A round up of interesting or cool stuff I’ve read.
I read two articles in the last week pondering the same question:
- Monevator – Should you own Bitcoin in your portfolio?
- Evidenced Based Investor – Should Bitcoin be in your portfolio?
With that said, I thought I’d revisit my thoughts on Bitcoin.
Personally, I don’t (yet) see a case for it being used as a currency. It’s still too volatile.
If you were to try to price everything in Bitcoin, it would be equivalent to a loaf of bread costing 50p in the morning, £5 in the afternoon and then £3 in the evening. No retailer can deal with those fluctuations.
As it seems to be trending upwards, who’s going to want to buy something for 1 bitcoin today, when you can buy it for 0.5 bitcoins in a few weeks?
The new gold
I can see a case for it being a “new gold,” i.e. a store of value.
I don’t see the price crashing to zero. The fact that it has reached these highs means that, the moment it drops, people will be desperate to pick it up “on the cheap,” pushing the price up again.
Government intervention remains a risk. What’s to stop a government banning it (like the US did with gold in 1953)? That would presumably be a huge blow to its value.
I think it’s more likely that countries will make their own national cryptocurrency.
A digital currency is not a completely unheard of phenomenon. In China, everyone pays with their phone, via an app called WeChat.
WeChat is Facebook on steroids. Imagine Facebook + PayPal, and everyone has it installed on their phone. When I lived there, you could go to the local corner shop and pay for your groceries with WeChat. Even better, the store owner would simply receive the money into their own WeChat account. It’s not such a huge jump to remove the physical notes from circulation and go all in on a digital currency.
The biggest thing keeping my from allocating a small amount to it is lack of knowledge.
Specifically, knowing where to store it safely.
I do have a Coinbase account. It currently holds a smattering of random coins that I received for signing up and doing some quizzes. They’re probably worth a few £ each, and I fully expect them to drop to zero at some point. It’s just fun to check in every few months.
But, when it comes to actually investing my own money, safety is paramount. And the few things I’ve read online consistently mention that you shouldn’t just leave your cryptocurrency in an online exchange.
Once I start reading what you *should* do, it all starts to look overwhelming. Something about holding it all in a digital wallet on a dedicated hard drive with a password in the form of a pair of private keys.
That’s a lot of things that can go wrong. Knowing my luck, I’d either lose a part of the password or my hard drive would break.
Meanwhile, if I go the lazy route and just leave it all on Coinbase, there’s a risk that I’ll get hacked and lose it all.
Whilst I can see the appeal of getting involved with this asset class, my personal opinion remains unchanged. I’ll continue to stick with my global index tracker funds and observe the rise of bitcoin from the side-lines! For those looking for more information, I recommend the above two articles as a good starting point.
Interesting links that caught my eye this week:
Financial Origin Stories
- Fire and Wide – Playing The Cards You Have
- FIREplant – Origins
- Mr MedFI – Evolution
- Cent by Cent – My Financial Origin Story
Several more great additions to the Sovereign Quest February Challenge. All worthy reads, each of the above gives an interesting look into what makes these bloggers tick.
- Andrew Duncan – How to donate effectively
Andrew draws attention to the GiveWell website. In his own words:
“GiveWell are a charity evaluating organisation that analyse organisations from all over the world to find out where your donation can do the most good. Where it can save the most lives.”
- The Twenty Percent – Giving rather than giving up this Lent
Rather than giving something up for lent, Katie proposes to instead donate daily to her local foodbank. Great idea!
- FIRE V London – Crowdfunding: why its returns suck
An insightful look at crowdlending. I’ve never invested in any crowdfunding, although have occasionally been tempted.
- Nick Maggiulli – The 10 Biggest Money Mistakes
“A mistake is a dividend of knowledge that will pay you until the day you die.”
- Occam Investing – Why do stocks go up?
An excellent read. My favourite part was the comment on risk:
“In order to earn high returns, you must take risk – but taking risk does not cause high returns.”
It sounds like a moot point, but the article explains it well.
- Iona Bain & The Evidence Based Investor – A millennial’s guide to a secure financial future
A preview of Iona’s upcoming book, Own It.
- Incognito Money Scribe – Are You Financially Resilient?
IMS sets out the necessary steps for financial resilience.
- More to That – The Staircase of Self
“Pride likes to masquerade as confidence, but given enough time, it reveals its true face. Someone who says they’re proud to be a member of a political party is so attached to that identity that they will fear any legitimate opposition to it. Someone who is proud of their accomplishments will fear any attacks that are made to their body of work.”
- Life After The Daily Grind – Is being rich worth it?
“… at some point, the number in your database stops making a difference. There are diminishing returns. It’s all the other things in life that make it memorable. When you die, no one talks about the car you drove.”
- Mark Manson – Why I Am Not a Stoic
This article talks about what Mark likes about Stoicism, where the philosophy falters, and which other schools of thought he draws from to inform his own outlook on life.
- Morgan Housel – Best Story Wins
A piece of advice that Morgan has demonstrates with great effect.
- Scott Galloway – The Algebra of Wealth
“Focus x Stoicism x Time x Diversification = Wealth.”
- FI Scribbles – Preparing For Early Retirement – Finding Fulfilment
Kujah tests out early retirement by taking a two week holiday from work in order to try out a new way of living.
Neil Woodford relaunch plans spark call for inquiry &
Fallen fund manager Woodford’s return ‘is a kick in the guts’ – BBC
Personally, I don’t see a problem with Woodford starting a new fund, as long as any promotional material makes his successes AND failures very clear. Although, there’s the argument that everyone should do their own research prior to investing in anything. A quick search online for “Woodford” should alert any prospective investors to the risks involved. If they still want to invest with him, then, what can you do? There’s every chance that he’ll fail again, just as there’s every chance that he’ll go on another tear and make a lot of money for some people. Without the benefit of hindsight, who knows?
- Sign up to Trading212 via this link and we both receive a free share.
- Sovereign Quest – A new personal finance curation site launched by Indeedably. It’s already off to a great start. Definitely worth checking out.
- Money Saving Expert – Working from home due to coronavirus, even for a day? Claim a year’s worth of tax relief. It only takes 2 minutes and could net you £62/year or £124/year for basic/higher rate tax payers, respectively.
Thanks for reading. Hope you all have a great week!