Bitcoin AA - Just out of Curiousity

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cal91
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Bitcoin AA - Just out of Curiousity

Post by cal91 » Tue Sep 19, 2017 1:04 pm

While most Bogleheads seem to agree that Bitcoin is glorified gambling, I've come across some posts that believe it is the next big thing.

I'm curious if their money is where their mouth is.

Not sure if I'll get any responses answering these, but here are the questions.

1.What percentage, if any, of your total invested assets is in Bitcoin?

2. Do you continually invest into Bitcoin? (every paycheck X amount goes into Bitcoin, etc.)

PFInterest
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Re: Bitcoin AA - Just out of Curiousity

Post by PFInterest » Tue Sep 19, 2017 1:06 pm

youre a little late to the game.
1) none.
2) no.

cal91
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Re: Bitcoin AA - Just out of Curiousity

Post by cal91 » Tue Sep 19, 2017 1:10 pm

Thanks for your opinion. How can you be late to a game if you're not playing it? I guess you're late to the game as well!

And FYI, my answers are the same as yours :)

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rmelvey
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Re: Bitcoin AA - Just out of Curiousity

Post by rmelvey » Tue Sep 19, 2017 1:44 pm

I am 98% US equities and 2% bitcoin (excluding a small cash position). I don't invest each paycheck, but I do have limit orders set so that if it drops a lot I will pick up more. 2% might not seem like a lot, but it's very common to see 20% price swings in a day. If bitcoin ever became more than 5% of my portfolio I would sell some off so that it wouldn't dominate my daily returns.

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BogleMelon
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Re: Bitcoin AA - Just out of Curiousity

Post by BogleMelon » Tue Sep 19, 2017 1:57 pm

1. 0%
2. $0
Excuse my English, it is my second language! | | "One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

queso
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Re: Bitcoin AA - Just out of Curiousity

Post by queso » Tue Sep 19, 2017 2:27 pm

1. <1% across 3 cryptocurrencies
2. No.

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Pranav
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Re: Bitcoin AA - Just out of Curiousity

Post by Pranav » Tue Sep 19, 2017 3:28 pm

BogleMelon wrote:
Tue Sep 19, 2017 1:57 pm
1. 0%
2. $0
Same here.
Pranav

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greg24
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Re: Bitcoin AA - Just out of Curiousity

Post by greg24 » Tue Sep 19, 2017 3:43 pm

Can everyone list all the currencies they invest in, not just Bitcoin?

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BogleMelon
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Re: Bitcoin AA - Just out of Curiousity

Post by BogleMelon » Tue Sep 19, 2017 3:56 pm

greg24 wrote:
Tue Sep 19, 2017 3:43 pm
Can everyone list all the currencies they invest in, not just Bitcoin?
I don't consider currencies a mean of investing. Currencies were created and used for 2 things (investing is not one of them):
1- As a mean of exchange
2- To speculate on.
Excuse my English, it is my second language! | | "One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

renue74
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Re: Bitcoin AA - Just out of Curiousity

Post by renue74 » Tue Sep 19, 2017 3:59 pm

I bought $150 in BC last year to play around with to pay for Amazon stuff through purse.io.

I totally forgot about it after a couple small orders and my $150 in Coinbase.com turned into about $450 or $500.

I immediately cashed out and bought steaks and baked potatoes for the family. #neverlookedback

ny_rn
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Re: Bitcoin AA - Just out of Curiousity

Post by ny_rn » Tue Sep 19, 2017 4:14 pm

1. A very, very small percentage. I do not include it in my total net worth.

2. I took "x" amount of money and put it in litecoin, bitcoin and ethereum a few months ago. After I made my money back, I took my principal out and now I'm just playing with the gains. Notice I said, "playing."

Maybe I'll include cryptocurrencies in my total net worth someday if the payoff changes it significantly. Then, I'll call myself a cryptocurrency guru. :beer

Valuethinker
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Re: Bitcoin AA - Just out of Curiousity

Post by Valuethinker » Tue Sep 19, 2017 4:16 pm

BogleMelon wrote:
Tue Sep 19, 2017 3:56 pm
greg24 wrote:
Tue Sep 19, 2017 3:43 pm
Can everyone list all the currencies they invest in, not just Bitcoin?
I don't consider currencies a mean of investing. Currencies were created and used for 2 things (investing is not one of them):
1- As a mean of exchange
2- To speculate on.
Also as

- a unit of account
- a store of value

re 2, fixed exchange rates dominated from the 1870s to 1971, with interregnums around the World Wars. You could not, easily, speculate on currencies (there were also exchange controls).

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Re: Bitcoin AA - Just out of Curiousity

Post by aj76er » Tue Sep 19, 2017 7:34 pm

In it's short history, has anyone calculated the correlation to the global equities market or just the S&P500?

Not sure how meaningful it would be, but interesting nonetheless.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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Cloudy
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Re: Bitcoin AA - Just out of Curiousity

Post by Cloudy » Tue Sep 19, 2017 9:20 pm

aj76er wrote:
Tue Sep 19, 2017 7:34 pm
In it's short history, has anyone calculated the correlation to the global equities market or just the S&P500?

Not sure how meaningful it would be, but interesting nonetheless.
There was an article recently that showed a direct correlation between btc price and Google searches for bitcoin. I'm not sure on the causality but I thought it was interesting.

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Re: Bitcoin AA - Just out of Curiousity

Post by kosomoto » Tue Sep 19, 2017 9:33 pm

If somebody decides 5% of their allocation will be bitcoin, and it drops in half, will you sell stocks or bonds to buy more bitcoin?

If it drops in half again, will you do the same?

Rinse and repeat until your entire portfolio return is negative.

Valuethinker
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Re: Bitcoin AA - Just out of Curiousity

Post by Valuethinker » Wed Sep 20, 2017 2:52 am

kosomoto wrote:
Tue Sep 19, 2017 9:33 pm
If somebody decides 5% of their allocation will be bitcoin, and it drops in half, will you sell stocks or bonds to buy more bitcoin?

If it drops in half again, will you do the same?

Rinse and repeat until your entire portfolio return is negative.
Quite. And we argue here about reit allocations.

Or even gold.

When a solar flare takes out the internet for 3 days or 3 weeks it will be a different discussion.

queso
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Re: Bitcoin AA - Just out of Curiousity

Post by queso » Wed Sep 20, 2017 6:51 am

greg24 wrote:
Tue Sep 19, 2017 3:43 pm
Can everyone list all the currencies they invest in, not just Bitcoin?
Bitcoin, Ethereum and Litecoin. It's funny how correlated they are though when you start watching them and comparing charts. I suppose having three protects me against one of them having some major hack, fork, problem, etc. and dropping like a rock, but I trust none of them. I would never include them as a part of my AA and rebalance into them, etc. They were a fun project for me to learn about blockchain and play with a Trezor. If they ever amount to much I'll be surprised, but if they do maybe I'll cash them out and buy VTSAX or a new bike. :happy

fatlever
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Re: Bitcoin AA - Just out of Curiousity

Post by fatlever » Wed Sep 20, 2017 7:42 am

kosomoto wrote:
Tue Sep 19, 2017 9:33 pm
If somebody decides 5% of their allocation will be bitcoin, and it drops in half, will you sell stocks or bonds to buy more bitcoin?

If it drops in half again, will you do the same?

Rinse and repeat until your entire portfolio return is negative.
Funny, I put around 5% in cryptos earlier this year. It balooned to around 25% of my portfolio. I took out most of it and I was all in house money as I posted in one of the threads. The China development made me a bit uneasy so I took more money out last week and that money I am using to take off 7 years of payments from my mortgage. It is now around 5%, all house money still.

I read about Bitcoin from this forum first in 2013 the advice here that kept me from putting in money until earlier this year. I think as some people have been saying, the financial risk now might be if you don't at least have a tiny bit in Bitcoin.

Valuethinker
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Re: Bitcoin AA - Just out of Curiousity

Post by Valuethinker » Wed Sep 20, 2017 8:08 am

fatlever wrote:
Wed Sep 20, 2017 7:42 am
kosomoto wrote:
Tue Sep 19, 2017 9:33 pm
If somebody decides 5% of their allocation will be bitcoin, and it drops in half, will you sell stocks or bonds to buy more bitcoin?

If it drops in half again, will you do the same?

Rinse and repeat until your entire portfolio return is negative.
Funny, I put around 5% in cryptos earlier this year. It balooned to around 25% of my portfolio. I took out most of it and I was all in house money as I posted in one of the threads. The China development made me a bit uneasy so I took more money out last week and that money I am using to take off 7 years of payments from my mortgage. It is now around 5%, all house money still.

I read about Bitcoin from this forum first in 2013 the advice here that kept me from putting in money until earlier this year. I think as some people have been saying, the financial risk now might be if you don't at least have a tiny bit in Bitcoin.
Fortune favours the brave ;-).

The issue is that in the universe of investable assets, the total market cap of cyber currencies is almost infintesimal. That is both a bull care and a bear case, of course. But it's hard to fit it into an orthodox asset allocation framework in that case.

Angelus359
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Re: Bitcoin AA - Just out of Curiousity

Post by Angelus359 » Wed Sep 20, 2017 8:13 am

I have about 1400$ of a mixture of cryptocurrency

My IRA has about 24k in it

That works out to be 5.5% of my portfolio


Just gonna let it sit and see what happens. Buy and hold.
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bberris
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Re: Bitcoin AA - Just out of Curiousity

Post by bberris » Wed Sep 20, 2017 8:58 am

Like the stock tips from the shoeshine boy in 1929, the 2017 version is BH threads discussing bitcoin.

queso
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Re: Bitcoin AA - Just out of Curiousity

Post by queso » Wed Sep 20, 2017 9:14 am

bberris wrote:
Wed Sep 20, 2017 8:58 am
Like the stock tips from the shoeshine boy in 1929, the 2017 version is BH threads discussing bitcoin.
I'll defer to the sage words of the Doge on this one: "Very bubble. Much scam. So avoid."

https://www.nytimes.com/2017/09/15/busi ... ss&emc=rss

Jack FFR1846
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Re: Bitcoin AA - Just out of Curiousity

Post by Jack FFR1846 » Wed Sep 20, 2017 9:18 am

queso wrote:
Wed Sep 20, 2017 9:14 am

I'll defer to the sage words of the Doge on this one: "Very bubble. Much scam. So avoid."
I agree with the sentiment, but the dialect is a bit off, I think. Try: "Very bubble. Much scam. Such avoid."

:D
Bogle: Smart Beta is stupid

queso
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Re: Bitcoin AA - Just out of Curiousity

Post by queso » Wed Sep 20, 2017 9:24 am

Jack FFR1846 wrote:
Wed Sep 20, 2017 9:18 am
queso wrote:
Wed Sep 20, 2017 9:14 am

I'll defer to the sage words of the Doge on this one: "Very bubble. Much scam. So avoid."
I agree with the sentiment, but the dialect is a bit off, I think. Try: "Very bubble. Much scam. Such avoid."

:D
yeah, your version is better.

30sep16
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Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 1:12 am

I have 7.5% of my investable assets in Bitcoin and 92.5% in CDs, an extreme "barbell" portfolio.

I have nothing in stocks and bonds, which I view as too risky right now. Huh? you say.

It's about the ASYMMETRY. Bitcoin can only crash by 100%. But it can and probably will increase by 1,000% or even 10,000%.

But the stock market will probably only make around 5% a year over the next decade according to the eggheads, and has downside of 50%+. We are due for another crash, historically speaking. The last financial crisis wasn't truly solved, was just papered over in debt and the worst is probably yet to come.

The eggheads also agree that bonds have run the course of a 30-year bull run, and have downside due to rate hikes and inflation.

The asymmetry is unfavorable for stocks and bonds right, but the asymmetry is incredibly favorable for Bitcoin.

Why do I think Bitcoin has so much upside? It has faced several major challenges this year, from ETF denial to a hard fork to interference by China. Each time it drops in a big way for a few weeks, and then rebounds to a major new high. It is incredibly resilient. Now imagine what happens when the ETF is approved, and it will be. Then it will be easy for the average investor to buy Bitcoin, pushing it far higher.

Yes, it looks a lot like a bubble given the parabolic growth. However, consider that Bitcoin has a market cap of only $64 billion, vs. more than $7 trillion for the gold market. Bitcoin is less than Bill Gates. Only a tiny fraction of the world's population has any Bitcoin, and so it can go up a whole lot before it tops out. And yes, everyone is talking about Bitcoin, but right now it's not so easy to buy so very few people actually OWN Bitcoin. Everyone talking about Bitcoin would be of a concern to be AFTER the EFT was approved and had ballooned with funds from everyday people.

Also, Bitcoin is unique in that it is deflationary. No more than 21M Bitcoin will ever exist, which will continue to put upward pressure on the price. Even the gold supply isn't limited, as new gold is mined when prices go up.

Also, various countries and financial institutions have effectively endorsed Bitcoin. Every time another country legitimizes Bitcoin, there's a new flow of money from the citizens of that country.

Bitcoin also fits the "zeitgeist" of our time. Digital is the future, and Bitcoin is digital money. Psychologically people will continue to be drawn to it.

Now, I could be wrong and Bitcoin could crash hard, and even go to zero. The worst than can do for me is a 7.5% dip in my portfolio, which you folks in stocks/bonds experience on a regular basis. But I've already made more than that 7.5% amount this year alone in Bitcoin. So I literally cannot lose a cent on Bitcoin now.

I keep "scraping" new profits off the top as necessary, often more than once a month, to keep a 7.5% cap on the asset allocation.

Someone asked whether one would shift assets into the Bitcoin allocation if it crashed. A short while ago, I would have told you no, that I would only practice asymmetric rebalancing of Bitcoin, taking profits but not adding to shortfalls.

Until I uploaded the Bitcoin price history to PortfolioVisualizer.com and played around with portfolio optimization. I also created an Excel spreadsheet to test asymmetric rebalancing, since PV doesn't offer that. And I was shocked to discover that even when Bitcoin crashed by >80% for much of 2014, you were better off continuing to buy it every month as it went down. It resulted in a 24% drawdown on the 80/20 portfolio I tested, so just a little more than its 20% allocation.

Since 7/31/10, rebalanced monthly a 60/40 portfolio starting at $10,000 would have grown to $19,539, a CAGR of 9.92% with a drawdown of 8.21%. If you added just 2% to Bitcoin for a 59/39/2 portfolio, you end up with $29,034, a CAGR of 16.24% with a maxDD of 8.61%. That's a Sortino ratio of 4.24 vs. 2.85 for the 60/40 portfolio. With just a 2% allocation! A couple studies have been done recommending that 2% is optimal from a risk/reward standpoint.

If you increased that to 7.5% bitcoin and the rest 60/40 you'd end up with $78,930, a CAGR of 33.87% and maxDD of 12.97%. That's a Sortino ratio of 6.49. That's also a 1.77 Sharpe vs 1.42 for the 60/40 and 1.48 for the 59/39/2, so I'm not sure why the studies recommended 2%.

And these numbers include an >80% crash of Bitcoin that took 3 years to recover, rebalancing funds INTO the crash as it went along.

In conclusion, I think you're nuts NOT to have a tiny allocation to Bitcoin, when you can select your downside, but the possible upside is staggering. Especially with the meager returns we are likely to see from traditional asset classes.

I think it's more likely Bitcoin gets to BRK.A's $275K price before it goes to $0. But even if I'm wrong I've done very, very well. And it's more likely to crash in the 80% range and eventually recover, vs go to $0. Which was already a very profitable holding.

How will you feel if you decided not to risk a couple percent on Bitcoin and it continued with another >1,000% run? It's just nuts not to take the obvious side of that asymmetry. Just be sure to rebalance every month at a minimum.

Here are guys smarter than me writing a more thorough and better written version of what I said here:
http://horizonkinetics.com/bitcoin-review/
Last edited by 30sep16 on Thu Sep 21, 2017 2:06 am, edited 2 times in total.

30sep16
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Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 1:18 am

P.S. The easiest way to buy Bitcoin in the U.S. is via Coinbase. If you want to avoid the spread they charge, send your money to Coinbase, and then transfer it to GDAX, their exchange for "pros" where you can avoid any spread or fees at all. It's just a little more technical. Coinbase is Bitcoin for dummies, but it's actually not bad to pay the spread when the growth rate is so high and it dwarves the spread.

After purchasing, you could transfer at least half your Bitcoin to a paper or hardware wallet such as Ledger Nano S, so you are in control of the keys to our Bitcoin, rather than let Coinbase have the keys with an IOU to you, which leaves you subject to Coinbase getting hacked.

30sep16
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Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 1:47 am

BogleMelon wrote:
Tue Sep 19, 2017 3:56 pm
greg24 wrote:
Tue Sep 19, 2017 3:43 pm
I don't consider currencies a mean of investing. Currencies were created and used for 2 things (investing is not one of them):
1- As a mean of exchange
2- To speculate on.
Your mistake is lumping in Bitcoin with fiat currents of the past and present. It's quite obviously something very different. And skyrocketing.

30sep16
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Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 1:48 am

aj76er wrote:
Tue Sep 19, 2017 7:34 pm
In it's short history, has anyone calculated the correlation to the global equities market or just the S&P500?

Not sure how meaningful it would be, but interesting nonetheless.
The monthly correlation of Bitcoin and S&P 500 is 0.17, from July 2010 thru August 2017. I got this by uploading Bitcoin's price history to PortfolioVisualizer.com.

Valuethinker
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Re: Bitcoin AA - Just out of Curiousity

Post by Valuethinker » Thu Sep 21, 2017 3:50 am

bberris wrote:
Wed Sep 20, 2017 8:58 am
Like the stock tips from the shoeshine boy in 1929, the 2017 version is BH threads discussing bitcoin.
I think Bernard Baruch said Elevator Operator.

And I've never managed to find one in all my searches for one, since ;-)

queso
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Re: Bitcoin AA - Just out of Curiousity

Post by queso » Thu Sep 21, 2017 7:10 am

30sep16 wrote:
Thu Sep 21, 2017 1:12 am
In conclusion, I think you're nuts NOT to have a tiny allocation to Bitcoin
I think most folks here would think you are nuts to have zero allocation to index funds and have everything in cash and Bitcoin. I hear what you are saying, but basically what it boils down to is that you prefer to gamble on Bitcoin than follow a BH type sound investment strategy using low cost index funds. Granted, in the end you may end up winning the lottery, but the downside to your strategy is much worse than the average BH's (BTC drops to zero and your cash has been losing money the whole time due to inflation and crummy CD yields).
30sep16 wrote:
Thu Sep 21, 2017 1:12 am
I have nothing in stocks and bonds, which I view as too risky right now. Huh? you say.
This causes massive lulz coming from someone who is relying on Bitcoin and CDs as an investment strategy. This is akin to someone preferring Russian roulette over smoking because "smoking is bad for your health".
30sep16 wrote:
Thu Sep 21, 2017 1:12 am
But it can and probably will increase by 1,000% or even 10,000%.
Pure speculation (but I do hope you are right). :)

am
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Re: Bitcoin AA - Just out of Curiousity

Post by am » Thu Sep 21, 2017 8:45 am

Angelus359 wrote:
Wed Sep 20, 2017 8:13 am
I have about 1400$ of a mixture of cryptocurrency

My IRA has about 24k in it

That works out to be 5.5% of my portfolio


Just gonna let it sit and see what happens. Buy and hold.

How’d you get it into your IRA? Only way I know is with gbtc(bitcoin investment trust).

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BogleMelon
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Re: Bitcoin AA - Just out of Curiousity

Post by BogleMelon » Thu Sep 21, 2017 9:51 am

30sep16 wrote:
Thu Sep 21, 2017 1:47 am
BogleMelon wrote:
Tue Sep 19, 2017 3:56 pm
greg24 wrote:
Tue Sep 19, 2017 3:43 pm
I don't consider currencies a mean of investing. Currencies were created and used for 2 things (investing is not one of them):
1- As a mean of exchange
2- To speculate on.
And skyrocketing.
You mean "and skyrocketed" because no one can tell if the skyrocketing will continue forever
Excuse my English, it is my second language! | | "One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

30sep16
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Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 11:10 am

queso wrote:
Thu Sep 21, 2017 7:10 am
30sep16 wrote:
Thu Sep 21, 2017 1:12 am
In conclusion, I think you're nuts NOT to have a tiny allocation to Bitcoin
I think most folks here would think you are nuts to have zero allocation to index funds and have everything in cash and Bitcoin. I hear what you are saying, but basically what it boils down to is that you prefer to gamble on Bitcoin than follow a BH type sound investment strategy using low cost index funds. Granted, in the end you may end up winning the lottery, but the downside to your strategy is much worse than the average BH's (BTC drops to zero and your cash has been losing money the whole time due to inflation and crummy CD yields).
30sep16 wrote:
Thu Sep 21, 2017 1:12 am
I have nothing in stocks and bonds, which I view as too risky right now. Huh? you say.
This causes massive lulz coming from someone who is relying on Bitcoin and CDs as an investment strategy. This is akin to someone preferring Russian roulette over smoking because "smoking is bad for your health".
30sep16 wrote:
Thu Sep 21, 2017 1:12 am
But it can and probably will increase by 1,000% or even 10,000%.
Pure speculation (but I do hope you are right). :)
The "huh?" line was a rhetorical device, followed by quite a few sentences about asymmetry. You ignored the answer I gave. Thus your post was a complete waste of time, and quite revealing about your mental process.

And no, my downside is not much worse. My downside is 7.5%. Stocks and bonds have both crashed at the same time, every 40 years or so throughout our nation's history. And it's been 40 years. Ostriches.

When I AM in traditional assets, I mostly use low-cost index funds. And I'll shift to an all-weather type strategy using those funds after the next collapse (which will probably cause my Bitcoin to skyrocket even higher). Bogleheadism doesn't mean refusing to think and continuing to explore new ideas.

GuyFromGeorgia
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Re: Bitcoin AA - Just out of Curiousity

Post by GuyFromGeorgia » Thu Sep 21, 2017 11:28 am

30sept16 - Curious when you switched to the cash/CD and Bitcoin AA you have. How much of the recent run-up have you missed out on? When the previous person said you'll be worse off with this strategy, they are indicating that you're missing out on potential gains. Sure, the market might tank tomorrow and you could be perfect at timing the market, but if you sold a year ago you've missed 20-30% returns. Time in the market is one of the biggest keys to Boglehead philosophy. When do you plan to get back into the market?

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Re: Bitcoin AA - Just out of Curiousity

Post by Nate79 » Thu Sep 21, 2017 11:36 am

Why do Bitcoin fanboys get so defensive and attack when people point out potential flaws in their strategy? It seems that every day there is a new Bitcoin fanatic on here hyping it up and then they are gone a few days later.

30sep16
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Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 11:36 am

GuyFromGeorgia wrote:
Thu Sep 21, 2017 11:28 am
30sept16 - Curious when you switched to the cash/CD and Bitcoin AA you have. How much of the recent run-up have you missed out on? When the previous person said you'll be worse off with this strategy, they are indicating that you're missing out on potential gains. Sure, the market might tank tomorrow and you could be perfect at timing the market, but if you sold a year ago you've missed 20-30% returns. Time in the market is one of the biggest keys to Boglehead philosophy. When do you plan to get back into the market?
I got in this February when the SEC was considering the Bitcoin ETF, thinking it could really spike if they approved. At that time it was <1% of my AA.

They denied. It fell a bit for a days, then shot UP, presumably because of pent-up demand waiting on the ETF, and when it was denied enough of those folks decided to figure out how to buy Bitcoin the "normal" way.

So I increased my allocation. Every couple of months something "disastrous" for Bitcoin happened, it crashed, and quickly rebounded to new highs. So I kept increasing my allocation.

When do I plan to get back into the market? I answered it 2 posts above. After it crashes. I'd like to have gunpowder then, Buffet style. There's much more downside than upside to the traditional markets right now. Thank God Bitcoin started surging at just the right time. Which is the whole point of an uncorrelated asset.

30sep16
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Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 11:38 am

Nate79 wrote:
Thu Sep 21, 2017 11:36 am
Why do Bitcoin fanboys get so defensive and attack when people point out potential flaws in their strategy? It seems that every day there is a new Bitcoin fanatic on here hyping it up and then they are gone a few days later.
Because, on this website, the number of people here who sneer is much greater than the number who think and ask honest questions. As you just did.

And because so many of them are so infuriated by Bitcoin they make patently illogical statements, which are deserving of being exposed.

Like the guy who just told me my 7.5/92.5 Bitcoin/CDs portfolio is more risky than a stocks/bonds portfolio. When, by choosing 7.5, I am much more CONSERVATIVE about risk than the stocks/bonds mentality is. Especially when we are due for another crash historically speaking. Especially when we are due for another 40-year interval of stocks and bonds crashing at the SAME time, which many people are warning about. Your downside is 30-60% or more. Mine is 7.5%.

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Re: Bitcoin AA - Just out of Curiousity

Post by HomerJ » Thu Sep 21, 2017 11:43 am

fatlever wrote:
Wed Sep 20, 2017 7:42 am
I think as some people have been saying, the financial risk now might be if you don't at least have a tiny bit in Bitcoin.
There is zero risk in NOT investing in Bitcoin. Very silly statement for "some people" (and you) to make.

CantPassAgain
Posts: 430
Joined: Fri Mar 15, 2013 8:49 pm

Re: Bitcoin AA - Just out of Curiousity

Post by CantPassAgain » Thu Sep 21, 2017 12:08 pm

30sep16 wrote:
Thu Sep 21, 2017 11:38 am
Nate79 wrote:
Thu Sep 21, 2017 11:36 am
Why do Bitcoin fanboys get so defensive and attack when people point out potential flaws in their strategy? It seems that every day there is a new Bitcoin fanatic on here hyping it up and then they are gone a few days later.
Because, on this website, the number of people here who sneer is much greater than the number who think and ask honest questions. As you just did.

And because so many of them are so infuriated by Bitcoin they make patently illogical statements, which are deserving of being exposed.

Like the guy who just told me my 7.5/92.5 Bitcoin/CDs portfolio is more risky than a stocks/bonds portfolio. When, by choosing 7.5, I am much more CONSERVATIVE about risk than the stocks/bonds mentality is. Especially when we are due for another crash historically speaking. Especially when we are due for another 40-year interval of stocks and bonds crashing at the SAME time, which many people are warning about. Your downside is 30-60% or more. Mine is 7.5%.
The problem is, this isn't a general finance forum that exists to treat all investing "ideas" as equal. It was created and is maintained to promote a point of view regarding investing, a point of view that is not compatible with promoting ideas like speculating on bitcoin.

Furthermore, most people here ("bogleheads") do think and ask honest questions. They have done it, continue to do it, and will do so in the future. And they are smart enough to see through a lot of BS because they have been here a long time and have seen it all before, over and over again.

So, you are not special, you do not know some secret no one else does, and people are right to be skeptical of every one of your comments.

Regards
Last edited by CantPassAgain on Thu Sep 21, 2017 12:11 pm, edited 1 time in total.

User avatar
HomerJ
Posts: 10386
Joined: Fri Jun 06, 2008 12:50 pm

Re: Bitcoin AA - Just out of Curiousity

Post by HomerJ » Thu Sep 21, 2017 12:11 pm

30sep16 wrote:
Thu Sep 21, 2017 11:38 am
Like the guy who just told me my 7.5/92.5 Bitcoin/CDs portfolio is more risky than a stocks/bonds portfolio. When, by choosing 7.5, I am much more CONSERVATIVE about risk than the stocks/bonds mentality is. Especially when we are due for another crash historically speaking. Especially when we are due for another 40-year interval of stocks and bonds crashing at the SAME time, which many people are warning about. Your downside is 30-60% or more. Mine is 7.5%.
The correct way to get rich would be to sell your crystal ball to someone for one billion dollars.

A 50/50 stocks/bond portfolio doesn't have a downside of "30%-60% or more". And, so far, all crashes have been temporary. If the markets continue to go up for a few more years, you will miss out on all those gains, while your CD money lags inflation. But hopefully Bitcoin will make up for that. But it might not.

Your risk is sitting there making nothing (or losing a few percent from Bitcoin), while the markets continue to go up. And then when they do crash (and they will, but no one knows when, don't fool yourself), they still may be higher than today, so jumping back in then (assuming you can time the bottom) still won't make you money.

The BH way to recognize that we cannot predict the future. You think you can. Many others before have tried and failed.

The long-term returns from a conservative stocks and bonds portfolio has been very decent. And those long-term returns INCLUDE crashes. Read that again. The long-term decent returns (enough to allow one to grow their portfolio large enough for a comfortable retirement) INCLUDE all the crashes, and occasional decades of bad returns.

There's no need to time the market or predict anything. Just staying the course through thick and thin gets you decent returns.

You are taking a risk of not getting those decent long-term returns. Instead, you think you can do better and avoid the bad years, and only invest in the stock market during the good years. That may indeed be possible. But history has shown it to be very hard.

But I know you think you are smarter than the average bear. Good luck to you. Maybe you'll be right. But if you're wrong, there could indeed be a downside. BItcoin could plateau or crash completely, and you could be sitting in cash for 5-10 years making nothing waiting for the market to drop. That could be costly to your retirement plan.

Me, I'll just stay the course, take the good with the bad, and get rich slowly instead of buying a lottery ticket and hoping it pays off.
Last edited by HomerJ on Thu Sep 21, 2017 12:12 pm, edited 1 time in total.

30sep16
Posts: 38
Joined: Fri Sep 30, 2016 8:52 pm

Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 12:11 pm

CantPassAgain wrote:
Thu Sep 21, 2017 12:08 pm
30sep16 wrote:
Thu Sep 21, 2017 11:38 am
Nate79 wrote:
Thu Sep 21, 2017 11:36 am
Why do Bitcoin fanboys get so defensive and attack when people point out potential flaws in their strategy? It seems that every day there is a new Bitcoin fanatic on here hyping it up and then they are gone a few days later.
Because, on this website, the number of people here who sneer is much greater than the number who think and ask honest questions. As you just did.

And because so many of them are so infuriated by Bitcoin they make patently illogical statements, which are deserving of being exposed.

Like the guy who just told me my 7.5/92.5 Bitcoin/CDs portfolio is more risky than a stocks/bonds portfolio. When, by choosing 7.5, I am much more CONSERVATIVE about risk than the stocks/bonds mentality is. Especially when we are due for another crash historically speaking. Especially when we are due for another 40-year interval of stocks and bonds crashing at the SAME time, which many people are warning about. Your downside is 30-60% or more. Mine is 7.5%.
The problem is, this isn't a general finance forum that exists to treat all investing "ideas" as equal. It was created and is maintained to promote a point of view regarding investing, a point of view that is not compatible with promoting ideas like speculating on bitcoin.

Furthermore, most people here ("bogleheads") do think and ask honest questions. They have done it, continue to do it, and will do so in the future. And they are smart enough to see through a lot of BS because they have been here a long time and have seen it all before, over and over again, and the story is always the same.

So, you are not special, you do not know some secret no one else does, and people are right to be skeptical of every one of your comments.

Regards
I agree with the BH particular point of view. A low-cost index fund is nearly always the way to go. The things you can control that most affect your returns are fees and asset allocation, along with other things in your control like rebalancing.

The question is where assets with a particular risk-reward profile should fit into that allocation. BHism should be eager to find new solutions for that, since it's one of the only things that is IN your control.

The problem here, is that you and many others have decided that BHism really means ostrichism.

Valuethinker
Posts: 33176
Joined: Fri May 11, 2007 11:07 am

Re: Bitcoin AA - Just out of Curiousity

Post by Valuethinker » Thu Sep 21, 2017 12:17 pm

30sep16 wrote:
Thu Sep 21, 2017 11:38 am
Nate79 wrote:
Thu Sep 21, 2017 11:36 am
Why do Bitcoin fanboys get so defensive and attack when people point out potential flaws in their strategy? It seems that every day there is a new Bitcoin fanatic on here hyping it up and then they are gone a few days later.
Because, on this website, the number of people here who sneer is much greater than the number who think and ask honest questions. As you just did.

And because so many of them are so infuriated by Bitcoin they make patently illogical statements, which are deserving of being exposed.

Like the guy who just told me my 7.5/92.5 Bitcoin/CDs portfolio is more risky than a stocks/bonds portfolio. When, by choosing 7.5, I am much more CONSERVATIVE about risk than the stocks/bonds mentality is. Especially when we are due for another crash historically speaking. Especially when we are due for another 40-year interval of stocks and bonds crashing at the SAME time, which many people are warning about. Your downside is 30-60% or more. Mine is 7.5%.
There is something going on here.

A brand new poster is mega for bitcoin. And seems to know a lot about the posters on this Forum?

Has Nicholas Taleb of barbell portfolio fame just joined us?

CantPassAgain
Posts: 430
Joined: Fri Mar 15, 2013 8:49 pm

Re: Bitcoin AA - Just out of Curiousity

Post by CantPassAgain » Thu Sep 21, 2017 12:20 pm

Valuethinker wrote:
Thu Sep 21, 2017 12:17 pm
30sep16 wrote:
Thu Sep 21, 2017 11:38 am
Nate79 wrote:
Thu Sep 21, 2017 11:36 am
Why do Bitcoin fanboys get so defensive and attack when people point out potential flaws in their strategy? It seems that every day there is a new Bitcoin fanatic on here hyping it up and then they are gone a few days later.
Because, on this website, the number of people here who sneer is much greater than the number who think and ask honest questions. As you just did.

And because so many of them are so infuriated by Bitcoin they make patently illogical statements, which are deserving of being exposed.

Like the guy who just told me my 7.5/92.5 Bitcoin/CDs portfolio is more risky than a stocks/bonds portfolio. When, by choosing 7.5, I am much more CONSERVATIVE about risk than the stocks/bonds mentality is. Especially when we are due for another crash historically speaking. Especially when we are due for another 40-year interval of stocks and bonds crashing at the SAME time, which many people are warning about. Your downside is 30-60% or more. Mine is 7.5%.
There is something going on here.

A brand new poster is mega for bitcoin. And seems to know a lot about the posters on this Forum?

Has Nicholas Taleb of barbell portfolio fame just joined us?
There is definitely something going on here. And it is almost certainly self-serving. Any time I see a comment about "bogleheads sticking their head in the sand" or somesuch nonsense in response to whatever the current hot thing is, that is the first alarm bell that goes off in my head.

CantPassAgain
Posts: 430
Joined: Fri Mar 15, 2013 8:49 pm

Re: Bitcoin AA - Just out of Curiousity

Post by CantPassAgain » Thu Sep 21, 2017 12:24 pm

30sep16 wrote:
Thu Sep 21, 2017 12:11 pm
CantPassAgain wrote:
Thu Sep 21, 2017 12:08 pm
30sep16 wrote:
Thu Sep 21, 2017 11:38 am
Nate79 wrote:
Thu Sep 21, 2017 11:36 am
Why do Bitcoin fanboys get so defensive and attack when people point out potential flaws in their strategy? It seems that every day there is a new Bitcoin fanatic on here hyping it up and then they are gone a few days later.
Because, on this website, the number of people here who sneer is much greater than the number who think and ask honest questions. As you just did.

And because so many of them are so infuriated by Bitcoin they make patently illogical statements, which are deserving of being exposed.

Like the guy who just told me my 7.5/92.5 Bitcoin/CDs portfolio is more risky than a stocks/bonds portfolio. When, by choosing 7.5, I am much more CONSERVATIVE about risk than the stocks/bonds mentality is. Especially when we are due for another crash historically speaking. Especially when we are due for another 40-year interval of stocks and bonds crashing at the SAME time, which many people are warning about. Your downside is 30-60% or more. Mine is 7.5%.
The problem is, this isn't a general finance forum that exists to treat all investing "ideas" as equal. It was created and is maintained to promote a point of view regarding investing, a point of view that is not compatible with promoting ideas like speculating on bitcoin.

Furthermore, most people here ("bogleheads") do think and ask honest questions. They have done it, continue to do it, and will do so in the future. And they are smart enough to see through a lot of BS because they have been here a long time and have seen it all before, over and over again, and the story is always the same.

So, you are not special, you do not know some secret no one else does, and people are right to be skeptical of every one of your comments.

Regards
I agree with the BH particular point of view....
LOL, sure you do.

30sep16
Posts: 38
Joined: Fri Sep 30, 2016 8:52 pm

Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 12:25 pm

Valuethinker wrote:
Thu Sep 21, 2017 12:17 pm
30sep16 wrote:
Thu Sep 21, 2017 11:38 am
Nate79 wrote:
Thu Sep 21, 2017 11:36 am
Why do Bitcoin fanboys get so defensive and attack when people point out potential flaws in their strategy? It seems that every day there is a new Bitcoin fanatic on here hyping it up and then they are gone a few days later.
Because, on this website, the number of people here who sneer is much greater than the number who think and ask honest questions. As you just did.

And because so many of them are so infuriated by Bitcoin they make patently illogical statements, which are deserving of being exposed.

Like the guy who just told me my 7.5/92.5 Bitcoin/CDs portfolio is more risky than a stocks/bonds portfolio. When, by choosing 7.5, I am much more CONSERVATIVE about risk than the stocks/bonds mentality is. Especially when we are due for another crash historically speaking. Especially when we are due for another 40-year interval of stocks and bonds crashing at the SAME time, which many people are warning about. Your downside is 30-60% or more. Mine is 7.5%.
There is something going on here.

A brand new poster is mega for bitcoin. And seems to know a lot about the posters on this Forum?

Has Nicholas Taleb of barbell portfolio fame just joined us?
My join date was a year ago. You can see it in my profile history. Do you have a problem with lurkers commenting if they have a different point of view?

And yes, my thinking is shaped a great deal by Taleb.

It's been proven many times that barbell portfolios have had a better risk/return profile over the years than the 60/40 portfolio. So have all-weather type porfolios with 15% or so commodities.

Yet most of you continue to pretend that's not the case even though it's been known for years.

30sep16
Posts: 38
Joined: Fri Sep 30, 2016 8:52 pm

Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 12:35 pm

HomerJ wrote:
Thu Sep 21, 2017 12:11 pm
30sep16 wrote:
Thu Sep 21, 2017 11:38 am
Like the guy who just told me my 7.5/92.5 Bitcoin/CDs portfolio is more risky than a stocks/bonds portfolio. When, by choosing 7.5, I am much more CONSERVATIVE about risk than the stocks/bonds mentality is. Especially when we are due for another crash historically speaking. Especially when we are due for another 40-year interval of stocks and bonds crashing at the SAME time, which many people are warning about. Your downside is 30-60% or more. Mine is 7.5%.
The correct way to get rich would be to sell your crystal ball to someone for one billion dollars.

A 50/50 stocks/bond portfolio doesn't have a downside of "30%-60% or more". And, so far, all crashes have been temporary. If the markets continue to go up for a few more years, you will miss out on all those gains, while your CD money lags inflation. But hopefully Bitcoin will make up for that. But it might not.

Your risk is sitting there making nothing (or losing a few percent from Bitcoin), while the markets continue to go up. And then when they do crash (and they will, but no one knows when, don't fool yourself), they still may be higher than today, so jumping back in then (assuming you can time the bottom) still won't make you money.

The BH way to recognize that we cannot predict the future. You think you can. Many others before have tried and failed.

The long-term returns from a conservative stocks and bonds portfolio has been very decent. And those long-term returns INCLUDE crashes. Read that again. The long-term decent returns (enough to allow one to grow their portfolio large enough for a comfortable retirement) INCLUDE all the crashes, and occasional decades of bad returns.

There's no need to time the market or predict anything. Just staying the course through thick and thin gets you decent returns.

You are taking a risk of not getting those decent long-term returns. Instead, you think you can do better and avoid the bad years, and only invest in the stock market during the good years. That may indeed be possible. But history has shown it to be very hard.

But I know you think you are smarter than the average bear. Good luck to you. Maybe you'll be right. But if you're wrong, there could indeed be a downside. BItcoin could plateau or crash completely, and you could be sitting in cash for 5-10 years making nothing waiting for the market to drop. That could be costly to your retirement plan.

Me, I'll just stay the course, take the good with the bad, and get rich slowly instead of buying a lottery ticket and hoping it pays off.
I've spent 100+ hours with the Simba backtesting spreadsheet and Portfolio Visualizer. My analysis runs to 1871. (Had to convert years to months and back again to test in PV.) There have been a number of periods where a stock/bond portfolio, real returns after adjusting for inflation, had catastrophic crashes... every 40 years or so. And we're due. But very few are talking about it because it hasn't happened in their lifetimes. The crashes you're happy to sit through can wrench your guts for a decade or more. Also, look at Japan. The worst I can do is a 7.5% downturn. And if bitcoin blows up forever, then I'm in an all-weather strategy with low-cost index funds. And far ahead of you in your crash.

GuyFromGeorgia
Posts: 72
Joined: Sat Dec 29, 2012 12:16 pm

Re: Bitcoin AA - Just out of Curiousity

Post by GuyFromGeorgia » Thu Sep 21, 2017 12:38 pm

30sep16 wrote:
Thu Sep 21, 2017 12:35 pm
I've spent 100+ hours with the Simba backtesting spreadsheet and Portfolio Visualizer. My analysis runs to 1871. (Had to convert years to months and back again to test in PV.) There have been a number of periods where a stock/bond portfolio, real returns after adjusting for inflation, had catastrophic crashes... every 40 years or so. And we're due. But very few are talking about it because it hasn't happened in their lifetimes. The crashes you're happy to sit through can wrench your guts for a decade or more. Also, look at Japan. The worst I can do is a 7.5% downturn. And if bitcoin blows up forever, then I'm in an all-weather strategy with low-cost index funds. And far ahead of you in your crash.
And if the stock market continues up for another 5+ years and bitcoin drops to zero you're in a worse spot than having been fully diversified. Listen, nobody on here cares that you have 7.5% invested in Bitcoin. The concern and questions come from having 92.5% in cash. That flies in the face of all Boglehead theory.

30sep16
Posts: 38
Joined: Fri Sep 30, 2016 8:52 pm

Re: Bitcoin AA - Just out of Curiousity

Post by 30sep16 » Thu Sep 21, 2017 12:43 pm

GuyFromGeorgia wrote:
Thu Sep 21, 2017 12:38 pm
30sep16 wrote:
Thu Sep 21, 2017 12:35 pm
I've spent 100+ hours with the Simba backtesting spreadsheet and Portfolio Visualizer. My analysis runs to 1871. (Had to convert years to months and back again to test in PV.) There have been a number of periods where a stock/bond portfolio, real returns after adjusting for inflation, had catastrophic crashes... every 40 years or so. And we're due. But very few are talking about it because it hasn't happened in their lifetimes. The crashes you're happy to sit through can wrench your guts for a decade or more. Also, look at Japan. The worst I can do is a 7.5% downturn. And if bitcoin blows up forever, then I'm in an all-weather strategy with low-cost index funds. And far ahead of you in your crash.
And if the stock market continues up for another 5+ years and bitcoin drops to zero you're in a worse spot than having been fully diversified. Listen, nobody on here cares that you have 7.5% invested in Bitcoin. The concern and questions come from having 92.5% in cash. That flies in the face of all Boglehead theory.
The upside for stocks is around 5% a year (Vanguard just warned about this) and the downside over those 5 years is probably 50%. The upside to Bitcoin is >1,000% and the downside is 100%. The asymmetry of that math is what this is about.

If we weren't at the end of a 30-year bull run in bonds, with interest rates at all-time lows, then I'd be in bonds. But right now the bond market has more downside than upside, like stocks.

Much of my cash is in an inherited annuity that returns a fixed 2.4% after fees. It has a cash value and can be sold in the event of inflation. You'd have to buy 5-10 year CDs to match that rate, plus you'd be locked in. My next best bet seems to be a CD or MYGA with a withdrawal option for a penalty. Can you recommend a fixed income product that's better than 2.4% upside and 0% downside? If so I'd love to know, because I've been searching.

alfaspider
Posts: 920
Joined: Wed Sep 09, 2015 4:44 pm

Re: Bitcoin AA - Just out of Curiousity

Post by alfaspider » Thu Sep 21, 2017 12:47 pm

30sep16 wrote:
Thu Sep 21, 2017 11:38 am
Nate79 wrote:
Thu Sep 21, 2017 11:36 am
Why do Bitcoin fanboys get so defensive and attack when people point out potential flaws in their strategy? It seems that every day there is a new Bitcoin fanatic on here hyping it up and then they are gone a few days later.
Because, on this website, the number of people here who sneer is much greater than the number who think and ask honest questions. As you just did.

And because so many of them are so infuriated by Bitcoin they make patently illogical statements, which are deserving of being exposed.

Like the guy who just told me my 7.5/92.5 Bitcoin/CDs portfolio is more risky than a stocks/bonds portfolio. When, by choosing 7.5, I am much more CONSERVATIVE about risk than the stocks/bonds mentality is. Especially when we are due for another crash historically speaking. Especially when we are due for another 40-year interval of stocks and bonds crashing at the SAME time, which many people are warning about. Your downside is 30-60% or more. Mine is 7.5%.
Your portfolio only works if you are correct and bitcoin continues to shoot up at extraordinary levels. Returns on that 7.5% have to be extraordinary to make up for negative real returns on the rest of your portfolio- roughly 10x the average returns of the S&P 500.

It is essentially impossible for bitcoin to continue to increase at the rate it has over the last 6 years (around 4,000% since fall 2011) over the medium and long term. The total current value of all bitcoins is something like $41 billion. If that continued, it would be worth over 16 Trillion in another 6 years (around the total dollar value of outstanding U.S. debt). Shortly thereafter, it would have to be considerably more valuable than all other money currently in circulation (around 80 Trillion)- a near impossibility. Even at 70% annual growth (about what it would take for your portfolio to beat the average BH portfolio based on historical average market returns), bitcoin would have to surpass that 80 trillion mark in under 15 years.

Long story short, your portfolio has almost no chance of working well over the long term. An index fund portfolio is not guaranteed, but has a demonstrated track record of working well over a wide variety of timeframes.

alfaspider
Posts: 920
Joined: Wed Sep 09, 2015 4:44 pm

Re: Bitcoin AA - Just out of Curiousity

Post by alfaspider » Thu Sep 21, 2017 12:50 pm

30sep16 wrote:
Thu Sep 21, 2017 12:43 pm

The upside for stocks is around 5% a year (Vanguard just warned about this) and the downside over those 5 years is probably 50%. The upside to Bitcoin is >1,000% and the downside is 100%. The asymmetry of that math is what this is about.

Under this logic, you should put that 7.5% in lottery tickets. The potential upside for a power ball ticket is several hundred million percent.

Locked