I was lucky. I got some great advice early in my career from a very successful businessman. He said to me “never invest your time or your money in something that doesn’t continually pay you every month for the effort or capital you have previously invested.” He had been in the franchise restaurant business starting in the early 80s. He was nearing the tail end of his career as I was just starting mine, but his words always stuck with me. From these wise words I adopted the idea that the three sweetest words in the English language are “passive residual income”. That is the dream, right? Sitting on a tropical beach somewhere sipping a mojito knowing that while you are living the life of leisure, you are still getting paid. The picture painted by about every get rich quick scheme known to man, but the dream lives on.
For me, the first influence was my dad. He worked hard for a living, nearly 35 years for the government. Dad never made a ton of money, but he had job security, and most importantly once he retired he had a define benefits pension plan that would provide him a paycheque for the rest of his life. The golden pension plan was great, but is from a bygone era, and I knew I would never see one. There was no secure pay cheque in my future, I would need to find another way. Passive residual income was, and continues to be, my goal.
Investment Real Estate
The first major pursuit on this road to passive residual income for me was investment real estate. Real estate checks a lot of boxes for me. You can leverage your capital and purchase it predominantly with someone else’s money. The asset appreciates in value over time (much more so in high inflationary environments like the one we find ourselves in now). You can rent it out and produce a monthly income (if you purchase smartly it can be cashflow positive each month). The lessons learned in over a decade of investing in real estate have followed me into the land of magical internet money.
With most investments, you are locking in your profits when you buy, it becomes very important to not let your emotions get in the way. If the numbers don’t make sense, you need to be able to walk away. Warren Buffet famously said “Rule Number One: Never Lose Money. Rule Number Two: Never Forget Rule Number One”, though I don’t fully subscribe to this mantra, it is definitely a good starting point.
Crypto
When looking at all things crypto (coins, tokens, DeFi, NFTs and any variety of other things I may or may not understand) I think it is firstly most important to understand yourself, your goals and most importantly your risk tolerance. Myself I have a decent sized crypto portfolio (if I do say so myself) but I am certainly no whale. However, I operate under the assumption it all could go to zero tomorrow and I need to be ok with that. It really is the wild west all over again and what is worth $50K today could be illegal or worthless tomorrow. My emotions in the moment may not be ok with that, but certainly my bank account needs to be.
Diversification
With those ground rules out of the way, let me talk a little bit about diversification. First off I will say, I think this term is mostly complete BS. It is a word that everyone thinks they understand but I am sure if you asked 100 people what it meant, you would get about 75 different answers. In much of traditional finance it has been a way to spread your money around to try and make sure you don’t lose it all at once. So many bankers, financial advisors and media advice columns talk about putting a certain % of your holdings in some variety of fixed income account paying about 0.25% interest. Why anyone thinks this is a good idea is beyond me. I have often observed the biggest risk most people face is their inability to actually mitigate risk. In trying to not lose money, you are actually faced with a huge opportunity cost of what you could’ve actually done to grow that money.
To me, especially in the crypto space, diversification needs to be if I lose everything on 4 of my investments, the 5th one should be able to re-coup all of my losses and then be profitable on top of that. I prefer to ask myself, if play A is going to zero, what market conditions exist? In those market conditions, what would be thriving? If Eth is crashing, are NFTs thriving? If profile pictures are no longer the rage, is DeFi yield farming going to be where money gets parked?
Predicting the future
Do I know what is going to happen tomorrow? That is a hard no! Are the scenarios I lay out in my head the correct ones? Every once in a while I suppose, but the more important aspect is the thought process you put yourself through. As I said above, I have entered this space understanding it could all go to zero.
So, what do I like and what do I invest in? It should be no surprise, that based on my real estate background, one of the things in the crypto space that drew my attention was digital land. Owning an asset you can build upon, rent out and otherwise participate was in line with my thought process. The first project I invested in was the Sandbox. Like any good degen, I learned the hard way about the impacts of gas fees while doing my first LP play with the $Sand/Eth pair on Uniswap. I did some small dollar value transactions that got eaten away when gas fees cost me a few hundred % of my initial investment. Lessons on gas however is a topic for another day. I also bought 2 plots of Sandbox land which provided me with an immediate yield. (it boosted the payout % on my LP). Through this experience, I have invested in other LPs, in particular those that offer yield farming of the LP tokens.
Virtual Land
I continue to like the Metaverse, I have jumped into the Pavia project on Cardano and have my eye on a few others. Say what you will about large corporations, but when you see them spending billions on Metaverse plays (Microsoft and Facebook come to mind), there is definitely something there. I own a few NFTs from Jenkins the Valet and am eagerly watching their licensing plays. It motivated me to get in on Mutant Apes and sign a licensing deal with my newly acquired Ape to see where that goes. I am also quite interested in yield farming with my two current plays being Defi Kingdoms and Looks rare. By the time you read this, I am sure it will have changed, but as I write this in January of 2022 this is me.
Just me
As I wrap up this piece, this is mostly to serve as an introduction. I am sure if you are arriving on my page, you will have come here through other pieces or topics. Maybe this will provide some background on who I am and how I got here. I would say it may help you figure out how I think, but I have known my wife for over 15 years, and she is as confused as ever about my thought process. Always remember to DYOR and as Red Green loves to say “Keep your stick on the ice”.