How to setup a crypto-currency "index fund" (Bitcoin, etc.)

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AndroAsc
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How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by AndroAsc » Tue Dec 26, 2017 10:04 pm

So maybe I should have bought some Bitcoin a few years back when it was $1000 :P

In all seriousness, let's say I have some play money that I can lose. What's the right way to speculate in crypto-currency?

Do you hold a diversified basket of cryto-currency, bitcoin and some other competing currency?

Do you have a fixed "investment plan", e.g. hold until I get 2X returns, liquidate capital and hold until it grows to 50X and cash out?

How do you hedge against "institutional risks" that the trading platform takes your bitcoins and runs away with your money, since this is effectively unregulated?

Lastly, any useful/serious material for speculating in Bitcoin and the likes?
Last edited by AndroAsc on Tue Dec 26, 2017 11:00 pm, edited 2 times in total.

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Taylor Larimore
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Speculating vs. Boglehead Investing

Post by Taylor Larimore » Tue Dec 26, 2017 10:18 pm

AndroAsc:
any useful/serious material for speculating in Bitcoin and the likes?
The Bogleheads Forum is not about "speculating" (gambling). It is about investing to meet financial goals.

The Boglehead Philosophy

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

AndroAsc
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Re: The right way to speculate in crypto-currency (Bitcoin, etc.)

Post by AndroAsc » Tue Dec 26, 2017 10:24 pm

There are lots of post of "play money" on this forum, so it's not really that different from some of the discussions we've had here.

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Taylor Larimore
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Re: The right way to speculate in crypto-currency (Bitcoin, etc.)

Post by Taylor Larimore » Tue Dec 26, 2017 10:27 pm

AndroAsc wrote:
Tue Dec 26, 2017 10:24 pm
There are lots of post of "play money" on this forum, so it's not really that different from some of the discussions we've had here.
AndroAsc:

You are right -- but I can think of better ways to spend "play money" -- even for those who can afford it.

Happy Holiday!
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

AndroAsc
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Re: The right way to speculate in crypto-currency (Bitcoin, etc.)

Post by AndroAsc » Tue Dec 26, 2017 10:59 pm

But seriously, as there is no crypto-currency index fund, my original question is motivated by how would we replicate one?

Based on worldcoinindex, the market cap seems to be as follows:
1) Bitcoin, 260 billion
2) Ethereum, 70 billion
3) BitcoinCash, 45 billion
4) Ripple, 45 billion
5) LiteCoin, Iota, Cardano, Dash, 15 billion each

Trading volume seems to be as follows:
1) Bitcoin, 6 billion
2) Ethereum, 1 billion
3) BitCoinCash, 1 billion
4) Ripple, 1 billion
4) Litecoin, 700 million

Based on market cap and trading volume, and to keep things "large cap", it seems that Bitcoin, Ethereum, BitcoinCash, Ripple and *maybe* LiteCoin would make up a "large cap crypto-currency" index fund. Then, it would be a matter of doing regular investments into these 4-5 crypto-currencies, but their crazy price fluctuation would make rebalancing tough.

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Re: The right way to speculate in crypto-currency (Bitcoin, etc.)

Post by GoldenFinch » Tue Dec 26, 2017 11:00 pm

1. “The right way to speculate in crypto-currency (bitcoin, etc.)” is buy it in 2011 and hold it for six years. Sell in 12/17 when it hits ~19k per bitcoin.

2. You said, “...let’s say I have some play money I can lose.” Why do you want to lose money?

AndroAsc
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Re: The right way to speculate in crypto-currency (Bitcoin, etc.)

Post by AndroAsc » Tue Dec 26, 2017 11:12 pm

GoldenFinch wrote:
Tue Dec 26, 2017 11:00 pm
1. “The right way to speculate in crypto-currency (bitcoin, etc.)” is buy it in 2011 and hold it for six years. Sell in 12/17 when it hits ~19k per bitcoin.

2. You said, “...let’s say I have some play money I can lose.” Why do you want to lose money?
I admit I am quite alarmed by how much crypto-currency has increased within the last year. I don't think any asset class has increased by 10X within a year correct?

To me, I see it as a educated bet, in my approach I have two phases:
1) Phase 1 is to cash out capital when the price grows to 2X
2) Phase 2 is hold indefinitely.

If I get get past Phase 1, I have no lost capital. So it becomes like a 95% chance of getting normal returns (like invested in stock market) or a 5% chance of going big, if the crypto-currencies take over the world.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by david1082b » Tue Dec 26, 2017 11:34 pm

Could a special cryptocurrencies forum be created and every thread about them moved there? I must admit I am sick of seeing them plastered over finance forums. They have only appeared in such great numbers after the MSM crowed about the big price gains.

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Re: The right way to speculate in crypto-currency (Bitcoin, etc.)

Post by Ditchwitch » Tue Dec 26, 2017 11:45 pm

AndroAsc wrote:
Tue Dec 26, 2017 10:59 pm
But seriously, as there is no crypto-currency index fund, my original question is motivated by how would we replicate one?

Based on worldcoinindex, the market cap seems to be as follows:
1) Bitcoin, 260 billion
2) Ethereum, 70 billion
3) BitcoinCash, 45 billion
4) Ripple, 45 billion
5) LiteCoin, Iota, Cardano, Dash, 15 billion each

Trading volume seems to be as follows:
1) Bitcoin, 6 billion
2) Ethereum, 1 billion
3) BitCoinCash, 1 billion
4) Ripple, 1 billion
4) Litecoin, 700 million

Based on market cap and trading volume, and to keep things "large cap", it seems that Bitcoin, Ethereum, BitcoinCash, Ripple and *maybe* LiteCoin would make up a "large cap crypto-currency" index fund. Then, it would be a matter of doing regular investments into these 4-5 crypto-currencies, but their crazy price fluctuation would make rebalancing tough.
I think you can create your own index by buying "fractions of Bitcoins", so if you really want why don't you go for it? I doubt that any digital currency that's backed up in "ether" rather than a hard asset or has some underlying value it brings to stake holders will be able to hold or increase it's value. In fact many suggest prices are being manipulated and we already be at the top so folks getting in might be in for a squeeze...

Personally, I see a future for blockchain technology when provided as a service to companies but that's more like an enabling technology and nothing close to a digital currency...
“Anyone who has never made a mistake has never tried anything new.” | ― Albert Einstein

columbia
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by columbia » Tue Dec 26, 2017 11:58 pm

Perhaps the board could have a crypto currency sub-forum. ;)

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by neofight » Wed Dec 27, 2017 1:43 am

columbia wrote:
Tue Dec 26, 2017 11:58 pm
Perhaps the board could have a crypto currency sub-forum. ;)
Not sure if this was meant tongue-in-cheek, but if this helps people who don't want to think about crypto-currencies avoid popping into threads to mutter "ponzi" or "tulip" repeatedly, rather than contributing to the topic at hand, that would be an improvement.

Personally, I've been involved in crypto *and* a bona-fide Boglehead in all other things since 2012, and basically stopped contributing to crypto threads since 2014 because attempting to to get actual facts out and debated kept getting drowned out by anti-crypto brigading (IMHO). It seems a lot better now - there are actual conversations - but the anti-crypto folk still reflexively interject at times. On Reddit they would get downvoted to not be a nuisance, but here this is up to mods, who aren't keeping the threads 'clean' of that sort of lower-quality posts when it comes to crypto.

Regarding this topic - a crypto 'index fund' - the challenge of balancing the fund on market cap weightings it is doesn't reflect that new coins will arise and 'take' share from existing ones. Consider BCH, for example: if one was building a cap-weighted 'fund' in July of this year, it looks like "this"[https://web.archive.org/web/20170701055 ... etcap.com/] with the top 5 by cap being:
1. BTC (40B)
2. ETH (26B)
3. XRP (10B)
4. LTC (2B)
5. ETC (1.7B)
where as of Dec 1 the picture was quite "different"[https://web.archive.org/web/20171201055 ... etcap.com/]
1. BTC (165B)
2. ETH (41B)
3. BCH (22B)
4. XRP (10B)
5. DASH (6B)

Clearly one would want to re-baseline frequently, and *also* rotate out of altcoins that had outsize gains and into coins that were lagging (the normal (BTC->Alt->BTC->Alt cycle). But these two goals are at somewhat odds with one another.

It would be interesting to hear if there are any analogs for this in other fields. For example, how do broad-market commodity ETFs handle distributing funds between things that are unlike one another (metals vs energy), or have categories of things that are substitutes (oil vs gas)?

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by WanderingDoc » Wed Dec 27, 2017 2:38 am

neofight wrote:
Wed Dec 27, 2017 1:43 am
columbia wrote:
Tue Dec 26, 2017 11:58 pm
Perhaps the board could have a crypto currency sub-forum. ;)
Not sure if this was meant tongue-in-cheek, but if this helps people who don't want to think about crypto-currencies avoid popping into threads to mutter "ponzi" or "tulip" repeatedly, rather than contributing to the topic at hand, that would be an improvement.

Personally, I've been involved in crypto *and* a bona-fide Boglehead in all other things since 2012, and basically stopped contributing to crypto threads since 2014 because attempting to to get actual facts out and debated kept getting drowned out by anti-crypto brigading (IMHO). It seems a lot better now - there are actual conversations - but the anti-crypto folk still reflexively interject at times. On Reddit they would get downvoted to not be a nuisance, but here this is up to mods, who aren't keeping the threads 'clean' of that sort of lower-quality posts when it comes to crypto.

Regarding this topic - a crypto 'index fund' - the challenge of balancing the fund on market cap weightings it is doesn't reflect that new coins will arise and 'take' share from existing ones. Consider BCH, for example: if one was building a cap-weighted 'fund' in July of this year, it looks like "this"[https://web.archive.org/web/20170701055 ... etcap.com/] with the top 5 by cap being:
1. BTC (40B)
2. ETH (26B)
3. XRP (10B)
4. LTC (2B)
5. ETC (1.7B)
where as of Dec 1 the picture was quite "different"[https://web.archive.org/web/20171201055 ... etcap.com/]
1. BTC (165B)
2. ETH (41B)
3. BCH (22B)
4. XRP (10B)
5. DASH (6B)

Clearly one would want to re-baseline frequently, and *also* rotate out of altcoins that had outsize gains and into coins that were lagging (the normal (BTC->Alt->BTC->Alt cycle). But these two goals are at somewhat odds with one another.

It would be interesting to hear if there are any analogs for this in other fields. For example, how do broad-market commodity ETFs handle distributing funds between things that are unlike one another (metals vs energy), or have categories of things that are substitutes (oil vs gas)?
I am trying to do something similar to what you suggested. However, given that only BTC, LTC, and ETH can be bought with USD, how would you handle the others on the list? Buy the appropriate amount of BTC, send to an exchange, and immediately buy the altcoin? This would get cumbersome if trying to DCA..
I'm not looking to get rich quick (crypto), I'm not looking to get rich slow (index funds).. I'm looking to get rich, for sure (real estate).

fatlever
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by fatlever » Wed Dec 27, 2017 2:54 am

AndroAsc wrote:
Tue Dec 26, 2017 10:04 pm
So maybe I should have bought some Bitcoin a few years back when it was $1000 :P

In all seriousness, let's say I have some play money that I can lose. What's the right way to speculate in crypto-currency?

Do you hold a diversified basket of cryto-currency, bitcoin and some other competing currency?

Do you have a fixed "investment plan", e.g. hold until I get 2X returns, liquidate capital and hold until it grows to 50X and cash out?

How do you hedge against "institutional risks" that the trading platform takes your bitcoins and runs away with your money, since this is effectively unregulated?

Lastly, any useful/serious material for speculating in Bitcoin and the likes?
First, what you might be looking for is something like this. Iconomi has something called a Digital Asset Array (DAA) which is an actively managed basket of cryptos which charges a 3% annual fee and an entry and exit fee. They have different DAA managed by different teams. I think the best one called BLX has some insane returns during different times this year. Like 9000% or some crazy number during a 3-month period in the June run up this year. It's not available to US investors :oops: I have a European passport which expired and thinking about renewing it just to get this.

https://steemit.com/cryptocurrency/@mcu ... -daa-token


Otherwise you would have to do it yourself which can be a lot of playing around with techs, reading, checking the trends, etc. I go with Bitcoin since I have no choice because I have some coins stuck in timelocked addresses for 3 years and can only get a 1/3 out every year. Next I go with Ethereum not becuause I am a big fan but because I feel like it can became huge if they actually get the a killer smart contract application. Just hedging. Then, I go with Monero because it's like a digital version of a Swiss Bank account - untraceable money which may one day be the defacto way of hiding assets, laundering money, buying things over the dark net or plainly just what a bank account should be. Last, I throw some money at interesting techs that I think could be big. Example, I threw a bit of money on something called RaiBlocks developed by a former Qualcom and AMD engineer -- it's a decentralized currency that has a throughput of 7000 tps and the speed of processing your transaction within 1-2 seconds. That $2K has gone to exactly 25K in less than two weeks. I don't know if this is the Bitcoin killer or if it's the flavor of the week. It's great fun though.

What I then tend to is treat crypto as a Golden Goose and cash out in chunks so trying to keep crypto 5%-10% of my portfolio so that I am totally comfortable with losing it all. I've missed out on some really big returns by doing this and I'll be honest it's kind of hard thinking if I had only held on to everything in October, I could have paid off the house, etc.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by Valuethinker » Wed Dec 27, 2017 4:34 am

AndroAsc wrote:
Tue Dec 26, 2017 10:04 pm
So maybe I should have bought some Bitcoin a few years back when it was $1000 :P

In all seriousness, let's say I have some play money that I can lose. What's the right way to speculate in crypto-currency?

Do you hold a diversified basket of cryto-currency, bitcoin and some other competing currency?

Do you have a fixed "investment plan", e.g. hold until I get 2X returns, liquidate capital and hold until it grows to 50X and cash out?

How do you hedge against "institutional risks" that the trading platform takes your bitcoins and runs away with your money, since this is effectively unregulated?

Lastly, any useful/serious material for speculating in Bitcoin and the likes?
Buy several C currencies. Sit and hold. Take some gains off the table.

As you would speculate on any currency.

smesman
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by smesman » Wed Dec 27, 2017 7:04 am

Here is another recent topic: viewtopic.php?t=221744
neofight wrote:
Wed Dec 27, 2017 1:43 am
Personally, I've been involved in crypto *and* a bona-fide Boglehead in all other things since 2012, and basically stopped contributing to crypto threads since 2014 because attempting to to get actual facts out and debated kept getting drowned out by anti-crypto brigading (IMHO). It seems a lot better now - there are actual conversations - but the anti-crypto folk still reflexively interject at times. On Reddit they would get downvoted to not be a nuisance, but here this is up to mods, who aren't keeping the threads 'clean' of that sort of lower-quality posts when it comes to crypto.
I agree that some "anti-"crypto posts are low quality, just as some crypto posts are low quality. (E.g. If posts are just stating a personal opinion or appeal to authority with no facts or rationale)

But I think the major points many crypto posts are missing, is that this is an investment forum with the philosophies of Jack Bogle as mentioned by Taylor. Posts that are not about this are basically off-topic. This site is not about "making money" in general, which might include topics such as salary negotiation or churning or speculation or whatever.

So if someone starts a crypto topic, isn't it fair to call into question whether it is an investment (and thus on-topic with this site)? Just like starting a topic on a crypto forum like "I believe crypto will crash, what are the best index funds to invest into and diversify my portfolio?" is off-topic there.

AndroAsc
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by AndroAsc » Wed Dec 27, 2017 9:33 am

neofight wrote:
Wed Dec 27, 2017 1:43 am
columbia wrote:
Tue Dec 26, 2017 11:58 pm
Perhaps the board could have a crypto currency sub-forum. ;)
Not sure if this was meant tongue-in-cheek, but if this helps people who don't want to think about crypto-currencies avoid popping into threads to mutter "ponzi" or "tulip" repeatedly, rather than contributing to the topic at hand, that would be an improvement.

Personally, I've been involved in crypto *and* a bona-fide Boglehead in all other things since 2012, and basically stopped contributing to crypto threads since 2014 because attempting to to get actual facts out and debated kept getting drowned out by anti-crypto brigading (IMHO). It seems a lot better now - there are actual conversations - but the anti-crypto folk still reflexively interject at times. On Reddit they would get downvoted to not be a nuisance, but here this is up to mods, who aren't keeping the threads 'clean' of that sort of lower-quality posts when it comes to crypto.

Regarding this topic - a crypto 'index fund' - the challenge of balancing the fund on market cap weightings it is doesn't reflect that new coins will arise and 'take' share from existing ones. Consider BCH, for example: if one was building a cap-weighted 'fund' in July of this year, it looks like "this"[https://web.archive.org/web/20170701055 ... etcap.com/] with the top 5 by cap being:
1. BTC (40B)
2. ETH (26B)
3. XRP (10B)
4. LTC (2B)
5. ETC (1.7B)
where as of Dec 1 the picture was quite "different"[https://web.archive.org/web/20171201055 ... etcap.com/]
1. BTC (165B)
2. ETH (41B)
3. BCH (22B)
4. XRP (10B)
5. DASH (6B)

Clearly one would want to re-baseline frequently, and *also* rotate out of altcoins that had outsize gains and into coins that were lagging (the normal (BTC->Alt->BTC->Alt cycle). But these two goals are at somewhat odds with one another.

It would be interesting to hear if there are any analogs for this in other fields. For example, how do broad-market commodity ETFs handle distributing funds between things that are unlike one another (metals vs energy), or have categories of things that are substitutes (oil vs gas)?
Thanks for the quality post. You brought up a point that I wasn't aware of, which is how quickly the constituents of a crypto-index changes. Although I would say that BCH is a fork of BTC is somewhat parallel to a megacorp splitting up into 2 corps, so the top 2 holdings remain the same. It is the alt-coins that seems to be more volatile index wise.

AndroAsc
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by AndroAsc » Wed Dec 27, 2017 9:35 am

smesman wrote:
Wed Dec 27, 2017 7:04 am
Here is another recent topic: viewtopic.php?t=221744
neofight wrote:
Wed Dec 27, 2017 1:43 am
Personally, I've been involved in crypto *and* a bona-fide Boglehead in all other things since 2012, and basically stopped contributing to crypto threads since 2014 because attempting to to get actual facts out and debated kept getting drowned out by anti-crypto brigading (IMHO). It seems a lot better now - there are actual conversations - but the anti-crypto folk still reflexively interject at times. On Reddit they would get downvoted to not be a nuisance, but here this is up to mods, who aren't keeping the threads 'clean' of that sort of lower-quality posts when it comes to crypto.
I agree that some "anti-"crypto posts are low quality, just as some crypto posts are low quality. (E.g. If posts are just stating a personal opinion or appeal to authority with no facts or rationale)

But I think the major points many crypto posts are missing, is that this is an investment forum with the philosophies of Jack Bogle as mentioned by Taylor. Posts that are not about this are basically off-topic. This site is not about "making money" in general, which might include topics such as salary negotiation or churning or speculation or whatever.

So if someone starts a crypto topic, isn't it fair to call into question whether it is an investment (and thus on-topic with this site)? Just like starting a topic on a crypto forum like "I believe crypto will crash, what are the best index funds to invest into and diversify my portfolio?" is off-topic there.
I'll just say that why do we have discussion on gold, commodities or alternative asset class then? I lump crypto in the same categories, albeit an emerging/riskier/untested class. There is no intrinsic reason why gold should hold value, just like like crypto.

AndroAsc
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by AndroAsc » Wed Dec 27, 2017 9:35 am

Is there any data that tracks the correlation between the various crypto currencies?

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by vitaflo » Wed Dec 27, 2017 9:55 am

neofight wrote:
Wed Dec 27, 2017 1:43 am
Personally, I've been involved in crypto *and* a bona-fide Boglehead in all other things since 2012, and basically stopped contributing to crypto threads since 2014 because attempting to to get actual facts out and debated kept getting drowned out by anti-crypto brigading (IMHO). It seems a lot better now - there are actual conversations - but the anti-crypto folk still reflexively interject at times. On Reddit they would get downvoted to not be a nuisance, but here this is up to mods, who aren't keeping the threads 'clean' of that sort of lower-quality posts when it comes to crypto.
While I agree on some of the snarkiness, you can't be surprised. This is a forum about managing risk, which is why we talk about index funds, AA's and staying the course. When someone talks about investing all their money into Tesla stock because they're the "future", they get met with similar comments as those who want to do the same in crypto. Bogleheads don't like unnecessary risk and volatility, and crytpo is the epitome of that right now.

As for an index fund of crypto-currency, it seems a little strange to leave out fiat currency in the index. Most people peg the value of any crypto on it's exchange rate to fiat. Given the wild volatility I would expect adding fiat currency to the index to be a ballast to the cyrpto volatility. Now one might say, well, fiat is so much larger than crypto that any change in crypto would end up not moving the needle at all in that scenario. But if I wanted a real market weight index of currency, I would probably want to place my bets in all the buckets, not just one sector. Just like a normal index fund.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by smesman » Wed Dec 27, 2017 10:16 am

AndroAsc wrote:
Wed Dec 27, 2017 9:35 am
I'll just say that why do we have discussion on gold, commodities or alternative asset class then? I lump crypto in the same categories, albeit an emerging/riskier/untested class. There is no intrinsic reason why gold should hold value, just like like crypto.
Yes, I think most bogleheads are also against holding gold or commodities. Alternative asset classes may be okay if they are expected to produce income for the average investor (e.g. something like a lending club or renting out properties.)

The thing is that for the average investor (over a large time period) there is no reason for any commodity to increase in value, after inflation. This makes sense because the commodities themselves are not producing anything or producing value for the world, they are just owned.

Commodities may be better in the face of inflation than cash, but there are alternatives such as TIPS that are more reliable. They may even provide a hedge (such as gold in certain time periods) or they may utterly fail (e.g. in some kind of crisis where everyone wants to sell their gold at the same time).

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by GibsonL6s » Wed Dec 27, 2017 12:12 pm

I bought a bit of GBTC the ETN that trades through Schwab as I don't feel comfortable giving credit card or banking info to Coinbase and the like. I was joking with my co-worker that I was buying an ETN which is a risky security which trades at a premium to the underlying asset which of course has no real value, so what could go wrong?

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by yangtui » Wed Dec 27, 2017 12:45 pm

Spend some time looking for the next Bitcoin and invest your play money or buy lottery tickets. The cat is already out of the bag, buying crypto now is a good way to make the buyers before you money.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by chevca » Wed Dec 27, 2017 1:03 pm

AndroAsc wrote:
Tue Dec 26, 2017 10:04 pm
In all seriousness, let's say I have some play money that I can lose. What's the right way to speculate in crypto-currency?
If this is the case, why worry about indexing? Go for broke, pick one, and hope it's the big winner.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by nisiprius » Wed Dec 27, 2017 1:59 pm

The theory behind indexing only really makes sense if you believe that the assets you are indexing are part of a single, coherent, frictionless, liquid market in which everything equilibrates quickly and rational actors can quickly exchange one set of assets for another. That's really true of the U.S. stock market--so much so that it is reasonable to talk of "the" U.S. stock market even though at this moment it is really, I don't know how many exchange there are... a dozen? twenty?

Even within the Bitcoin market itself, there are crazy differences between the prices quoted on different exchanges, and the stuff is so volatile that every morning I wake up to things like this on Google News:

Image

All I can say is "that shouldn't happen."

I doubt that even Bitcoin and Bitcoin Cash are freely exchangeable at well-defined prices that are within fractions of a cent of each other between different exchanges. Bitcoin is either so volatile, or has a market price that is so poorly defined, or both, that Valve gave up on accepting it as payment for online multiplayer games because there were too many problems with the price changing before a transaction could even be completed.

Bogle's idea is to get your fair share of the earnings of American business (or global business), and to avoid speculation by holding the whole market--and thus being on both sides of every trade, and completely indifferent to what speculators do.

Whatever you can say about cryptocurrencies, right now they are speculative, and trying to make an "index fund" out of them isn't going to magically change their nature. It doesn't make any more sense than trying to make "a state lottery index fund" (buy lottery tickets in every state lottery, weighted by the dollar size of the lottery), or "a casino index fund" (have a team of a twenty people pool their money, divide it equally twenty ways, fan out along the Las Vegas strip and each person spend a night gambling at a different casino, pool whatever remains of their money at the end and re-divide it in the same proportions as the initial contributions). Or a Thomas Kinkade, Painter of Light® Limited Edition Index Fund, or...
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by Ditchwitch » Wed Dec 27, 2017 2:23 pm

nisiprius wrote:
Wed Dec 27, 2017 1:59 pm
The theory behind indexing only really makes sense if you believe that the assets you are indexing are part of a single, coherent, frictionless, liquid market in which everything equilibrates quickly and rational actors can quickly exchange one set of assets for another. That's really true of the U.S. stock market--so much so that it is reasonable to talk of "the" U.S. stock market even though at this moment it is really, I don't know how many exchange there are... a dozen? twenty?

Even within the Bitcoin market itself, there are crazy differences between the prices quoted on different exchanges, and the stuff is so volatile that every morning I wake up to things like this on Google News:

Image

All I can say is "that shouldn't happen."

I doubt that even Bitcoin and Bitcoin Cash are freely exchangeable at well-defined prices that are within fractions of a cent of each other between different exchanges. Bitcoin is either so volatile, or has a market price that is so poorly defined, or both, that Valve gave up on accepting it as payment for online multiplayer games because there were too many problems with the price changing before a transaction could even be completed.

Bogle's idea is to get your fair share of the earnings of American business (or global business), and to avoid speculation by holding the whole market--and thus being on both sides of every trade, and completely indifferent to what speculators do.

Whatever you can say about cryptocurrencies, right now they are speculative, and trying to make an "index fund" out of them isn't going to magically change their nature. It doesn't make any more sense than trying to make "a state lottery index fund" (buy lottery tickets in every state lottery, weighted by the dollar size of the lottery), or "a casino index fund" (have a team of a twenty people pool their money, divide it equally twenty ways, fan out along the Las Vegas strip and each person spend a night gambling at a different casino, pool whatever remains of their money at the end and re-divide it in the same proportions as the initial contributions). Or a Thomas Kinkade, Painter of Light® Limited Edition Index Fund, or...
...a related question is whether blockchain technology companies can be growth investments on a scale that compares to the digital currencies and the answer to that is probably also no. However a sector index fund tailored to capturing growth could still be of significant interest with less growth maybe -50 to +300% over a year and maybe not several 1000% though. The posters here seem all to want the +1000%...so maybe there's just too litte interest here to pick a technology sector fund based on blockchain as a play. It sure seems more like a Vegas gambling situation with some play money for most. :greedy :greedy
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by jb1 » Wed Dec 27, 2017 2:53 pm

OP lol just forget it, youre asking on the wrong forum. I have learned a lot from here, but no one takes risks here. Ever. Biggest risk they take is driving to a gas station where they dont know the price.

Im 27. I dont want to wait until retirement to touch my money. I dont want to work 9-5 forever.

Imagine just imagine putting 1k in Bitcoin, Litecoin, and Ethereum (coins ranked top 3) 1 year ago. Thats well over 700k now. Is 3k a lot of money to be fair? Honestly no. Youd be sitting pretty. BHs would never recommend that.

Im not going to knock a 3 fund ( I have a 2 find now as I have ditched bonds, in fact took out my bond money and used it for crypto and have made way more in 6 months than I did in 4 years investing). Point is, you wont hear anything positive about "gambling" here. Your $100 in crypto could be thousands in 3 months. Your $100 in stocks and bonds will be thousands after a few years. What do you want?

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by WanderingDoc » Wed Dec 27, 2017 3:44 pm

jb1 wrote:
Wed Dec 27, 2017 2:53 pm
OP lol just forget it, youre asking on the wrong forum. I have learned a lot from here, but no one takes risks here. Ever. Biggest risk they take is driving to a gas station where they dont know the price.

Im 27. I dont want to wait until retirement to touch my money. I dont want to work 9-5 forever.

Imagine just imagine putting 1k in Bitcoin, Litecoin, and Ethereum (coins ranked top 3) 1 year ago. Thats well over 700k now. Is 3k a lot of money to be fair? Honestly no. Youd be sitting pretty. BHs would never recommend that.

Im not going to knock a 3 fund ( I have a 2 find now as I have ditched bonds, in fact took out my bond money and used it for crypto and have made way more in 6 months than I did in 4 years investing). Point is, you wont hear anything positive about "gambling" here. Your $100 in crypto could be thousands in 3 months. Your $100 in stocks and bonds will be thousands after a few years. What do you want?
You don't want to wait until retirement to touch your money. Thats me in a nutshell and why I invest in real estate.

I'm in my early 30s and collect enough passive monthly income from real estate property and partnerships to not have to work today. I did this in less than 4 years. You have to realize, real estate has the best tax treatment out of any asset period. It is typical to legally pay no tax on rental real estate.

Crypto (especially with the new laws effective in a few days for 2018) will have the worst tax consequences. Every trade will be taxable. And all your gains will be taxed at short term capital gains rates. No thanks.

I invested a bit in crypto, but due to it not producing any cash flow, and the awful tax treatment, it won't be more than 1% of my portfolio.
I'm not looking to get rich quick (crypto), I'm not looking to get rich slow (index funds).. I'm looking to get rich, for sure (real estate).

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by jb1 » Wed Dec 27, 2017 3:56 pm

WanderingDoc wrote:
Wed Dec 27, 2017 3:44 pm
jb1 wrote:
Wed Dec 27, 2017 2:53 pm
OP lol just forget it, youre asking on the wrong forum. I have learned a lot from here, but no one takes risks here. Ever. Biggest risk they take is driving to a gas station where they dont know the price.

Im 27. I dont want to wait until retirement to touch my money. I dont want to work 9-5 forever.

Imagine just imagine putting 1k in Bitcoin, Litecoin, and Ethereum (coins ranked top 3) 1 year ago. Thats well over 700k now. Is 3k a lot of money to be fair? Honestly no. Youd be sitting pretty. BHs would never recommend that.

Im not going to knock a 3 fund ( I have a 2 find now as I have ditched bonds, in fact took out my bond money and used it for crypto and have made way more in 6 months than I did in 4 years investing). Point is, you wont hear anything positive about "gambling" here. Your $100 in crypto could be thousands in 3 months. Your $100 in stocks and bonds will be thousands after a few years. What do you want?
You don't want to wait until retirement to touch your money. Thats me in a nutshell and why I invest in real estate.

I'm in my early 30s and collect enough passive monthly income from real estate property and partnerships to not have to work today. I did this in less than 4 years. You have to realize, real estate has the best tax treatment out of any asset period. It is typical to legally pay no tax on rental real estate.

Crypto (especially with the new laws effective in a few days for 2018) will have the worst tax consequences. Every trade will be taxable. And all your gains will be taxed at short term capital gains rates. No thanks.

I invested a bit in crypto, but due to it not producing any cash flow, and the awful tax treatment, it won't be more than 1% of my portfolio.
Are you a mind reader? Long term I want to do buy and hold real estate. BHs of course are against that also. I made a thread 2 days ago about taking out my Roth money and using it for a DP on a house. I also have 15k saved up, but I want to get at least 2 properties by the time im 30 (27 now). Was a big no no here.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by Money Market » Wed Dec 27, 2017 4:01 pm

There are several indexes available, but I found the Smith+Crown index to be the best because their criteria is the strictest. It's sort of like a DJIA for crypto commodities.

Personality, I buy cryptos for the same reason people buy lottery tickets. I like the technology and the potential, and it's quite fun to discuss with colleagues (I work in software.)

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by MindBogler » Wed Dec 27, 2017 4:46 pm

jb1 wrote:
Wed Dec 27, 2017 3:56 pm
Are you a mind reader? Long term I want to do buy and hold real estate. BHs of course are against that also. I made a thread 2 days ago about taking out my Roth money and using it for a DP on a house. I also have 15k saved up, but I want to get at least 2 properties by the time im 30 (27 now). Was a big no no here.
It's not that its a big no-no here to invest in real estate. Plenty of members here do, some speak fondly of it and others do not. What is a big no-no is being young and idealistic; thinking real estate is "a sure bet" or that it won't require significant effort to find and retain solid renters, buy properties with the right cap rates, and pay for upkeep, maintenance and vacancy.

The problem I see with the crypto crowd, like so many other herds before it, is the desire to "get rich quick" because this is "the next big thing!" I'll tell you what was the next big thing once, MCI WorldCom, et. al. Do you remember how that turned out? You were about 10 years old at the time. The fact is that a few people will get rich "investing" in crypto currencies. Most people will lose their shirt. The way to get rich is slowly and deliberately. The principles espoused on this forum, if followed diligently, will have you well on your way assuming you have something else which this forum cannot provide for you: patience.

Do not liquidate your Roth IRA to invest in real estate. This would be a terrible move. If you want to invest in real estate, leave your Roth alone. Save up money and then invest in real estate. Life isn't a get rich quick scheme.

/rant off

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Re: Speculating vs. Boglehead Investing

Post by TD2626 » Wed Dec 27, 2017 5:44 pm

neofight wrote:
Wed Dec 27, 2017 1:43 am
columbia wrote:
Tue Dec 26, 2017 11:58 pm
Perhaps the board could have a crypto currency sub-forum. ;)
Not sure if this was meant tongue-in-cheek, but if this helps people who don't want to think about crypto-currencies avoid popping into threads to mutter "ponzi" or "tulip" repeatedly, rather than contributing to the topic at hand, that would be an improvement.
I don't think that people are failing to contribute by muttering "ponzi" or "tulip". There are very substantial, very valid reasons to think Bitcoin could easily be a tulip-like bubble. An article published as recently as yesterday quoted a state securities regulator as comparing this to tulip bulbs. (https://www.theatlantic.com/business/ar ... le/549155/)

There appears to be a consensus of many responsible experts that cryptocurrency is not a responsible long term investment. It is thought to be speculative gambling:
Taylor Larimore wrote:
Tue Dec 26, 2017 10:18 pm
AndroAsc:
any useful/serious material for speculating in Bitcoin and the likes?
The Bogleheads Forum is not about "speculating" (gambling). It is about investing to meet financial goals.

The wiki (https://www.bogleheads.org/wiki/Bitcoin) says:
Bitcoin is strongly not recommended for use in an investment portfolio. Only invest in bitcoin if you can afford a total loss. Please ask in the forum for guidance.


Yes, it is true that cryptocurrencies could see gains, for example if there is widespread adoption - but they may instead be regulated out of existence at any time. Even if there is widespread adoption, no one knows which ones would be adopted, or how many years into the future that adoption would occur. Further, there is no long history of centuries of good performance like there is for stocks or bonds in order to be able to characterize long-term performance data. Can anyone really make a good guess as to what the cryptocurrency "index fund" will have in terms of CAGR and Standard Deviation over the next 30 or 50 years? (Responsible investors invest for the long haul).

When someone asks a question that basically reduces to "How do I work through the technical details of (insert serious investment mistake)" it isn't bad to respond with "You probably shouldn't do that" instead of directly answering the question -- indeed, that's common on this board.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by aristotelian » Wed Dec 27, 2017 5:53 pm

yangtui wrote:
Wed Dec 27, 2017 12:45 pm
Spend some time looking for the next Bitcoin and invest your play money or buy lottery tickets. The cat is already out of the bag, buying crypto now is a good way to make the buyers before you money.
Are you saying I should overweight "alt coins"?

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by WanderingDoc » Wed Dec 27, 2017 5:58 pm

MindBogler wrote:
Wed Dec 27, 2017 4:46 pm
jb1 wrote:
Wed Dec 27, 2017 3:56 pm
Are you a mind reader? Long term I want to do buy and hold real estate. BHs of course are against that also. I made a thread 2 days ago about taking out my Roth money and using it for a DP on a house. I also have 15k saved up, but I want to get at least 2 properties by the time im 30 (27 now). Was a big no no here.
It's not that its a big no-no here to invest in real estate. Plenty of members here do, some speak fondly of it and others do not. What is a big no-no is being young and idealistic; thinking real estate is "a sure bet" or that it won't require significant effort to find and retain solid renters, buy properties with the right cap rates, and pay for upkeep, maintenance and vacancy.

The problem I see with the crypto crowd, like so many other herds before it, is the desire to "get rich quick" because this is "the next big thing!" I'll tell you what was the next big thing once, MCI WorldCom, et. al. Do you remember how that turned out? You were about 10 years old at the time. The fact is that a few people will get rich "investing" in crypto currencies. Most people will lose their shirt. The way to get rich is slowly and deliberately. The principles espoused on this forum, if followed diligently, will have you well on your way assuming you have something else which this forum cannot provide for you: patience.

Do not liquidate your Roth IRA to invest in real estate. This would be a terrible move. If you want to invest in real estate, leave your Roth alone. Save up money and then invest in real estate. Life isn't a get rich quick scheme.

/rant off
I don't want to get rick quick. I want to get rich for sure. Hence real estate. Not everyone wants to work full time for 30-40 years in a job they may or may not like. jb1 wants income in his mailbox that he can use now, not when he is 65. Nothing wrong with that IMO.

Personally, I have moved a small position into equities through a 401k and Roth IRA, but that's because real estate has already made me financially free. Now doing it as a way to hedge and diversify.

What is wrong with getting rich in 3-5 years? Its not a scheme if you do it ethically and legally. Also, one can convert their Roth IRA into a self-directed Roth IRA which invests in rental property (as I have). Monthly cash flow is just recycled back into the Roth IRA. Although I still like regular rentals better due to the freedom they provide.
I'm not looking to get rich quick (crypto), I'm not looking to get rich slow (index funds).. I'm looking to get rich, for sure (real estate).

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by MindBogler » Wed Dec 27, 2017 6:07 pm

WanderingDoc wrote:
Wed Dec 27, 2017 5:58 pm
I don't want to get rick quick. I want to get rich for sure. Hence real estate. Not everyone wants to work full time for 30-40 years in a job they may or may not like. jb1 wants income in his mailbox that he can use now, not when he is 65. Nothing wrong with that IMO.

Personally, I have moved a small position into equities through a 401k and Roth IRA, but that's because real estate has already made me financially free. Now doing it as a way to hedge and diversify.

What is wrong with getting rich in 3-5 years? Its not a scheme if you do it ethically and legally. Also, one can convert their Roth IRA into a self-directed Roth IRA which invests in rental property (as I have). Monthly cash flow is just recycled back into the Roth IRA. Although I still like regular rentals better due to the freedom they provide.
You'll get rich for sure by investing in index funds as well. There is nothing wrong with real estate, specifically, but too many people get in over their heads in real estate whether through ignorance, hubris or some combination of the two. Let's face it, nothing sounds wrong with getting rich in 3-5 years, but most people aren't going to succeed in doing so. If we're playing a game of statistics, investing in the market is a lot more likely to succeed over the long term than hand picking a handful of rental properties. There is nothing wrong with doing both and perhaps you'll be a wizard at it. Most will not be so lucky.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by WanderingDoc » Wed Dec 27, 2017 6:23 pm

MindBogler wrote:
Wed Dec 27, 2017 6:07 pm
WanderingDoc wrote:
Wed Dec 27, 2017 5:58 pm
I don't want to get rick quick. I want to get rich for sure. Hence real estate. Not everyone wants to work full time for 30-40 years in a job they may or may not like. jb1 wants income in his mailbox that he can use now, not when he is 65. Nothing wrong with that IMO.

Personally, I have moved a small position into equities through a 401k and Roth IRA, but that's because real estate has already made me financially free. Now doing it as a way to hedge and diversify.

What is wrong with getting rich in 3-5 years? Its not a scheme if you do it ethically and legally. Also, one can convert their Roth IRA into a self-directed Roth IRA which invests in rental property (as I have). Monthly cash flow is just recycled back into the Roth IRA. Although I still like regular rentals better due to the freedom they provide.
You'll get rich for sure by investing in index funds as well. There is nothing wrong with real estate, specifically, but too many people get in over their heads in real estate whether through ignorance, hubris or some combination of the two. Let's face it, nothing sounds wrong with getting rich in 3-5 years, but most people aren't going to succeed in doing so. If we're playing a game of statistics, investing in the market is a lot more likely to succeed over the long term than hand picking a handful of rental properties. There is nothing wrong with doing both and perhaps you'll be a wizard at it. Most will not be so lucky.
Not taking calculated risks and chances (not just financial) early in life, leads to a lot of regret later in life. Just ask all of those who didn't fulfill their dreams in life. Didn't start that dream business, didn't take that motorcycle ride through Asia, didn't try something new, didn't move to their dream destination, didn't immerse themselves in their dream language or culture, etc.

I agree with you. Index funds will make you wealthy eventually, if you are alive, healthy enough, vibrant enough, and not jaded enough to enjoy that wealth. People spend less and less the older they get. This is the statistical fact.

Not having access to your own savings for decades is not my idea of wealthy. Not bashing index funds, but this is just the nitty gritty reality. YMMV :wink:
I'm not looking to get rich quick (crypto), I'm not looking to get rich slow (index funds).. I'm looking to get rich, for sure (real estate).

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by nisiprius » Wed Dec 27, 2017 6:37 pm

WanderingDoc wrote:
Wed Dec 27, 2017 5:58 pm
...I don't want to get rick quick. I want to get rich for sure...
Maybe...
Hence real estate.
In Booth Tarkington's novel, The Magnificent Ambersons, we read about a real estate development in the beginning:
Major Amberson bought two hundred acres of land at the end of National Avenue; and through this tract he built broad streets and cross-streets; paved them with cedar block, and curbed them with stone.... Most of the forest trees had been left to flourish still, and, at some distance, or by moonlight, the place was in truth beautiful; but the ardent citizen, loving to see his city grow, wanted neither distance nor moonlight. He had not seen Versailles, but, standing before the Fountain of Neptune in Amberson Addition, at bright noon, and quoting the favourite comparison of the local newspapers, he declared Versailles outdone. All this Art showed a profit from the start, for the lots sold well and there was something like a rush to build in the new Addition.
...and later:
His eyes rested a second or two longer upon the Fountain of Neptune, not an enlivening sight even in the shielding haze of autumn twilight. For more than a year no water had run in the fountain: the connections had been broken, and the Major was evasive about restorations, even when reminded by his grandson that a dry fountain is as gay as a dry fish. Soot streaks and a thousand pits gave Neptune the distinction, at least, of leprosy, which the mermaids associated with him had been consistent in catching; and his trident had been so deeply affected as to drop its prongs. Altogether, this heavy work of heavy art, smoked dry, hugely scabbed, cracked, and crumbling, was a dismal sight to the distracted eye of George Amberson Minafer, and its present condition of craziness may have added a mite to his own.
Real estate is not a sure thing.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by jb1 » Wed Dec 27, 2017 6:43 pm

WanderingDoc wrote:
Wed Dec 27, 2017 6:23 pm

Not taking calculated risks and chances (not just financial) early in life, leads to a lot of regret later in life. Just ask all of those who didn't fulfill their dreams in life. Didn't start that dream business, didn't take that motorcycle ride through Asia, didn't try something new, didn't move to their dream destination, didn't immerse themselves in their dream language or culture, etc.

I agree with you. Index funds will make you wealthy eventually, if you are alive, healthy enough, vibrant enough, and not jaded enough to enjoy that wealth. People spend less and less the older they get. This is the statistical fact.

Not having access to your own savings for decades is not my idea of wealthy. Not bashing index funds, but this is just the nitty gritty reality. YMMV :wink:
Im with ya wanderingdoc. Goal is to get my first property this year and house hack it, rinse, repeat. At the end of the day, people need a place to live. Could be a bear market, worse financial crisis ever, people still need a place to live and the USA is becoming more and more of a renter country. I used to have REITs and realized how poor they were. All that volatility for a 3% dividend? Call me naive, but at age 27, Im gonna do whatever I can to be financially free by 37.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by MindBogler » Wed Dec 27, 2017 7:00 pm

WanderingDoc wrote:
Wed Dec 27, 2017 6:23 pm
Not having access to your own savings for decades is not my idea of wealthy. Not bashing index funds, but this is just the nitty gritty reality. YMMV :wink:
In order to grow your business you're going to have to lever up and reinvest in new properties by taking on additional leverage. If having access to cash flow from real estate is your idea of wealthy, so be it, but it'll be many years for a normal investor starting from zero in real estate to have ready access to significant cash flow and I'd argue that the chance of failure is much higher. I knew plenty of real estate investors in my personal circles around 2003 - 2006. I don't know a single one that survived the crash and some lost their shirts. That's my anecdote for the day.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by MindBogler » Wed Dec 27, 2017 7:07 pm

jb1 wrote:
Wed Dec 27, 2017 6:43 pm
Im with ya wanderingdoc. Goal is to get my first property this year and house hack it, rinse, repeat. At the end of the day, people need a place to live. Could be a bear market, worse financial crisis ever, people still need a place to live and the USA is becoming more and more of a renter country. I used to have REITs and realized how poor they were. All that volatility for a 3% dividend? Call me naive, but at age 27, Im gonna do whatever I can to be financially free by 37.
You should start a thread and keep it updated yearly on your progress. There is nothing wrong with big ideas but why not hedge your bet with some boring investing on the side? I think if you want to be financially free by 37 (10 years), you should look into dramatically increasing your savings rate like they espouse over on MMM. It works, of course, but you will need a ridiculous savings rate and/or large income and modest spending. The MMM method is a mathematical process that works. There is some real estate investing going on over there as well. The chances of you hitting it big in real estate and making providing enough cash flow within 10 years to kick up your feet and spend the winters in Tahiti are slim to none. In 20 - 30 years? Sure, I think you can make it big in real estate with discipline and, of course, patience.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by telemark » Wed Dec 27, 2017 7:58 pm

The purpose of indexing is to capture the underlying return of a market at a low cost, and it relies on that market being reasonably efficient. The market in cryptocurrencies does not appear to be particularly efficient, and it's not clear that it has any underlying return at all. But VTSMX contains, or will contain, all the large public companies successfully incorporating blockchain into their business practices, and that's close enough for me.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by RRAAYY3 » Wed Dec 27, 2017 8:56 pm

Set it on fire and look at the pretty colors

I’m so sick of this “crypto currency” bs

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by sambb » Wed Dec 27, 2017 9:07 pm

its interesting how much venom there is for crypto - one of the best investments of the year. I know plenty of people who have made great money in just the last few months. Most are out. What a nice event to have some quick money and follow the trend. Is it bogleheadish? No. But Enron was part of the S&P and plenty of people lost money on it - a stock in an index, which was fraud. So, just because one is an indexer, doesnt mean one cant have fraudulent investments. Personally, im not in crypto any longer, but i wish i had put more in, and for those that made money - congratulations. For those who say "dont mix strategy with outcome" (whatever that means?) - my strategy is to have an outcome that makes money. I wish i had made more on crypto to achieve my outcome. Sure crypto may crash, it has before, so what. People who made their money wont care either. For the OP - indexing crypto may be by investing in the big players or blockchain, but its so volatile and moves so quickly. Probably due for some bad times before they become good again. I remember when Ballmer laughed at the iphone - it is possible for the herd to be wrong.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by abuss368 » Wed Dec 27, 2017 9:50 pm

I can honestly say I still got get it regarding the cyber currency. Yes, I have learned some from reading and I recently watching a Bitcoin film on Netflix. This feels like a bubble all the way around that may quite frankly end badly.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by Valuethinker » Thu Dec 28, 2017 12:25 pm

MindBogler wrote:
Wed Dec 27, 2017 4:46 pm
jb1 wrote:
Wed Dec 27, 2017 3:56 pm
Are you a mind reader? Long term I want to do buy and hold real estate. BHs of course are against that also. I made a thread 2 days ago about taking out my Roth money and using it for a DP on a house. I also have 15k saved up, but I want to get at least 2 properties by the time im 30 (27 now). Was a big no no here.
It's not that its a big no-no here to invest in real estate. Plenty of members here do, some speak fondly of it and others do not. What is a big no-no is being young and idealistic; thinking real estate is "a sure bet" or that it won't require significant effort to find and retain solid renters, buy properties with the right cap rates, and pay for upkeep, maintenance and vacancy.

The problem I see with the crypto crowd, like so many other herds before it, is the desire to "get rich quick" because this is "the next big thing!" I'll tell you what was the next big thing once, MCI WorldCom, et. al. Do you remember how that turned out? You were about 10 years old at the time. The fact is that a few people will get rich "investing" in crypto currencies. Most people will lose their shirt. The way to get rich is slowly and deliberately. The principles espoused on this forum, if followed diligently, will have you well on your way assuming you have something else which this forum cannot provide for you: patience.

Do not liquidate your Roth IRA to invest in real estate. This would be a terrible move. If you want to invest in real estate, leave your Roth alone. Save up money and then invest in real estate. Life isn't a get rich quick scheme.

/rant off
Residential rental real estate is a great way to get rich slowly. Over time, rents have tended to rise with inflation, and that, plus a decent starting yield (cap rate i.e. net of expenses) well above cost of borrowing, means you can make money.

The reason being OPM - Other Peoples' Money. And no margin calls (unless you have commercial loan covenants). As long as you have enough liquidity to pay interest & principal as and when due, then you can hold on even if the value of the asset falls below its mortgage (the OPM).

It's also a business. Meaning real, hard, sweaty work. You can get lucky and find a good manager (but you'll be paying 10% of rental income to them? And most managers in that industry are, unless you have scale, pretty awful, let's face it). More likely for your first few years, you will have to do it yourself-- tenant calls in the middle of the night due to blocked toilet, or heating/ AC out, flooded kitchen etc. Tenants skipping out without paying. Tenants messy personal lives impacting on same.

You have to be able to drive to the property, you have to be able to resolve issues (or have people who can). You have to not be away for a month at a client site, with no easy way of flying back-- you have to have the sort of career that lets you deal with these problems after 5 pm.

And it's not a diversified risk in the way a REIT is, or a stock market portfolio. The wrong unit, the wrong building, the wrong neighborhood, the wrong city ... they can all hit you. So too can Code violations and what happens to you, the property owner/ landlord, if someone dies? (sorry for that one - my neighbor is working on just such a case, this morning).

I think as long as one is cognizant of all the above risk factors, then, generally, we are supportive, here.

WanderingDoc
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by WanderingDoc » Thu Dec 28, 2017 3:15 pm

MindBogler wrote:
Wed Dec 27, 2017 7:00 pm
WanderingDoc wrote:
Wed Dec 27, 2017 6:23 pm
Not having access to your own savings for decades is not my idea of wealthy. Not bashing index funds, but this is just the nitty gritty reality. YMMV :wink:
In order to grow your business you're going to have to lever up and reinvest in new properties by taking on additional leverage. If having access to cash flow from real estate is your idea of wealthy, so be it, but it'll be many years for a normal investor starting from zero in real estate to have ready access to significant cash flow and I'd argue that the chance of failure is much higher. I knew plenty of real estate investors in my personal circles around 2003 - 2006. I don't know a single one that survived the crash and some lost their shirts. That's my anecdote for the day.
Most of those folks were probably "accidental landlords", who fancied themselves as real estate investors. I promise you they likely didn't do any underwriting of deals apart from: rent - mortgage = cash flow!!! which is absolutely incorrect.

The beauty of real estate is that even when property values go down like in 2007, you continue to make money if you bought a good deal which produces a net cash flow. I don't have red days like the stock market, ever. I don't even know what a down month or year looks like.

My anecdotes are, every real estate investor I know, especially those invested in large apartments, kicked butt even in 2006-2008. They actually did better in the recession than now.
I'm not looking to get rich quick (crypto), I'm not looking to get rich slow (index funds).. I'm looking to get rich, for sure (real estate).

WanderingDoc
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by WanderingDoc » Thu Dec 28, 2017 3:48 pm

MindBogler wrote:
Wed Dec 27, 2017 7:07 pm
jb1 wrote:
Wed Dec 27, 2017 6:43 pm
Im with ya wanderingdoc. Goal is to get my first property this year and house hack it, rinse, repeat. At the end of the day, people need a place to live. Could be a bear market, worse financial crisis ever, people still need a place to live and the USA is becoming more and more of a renter country. I used to have REITs and realized how poor they were. All that volatility for a 3% dividend? Call me naive, but at age 27, Im gonna do whatever I can to be financially free by 37.
You should start a thread and keep it updated yearly on your progress. There is nothing wrong with big ideas but why not hedge your bet with some boring investing on the side? I think if you want to be financially free by 37 (10 years), you should look into dramatically increasing your savings rate like they espouse over on MMM. It works, of course, but you will need a ridiculous savings rate and/or large income and modest spending. The MMM method is a mathematical process that works. There is some real estate investing going on over there as well. The chances of you hitting it big in real estate and making providing enough cash flow within 10 years to kick up your feet and spend the winters in Tahiti are slim to none. In 20 - 30 years? Sure, I think you can make it big in real estate with discipline and, of course, patience.
Absolutely incorrect.

Statistically, you have a MUCH higher probablity of becoming financially free in your 30s through real estate.

Why? INCOME. When it comes to retiring early, it doesn't matter what your total capital basis, only the cash flow/income. We LIVE on income.

With real estate, 10-12% return on cash through net income is typical on a mediocre deal, not counting the other ways real estate pays you. Much higher returns are typical. I have a deal that produces ~$20K in annual net income, which has only ... wait for it, $15K in the deal. VA loan on a costal condo producing a $3000 gross rent, $1600 net rental income per month. I have another deal I purchased cash, then refi'd, now has $0 in the deal, and produces $7-8K of net income per year.

I have a moderate to high W-2 income. If I put an equivalent amount of $ I invested in real estate every year, into a 3-fund portfolio, I would have to work full time until at least age 55! Because you can't live of the 1.5% dividend the S&P produces. You CAN live off the 10-15% dividend produced by real estate on the average property. As I mentioned above, some of my deal actually produce a 50-100%+ return on cash.

By the way, I did those deals while doing a medical residency in a highly competitive specialty, for anyone who thinks this takes a lot of time. It doesn't. Also, I never saved or had a budget. You can't "save" your way to wealth. You can only save your way to a mediocre early retirement where you live on a 4% withdrawal of a $600K index fund portfolio. Thats poverty. No thanks.
I'm not looking to get rich quick (crypto), I'm not looking to get rich slow (index funds).. I'm looking to get rich, for sure (real estate).

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telemark
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by telemark » Thu Dec 28, 2017 4:01 pm

sambb wrote:
Wed Dec 27, 2017 9:07 pm
For those who say "dont mix strategy with outcome" (whatever that means?)
What it means is that chance inevitably plays a role in investing, so that a bad strategy may lead to a good outcome or a good strategy may lead to a bad outcome. Saying "I made money, therefore my strategy was good" is confusing strategy with outcome.
- my strategy is to have an outcome that makes money.
It's good to be lucky, but "always be lucky" is not a strategy.

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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by arcticpineapplecorp. » Thu Dec 28, 2017 4:26 pm

sambb wrote:
Wed Dec 27, 2017 9:07 pm
its interesting how much venom there is for crypto - one of the best investments of the year. I know plenty of people who have made great money in just the last few months. Most are out. What a nice event to have some quick money and follow the trend. Is it bogleheadish? No. But Enron was part of the S&P and plenty of people lost money on it - a stock in an index, which was fraud. So, just because one is an indexer, doesnt mean one cant have fraudulent investments. Personally, im not in crypto any longer, but i wish i had put more in, and for those that made money - congratulations. For those who say "dont mix strategy with outcome" (whatever that means?) - my strategy is to have an outcome that makes money. I wish i had made more on crypto to achieve my outcome. Sure crypto may crash, it has before, so what. People who made their money wont care either. For the OP - indexing crypto may be by investing in the big players or blockchain, but its so volatile and moves so quickly. Probably due for some bad times before they become good again. I remember when Ballmer laughed at the iphone - it is possible for the herd to be wrong.
You're saying the only alternative is to own individual stocks "stock in an index". But you can own the index itself and those that have done that have made money over the long term despite Enron going to zero. Get it? Don't search for the needle, own the haystack.

So we can go back to the OP and say "well he's trying to be more diversified and own ALL cryptocurrencies, not just one". To that I say, fine...then we'll call it a sector bet. And again, bogleheads like to own the entire market which includes all sectors, not just one sector.

To say bitcoin was one of the best investments doesn't help you in the future, it would have helped you in the past. As the OP acknowledged, the coins aren't regulated so...
Bitcoin briefly falls 11% after South Korea moves to ban new cryptocurrency trading accounts
https://www.cnbc.com/2017/12/28/bitcoin ... ading.html
expect to see losses, not just gains. The OP believes there are only two outcomes, both of which involve making, not losing money. He's forgetting the one about incurring losses.
by arcticpineapplecorp. » Fri Dec 22, 2017 8:38 pm
How much of the volatility of bitcoin is due to whales influencing the market price versus new or outside investors? Bloomberg reports that about 40% of all bitcoin is owned by roughly 1,000 people, and many people believe these “whales” collude to influence the price of bitcoin. But there’s no proof of this. source: https://finance.yahoo.com/news/74-bitco ... 33293.html
“I think there are a few hundred guys,” says Kyle Samani, managing partner at Multicoin Capital. “They all probably can call each other, and they probably have.” One reason to think so: At least some kinds of information sharing are legal, says Gary Ross, a securities lawyer at Ross & Shulga. Because bitcoin is a digital currency and not a security, he says, there’s no prohibition against a trade in which a group agrees to buy enough to push the price up and then cashes out in minutes. source: https://www.bloomberg.com/news/articles ... 5#p3678225
why do you want to play this game when it's controlled by so few?
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

AndroAsc
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Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by AndroAsc » Thu Dec 28, 2017 8:01 pm

WanderingDoc wrote:
Thu Dec 28, 2017 3:48 pm
MindBogler wrote:
Wed Dec 27, 2017 7:07 pm
jb1 wrote:
Wed Dec 27, 2017 6:43 pm
Im with ya wanderingdoc. Goal is to get my first property this year and house hack it, rinse, repeat. At the end of the day, people need a place to live. Could be a bear market, worse financial crisis ever, people still need a place to live and the USA is becoming more and more of a renter country. I used to have REITs and realized how poor they were. All that volatility for a 3% dividend? Call me naive, but at age 27, Im gonna do whatever I can to be financially free by 37.
You should start a thread and keep it updated yearly on your progress. There is nothing wrong with big ideas but why not hedge your bet with some boring investing on the side? I think if you want to be financially free by 37 (10 years), you should look into dramatically increasing your savings rate like they espouse over on MMM. It works, of course, but you will need a ridiculous savings rate and/or large income and modest spending. The MMM method is a mathematical process that works. There is some real estate investing going on over there as well. The chances of you hitting it big in real estate and making providing enough cash flow within 10 years to kick up your feet and spend the winters in Tahiti are slim to none. In 20 - 30 years? Sure, I think you can make it big in real estate with discipline and, of course, patience.
Absolutely incorrect.

Statistically, you have a MUCH higher probablity of becoming financially free in your 30s through real estate.

Why? INCOME. When it comes to retiring early, it doesn't matter what your total capital basis, only the cash flow/income. We LIVE on income.

With real estate, 10-12% return on cash through net income is typical on a mediocre deal, not counting the other ways real estate pays you. Much higher returns are typical. I have a deal that produces ~$20K in annual net income, which has only ... wait for it, $15K in the deal. VA loan on a costal condo producing a $3000 gross rent, $1600 net rental income per month. I have another deal I purchased cash, then refi'd, now has $0 in the deal, and produces $7-8K of net income per year.

I have a moderate to high W-2 income. If I put an equivalent amount of $ I invested in real estate every year, into a 3-fund portfolio, I would have to work full time until at least age 55! Because you can't live of the 1.5% dividend the S&P produces. You CAN live off the 10-15% dividend produced by real estate on the average property. As I mentioned above, some of my deal actually produce a 50-100%+ return on cash.

By the way, I did those deals while doing a medical residency in a highly competitive specialty, for anyone who thinks this takes a lot of time. It doesn't. Also, I never saved or had a budget. You can't "save" your way to wealth. You can only save your way to a mediocre early retirement where you live on a 4% withdrawal of a $600K index fund portfolio. Thats poverty. No thanks.
I call BS on this, I'm the anti real-estate guy.

Your numbers are not right, or you are not factoring in all costs. If real-estate can do 10-12% return EVERY YEAR, then TIAA RE fund would have done similar (the expense ratio is 1.x%, and they buy and rent out properties). REITs would have done similarly as well.

Seriously, show your numbers:
1) How much mortgage payment do you need to pay on the real estate per month?
2) What is your gross rental income?
3) What costs and fees have you not accounted for? Property tax? Some other tax? Referral fees? Condo fees? Homeowners crap? Insurance? Salary for your property manager? How much do you spend fixing/maintaining the property? For less frequent but major costs like collapsed roof repair, give me an average over a 10-20 year period, don't say $0, because things will happen.
4) What is your vacancy rate (how many months each year is it not rented?) How does vacancy rate changes when the economy crashes? Remember even a monkey can make money during a bull market.
5) How much float do you need to maintain (for repairs, tenant default, etc.)?
6) How much time do you spend on this business (and it is a business, either you hire someone to do it for you, or you do it yourself). Calculate the "salary" you would pay yourself.

jb1
Posts: 165
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Location: NC

Re: How to setup a crypto-currency "index fund" (Bitcoin, etc.)

Post by jb1 » Thu Dec 28, 2017 8:12 pm

AndroAsc wrote:
Thu Dec 28, 2017 8:01 pm
WanderingDoc wrote:
Thu Dec 28, 2017 3:48 pm
MindBogler wrote:
Wed Dec 27, 2017 7:07 pm
jb1 wrote:
Wed Dec 27, 2017 6:43 pm
Im with ya wanderingdoc. Goal is to get my first property this year and house hack it, rinse, repeat. At the end of the day, people need a place to live. Could be a bear market, worse financial crisis ever, people still need a place to live and the USA is becoming more and more of a renter country. I used to have REITs and realized how poor they were. All that volatility for a 3% dividend? Call me naive, but at age 27, Im gonna do whatever I can to be financially free by 37.
You should start a thread and keep it updated yearly on your progress. There is nothing wrong with big ideas but why not hedge your bet with some boring investing on the side? I think if you want to be financially free by 37 (10 years), you should look into dramatically increasing your savings rate like they espouse over on MMM. It works, of course, but you will need a ridiculous savings rate and/or large income and modest spending. The MMM method is a mathematical process that works. There is some real estate investing going on over there as well. The chances of you hitting it big in real estate and making providing enough cash flow within 10 years to kick up your feet and spend the winters in Tahiti are slim to none. In 20 - 30 years? Sure, I think you can make it big in real estate with discipline and, of course, patience.
Absolutely incorrect.

Statistically, you have a MUCH higher probablity of becoming financially free in your 30s through real estate.

Why? INCOME. When it comes to retiring early, it doesn't matter what your total capital basis, only the cash flow/income. We LIVE on income.

With real estate, 10-12% return on cash through net income is typical on a mediocre deal, not counting the other ways real estate pays you. Much higher returns are typical. I have a deal that produces ~$20K in annual net income, which has only ... wait for it, $15K in the deal. VA loan on a costal condo producing a $3000 gross rent, $1600 net rental income per month. I have another deal I purchased cash, then refi'd, now has $0 in the deal, and produces $7-8K of net income per year.

I have a moderate to high W-2 income. If I put an equivalent amount of $ I invested in real estate every year, into a 3-fund portfolio, I would have to work full time until at least age 55! Because you can't live of the 1.5% dividend the S&P produces. You CAN live off the 10-15% dividend produced by real estate on the average property. As I mentioned above, some of my deal actually produce a 50-100%+ return on cash.

By the way, I did those deals while doing a medical residency in a highly competitive specialty, for anyone who thinks this takes a lot of time. It doesn't. Also, I never saved or had a budget. You can't "save" your way to wealth. You can only save your way to a mediocre early retirement where you live on a 4% withdrawal of a $600K index fund portfolio. Thats poverty. No thanks.
I call BS on this, I'm the anti real-estate guy.

Your numbers are not right, or you are not factoring in all costs. If real-estate can do 10-12% return EVERY YEAR, then TIAA RE fund would have done similar (the expense ratio is 1.x%, and they buy and rent out properties). REITs would have done similarly as well.

Seriously, show your numbers:
1) How much mortgage payment do you need to pay on the real estate per month?
2) What is your gross rental income?
3) What costs and fees have you not accounted for? Property tax? Some other tax? Referral fees? Condo fees? Homeowners crap? Insurance? Salary for your property manager? How much do you spend fixing/maintaining the property? For less frequent but major costs like collapsed roof repair, give me an average over a 10-20 year period, don't say $0, because things will happen.
4) What is your vacancy rate (how many months each year is it not rented?) How does vacancy rate changes when the economy crashes? Remember even a monkey can make money during a bull market.
5) How much float do you need to maintain (for repairs, tenant default, etc.)?
6) How much time do you spend on this business (and it is a business, either you hire someone to do it for you, or you do it yourself). Calculate the "salary" you would pay yourself.
Im honestly confused though as to how one can think RE cannot provide financial freedom quicker than indexing etc.

Again maybe Im being naive. Im 27. I can control RE. Are there bad tenants? Sure. Are there good ones? Sure. I cannot control the stock market. I cannot control Apple, Amazon or anything in Total Stock Market. All I can do is wake up and pray its green compared to red.

The RE market can be at an all time low. But if you buy and hold, how do you lose? People will always need a place to live no matter what. Its a fact. If I have 3 properties generating a cash flow of $300 each ($900) and that is after the mortgage is paid, how is it a bad gig? When everything is paid off, I can have 3 properties making say $1k a month.

Again maybe Im being naive, i want to do my first deal next year, but Id feel much more safe in a house which I control, compared to indexing.

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