. So a few people have gotten really rich, and a lot of people have lost money and many have to hope for it to double or more to get back to break even. Pretty much how bubbles go.

 

Maybe on paper, but I doubt it in terms of actual cash invested. Pushing the price from 29k to 64k just requires more buyers than sellers; you don't necessarily need as much net USD investment as the trip from 0 to 29k.

 

And it's still up 500%+ over 5 years. If you'd bought BTC during it's previous peak in December 2017, you'd have lost ~80% of that investment if you sold it one year later. If you'd instead held onto it, it'd have appreciated >50% by today, for a compounded annual return of ~11%.

There are a lot of idiots losing their shirts in crypto, for sure. But there are a lot of idiots doing the same with equities. If you'd bought TSLA at its peak back in late January, you'd have lost 30% of your money if you sold today. Short term retail investing is just speculation and a great way to lose your money. Doing so with an extra volatile asset class is obviously even more risky.

 

My view of cryptos has always been that they are just another trading vehicle. There is no need to debate their value beyond that. I choose to invest my "coin" elsewhere.

 

Kind of like the way a pyramid scheme works

 

Is it just another trading vehicle now that a country has made Bitcoin a legal currency?

You can now take your Bitcoin to El Salvador and avoid capital gains tax. You can buy anything you want in El Salvador with Bitcoin it's accepted by every business....so much for it being a pyramid scheme or a video game.

 

Man, those poor Salvadorian businesses are going to go crazy having to change their price tags every day.

 

Have any crypto enthusiasts/investors experimented with any of the custodial lending platforms, like BlockFi, Voyager or Celsius? What's been your experience?

I only have ~2% of my total portfolio in Crypto, but it seems appealing to move at least some of that into an environment that would make 5-6% annual yield...

 

Question to the board - help settle a "discussion". Once a company has announced a stock split (Nvidia in this case) and prices reflect the split, is it better to wait until after the split to buy or not?

I think that typically it is better to wait a few days to a couple of weeks for the inevitable price drop after the split and after profits are taken.

edit: I took a look at it to refresh my memory. APPL split on Aug 28, 2020 at $124.8. Less than 2 weeks later it was at $106. I think over exuberance by investors may have played a part in the run-up prior to the split and after the split market forces came into play and better reflected AAPL's value. I bought at $124 and could have bought more shares at $106 if I had waited. Of course, its now $142 or so. Here's the chart. Click on 1yr view and you'll see what I mean.
Apple Inc. (AAPL) Stock Price, News, Quote & History - Yahoo Finance

 

It makes no difference. Prices can go up or down after a split. There's no reliable pattern (and if there was it would be quickly arbitraged out of the market).

You pay for the higher yield with increased risk. If the crypto bank goes under in a crypto crash, you will almost certainly lose everything you put in. There's no free lunch.

 

Im confused. Why do you think that there is an inevitable price drop after the split (other than the obvious drop due to the split itself)?
If you like the stock on fundamentals buy it, if not pass.

 

It’s psychological. If you have 2 equal stocks but 1 has a lower price, which will more people buy?

 

Yea, I know the psychology, just no long term fundamental reason for it imo. Stock price at $10 or $100 company has the same value. That is why I dont get the question regarding the price drop after the split, profit taking, etc.

 

Agreed. Nvidia is still a good stock to own. I guess if you attempt to try and buy at the lowest price you would wait until after the split and get a lower price or not

 

It is something I've noticed more than once. In the case of AAPL it split on Aug 28, 2020 at $124 (adj for the split). About 2 weeks later it was selling for $106. I bought at $124.
Apple Inc. (AAPL) Stock Price, News, Quote & History - Yahoo Finance

 

Question for the investment gurus - wife and I have Roths. We've recently made contributions and are wondering about allocations. The accts currently consist of index funds. We haven't yet allocated our deposits, but are considering ETFs. So there are actually two Qs. 1) If our Roths are divided between Index funds and ETFs, are we missing out on a certain amount of compounding? 2) Would you advise us moving the existing funds into ETFs too?

Thanks for any advice!

 

No real advantage to move to ETFs if you're currently doing Index Funds. Both are low cost. ETFs allow you to trade throughout the day but the assumption is that since this is in a retirement fund, you wouldn't really be looking to do that anyways. And since you are already investing in index fund, i'm assuming your a little more conservative in your investment strategy so therefore, you probably wouldn't be doing any intraday trading of your ETFs. Now if you're looking to broaden your investing to more than just index funds, the question would be whether to add other mutual funds (like sector funds, etc). If thats the case, then an equivalent ETF over a mutual fund would be better since, in most cases, the cost of the ETF will be lower than the mutual fund. As for compounding, think of it this way: if you have $100K in one account that grows at a rate of 10%/year, would that be better than having 2 accounts with $50K each in it growing at the same rate? I think they'll be equal. At lest thats how I would come up with the answer to question 1.

 

I have a BlockFi account. So far it has been good. They pay me interest on my Bitcoin. It varies but normally stays around the 4-5% range. I can receive that interest in USD, Bitcoin, Ethereum or any other altcoin BlockFi supports. Some coins you can make as much as 7-8% return. You could easily put your savings account into a stable coin on BlockFi and make some nice returns by just parking it there.

BlockFi will also allow me to borrow against my Bitcoin or and other crypto in my account. While I have yet to use it the idea of being able to borrow USD against my Bitcoin without dealing with a bank and providing all of the information that comes with borrowing money sounds very appealing. Also the process should only take a few minutes and can be handled from the my cell phone at any time of the day or night.

BlockFi also has a credit card that will pay you Bitcoin rewards for using it.

It's considered a "hot" wallet which does come with the risk of being hacked as opposed to a cold wallet. I think this risk is pretty low considering the companies that are backing BlockFi but it is something that you should be aware of.

I don't have all of my Bitcoin in there but I am finding myself putting more Bitcoin into my BlockFi account the more I become comfortable with it. To date, BlockFi has been a good thing for me.

 

One advantage of mutual fund style investing is more brokers let you set up auto investing (e.g. buy $x every two weeks automatically). At least at Schwab, I have to manually place buy orders for ETFs every time, which can lead to less time invested and ultimately lower returns.