The reason why investors with longer time horizons (younger investors) can typically take on more (compensated) risk is because they have a longer time to ride out volatility and because contributions make up a larger % of assets - i.e. you get a greater impact from dollar cost averaging.
Thatās why target date funds typically start at 100% equity allocation and gradually shift towards bonds. It should be fairly intuitive that a 50% drop in value in your first month of investing has almost no impact on your outcomes while a 50% drop in your last month is massive.
20% p.a. for 20 years with equity investing is approaching Warren Buffet levels of talent. If only it were that easy. In crypto, you earn 20% p.a. interest on USD stablecoin, so thatās essentially the base case. If you canāt beat that by active trading then donāt and collect your 20% otherwise if you are good at it the sky is the limit.
Believe it or not, there are many investors with far less profile who have earned significantly more than 20% per annum over 20/30 year periods historically.
In addition, your strategy would inevitably produce similar results to what I am suggesting. Essentially let the compounding of capital create the value not the big bets.
I think youāre looking at this through a very narrow scope tbh.
There are definitely more numbers between 7 and 200, and NFTs and Crypto are not the only way of taking risk. I never mentioned a specific number, I never mentioned a specific asset. ātake risks while youngā does not equal āfind the riskiest asset class you can and try to +200% every yearā. Risk is not a binary, itās a scale.
I really like that youāve interpreted ātake risksā with your portfolio as āgo balls to the wallsā. My 20s was defined by āriskā taking, but that meant using all my tax free allowances, claiming any available relief on pension contributions, investing directly in index tracker funds and using low interest rates to my advantage. Iāve built a 500k stock portfolio since 21 (now 31) across SIPP, GIA, and ISAs, without crypto, meme stocks or crowd investing. Getting rich isnāt glamourous, and it doesnāt happen overnight for 99.9999999999% of the population, but itās not hard.
Risk almost has itās own Overton Window where what is and isnāt risky changes over the years. 10-15 years ago a 100% equity allocation was considered quite risky and would be mixed with bonds instead. Having a bond allocation is pretty much financial suicide in the current environment so I would say that a 100% index tracker portfolio is pretty much the lowest risk you can get away with currently and higher risk would be mixing in crypto and/or individual stock picks.
Congrats on the portfolio, what you did is probably the right move for most young investors.
If you invest in crypto and NFTs your risk tolerance is going to be tested big timeā¦ Easy to claim you only want such assets when they keep going up! But as the market is showing right now thereās downside as well as upside!
Bonds ETFs are always a good idea for me.
Gold and in fact any commodities I say no. Especially precious metals. Yes there is short supply and large demand, especially with all the modern tech. But, when space mining happens the entire metals worth will be tested big time. Yes thatās a way off, but as a man of science working in the space industry I can see it happening and ruining our economy.
Iām still up several hundred percent, thanks for asking.
Show me where Warren Buffett says young people shouldnāt take risks when investingā¦
you seem to be stuck on ārisk == cryptoāā¦ as I mentioned, crypto isnāt the only way to take risk. Youāre the one banging on about crypto, Iām talking about risk generally.
Also worth noting, Buffet made the bulk of his money a long time ago, when the markets were very different places. You canāt just use the same strategies from the '70s and expect to make buffet money in 2022.
Edit: I stand corrected, it turns out heās had a very good few years. I stand by my other point though.
I think there is a decent risk for young people (not me anymore sadly, much more middle aged) not investing. If stocks markets do even only reasonably well, their return will outstrip the return on most other low-risk assets, especially cash savings. Likewise with people in their early 30s who are close to putting a deposit down, house prices are rising faster than their deposits so their real term situation is getting worse. The greatest risk for the previous 10-20 years was not to be owning something, shares, bonds, gold, property, it pretty much all went up.
Obviously, one could sit on cash and hope for a good crash to then go all in. However, I doubt someone who never invested with be brave enough to do so when the time comes.
There is also the issue of making regular investing an unemotional habit as early as possible, I think this will create some wealth pretty effortlessly.
So you do this full time do you, like 9-5 5 days a week, with a team of analysis, you go to company headquaters and meet the executives face to face, digging into their products and strategies? or are you trying to suggest you can do all that on your evenings and weekends?
Otherwise, yes, I am suggesting thatā¦ The markets are affected by a lot more and a lot quicker. Information travels around the world instantly and the markets are more global accessible than they used to be. There is nothing wrong with going by fundamentals, but I think more can be made by working in a little risk and considering other drivers.
If you donāt like risk then thatās absolutely fine. but to outright say itās a āterrible strategyā is just narrow minded. After all, a healthy amount of risk is what let me buy 30% of my house in cash before my 30th birthday (I was flat broke at the time of my 20th birthday), so itās clearly not all that āterribleā.
