5 ms·
This violates two simple, and obvious, tenets of investing: 1. Don't put all your eggs in one basket. 2. If it sounds too good to be true, it probably is.
by luigi 15y ago
This violates two simple, and obvious, tenets of investing:
1. Don't put all your eggs in one basket.
2. If it sounds too good to be true, it probably is.
- kiba 15y agoThey are only heuristics, not iron law of investment. Even so, don't put all your eggs in one basket pretty much apply to all situations.
- deleted 15y ago[deleted]
- deleted 15y ago[deleted]
- splat 15y agoAndrew Carnegie would respectfully disagree with your first tenant: "Put all of your eggs in one basket -- and watch that basket!"
- diego 15y agoFor every Andrew Carnegie, there are lots of others who watched their basket and saw it destroyed. They just don't go around giving advice.
- hugh3 15y agoYes they do. They're the ones who go around saying "Don't put all your eggs in one basket".
- ecaradec 15y agoDon't put all your eggs in a basket you know nothing about.
- hugh3 15y agoActually, don't put any eggs in a basket you know nothing about. Don't put all your eggs in any basket even if you think you have perfect knowledge of it.
- creativeembassy 15y agoHow about we stop investing with eggs, eh? How about that?
- hugh3 15y agoEggs have pretty good long-term yields. One egg produces one chicken. One chicken produces an egg every day. At this rate you'll have 10^23 chickens in just a few short years.
- knowtheory 15y agoActually Luigi, you're missing the best and most fundamental rule: 3. Past performance is no guarantee of future returns
- hugh3 15y agoPersonally, my most fundamental rule is this: 4. Invest in stuff that has value.
- Jd 15y agoThis is the right strategy (IMO) not only because of near and long-term returns, but because it produces a better mentality. Trend or fad chasing may also produce substantial returns, but it produces scatter-brained people, often addicted to the beeps of their assorted gadgets, and detrimental to their health and well-being and the well-being of those around them. I'd rather be a carpenter in the Catskills making 35K / year and producing beautiful products that enhance life than a Forex trader taking 10x that amount but simply sloshing capital around.
- troels 15y agoDoesn't financial services have value?
- richardw 15y agoThe basket many people are holding all their eggs in, is the USD. That has depreciated significantly in the last few years, with a very good chance that it'll continue to do so. My home currency isn't the dollar but my app is priced in dollars and that sucks. I'd far prefer to have Euro earnings and earn a few bitcoins a month as a speculative investment.
- tectonic 15y agoDoes investing in foreign stocks hedge against this?
- hugh3 15y agoInvesting in any stocks hedges against this. For instance, I have shares in General Electric. That means I indirectly own part of all GE's assets. Some of their assets are in US dollars, but the vast majority of their assets are tangible things -- factories that make jet engines and diesel locomotives and dishwashers and... whatever the hell else we make. If the US dollar drops in value, the US dollar value of these real assets goes up correspondingly.
- nradov 15y agoThat's only true for some stocks, and GE is a bad example. The majority of GE's assets are not tangible things but rather debt owed to GE Capital. As of 2010 only 9% of GE's assets were tangible property, plants, and equipment. http://www.ge.com/investors/financial_reporting/index.html http://www.ge.com/investors/financial_reporting/index.html
- orijing 15y agoIn fact, Warren Buffett said this in an interview: Owning talent is the only way to hedge against depreciation of your currency (equivalently inflation).
- j123 15y agoHolding stocks can definitely hedge against a devaluation of currency. Even domestic stocks or others prices in the currency you're seeking to get out of can work, but are significantly worse at doing so than one priced in a "safer" currency. There are investment firms that specialize in investing in the stock of foreign companies.
- zitterbewegung 15y agoDue to the volatility of the bitcoin market I'm betting we are going to see a next blog post by the author "How I lost all my savings using bitcoin"
- deleted 15y ago[deleted]
- Wilduck 15y agoOr alternatively, "How I convinced more people to invest in bitcoin and then made bank when I pulled out my savings right before the crash."
- stevenj 15y agoRe: 1 Perhaps. But if you know what you're doing, wide diversification may not be wise. "How many insights do you need? Well, I'd argue: that you don't need many in a lifetime. If you look at Berkshire Hathaway and all of its accumulated billions, the top ten insights account for most of it. And that's with a very brilliant man—Warren's a lot more able than I am and very disciplined—devoting his lifetime to it. I don't mean to say that he's only had ten insights. I'm just saying, that most of the money came from ten insights. So you can get very remarkable investment results if you think more like a winning pari-mutuel player. Just think of it as a heavy odds against game full of craziness with an occasional mispriced something or other. And you're probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It's just that simple." -Charlie Munger http://ycombinator.com/munger.html http://ycombinator.com/munger.html Re: 2 "Too much of a good thing can be wonderful." -Mae West
- sorbus 15y agoThe purpose of diversification is in case your insight is wrong. In case bitcoin crashes faster than he's able to pull his money out, or in case demand slackens and prevents him from pulling his money out (being able to transform money from bitcoins to dollars is necessary until all the places he would spend money accept bitcoins too), being diversified would prevent him from losing everything.
- stevenj 15y agoI know nothing about Bitcoin. And I agree that you probably shouldn't put all your eggs in one basket. But that doesn't mean that wide diversification is the right strategy. I think some of the greatest successes have occurred because of an obsessive focus (e.g. Apple, Pixar, 37signals, Trader Joes, Chipotle, Berkshire Hathaway, top professional athletes).
- tptacek 15y agoApart from the fact that you're comparing the obsessive focus of a business plan to that of a portfolio, you realize that Berkshire owns NetJets, Dairy Queen, Borsheim's jewelry, insurance companies, and the Burlington Northern Railroad, right? "Obsessive focus on being awesome" is not a non-diversified investing strategy.
- inoop 15y ago2a. If there's money involved, it's probably a scam.
- hnsmurf 15y agoIn my experience people who write blog posts like this don't have enough eggs to really worry what happens to the basket. It's either someone with very little life savings or a pump and dumper.
- mcantelon 15y agoFalkvinge is the founder of the Swedish Pirate Party, so my guess he's willing to personally risk to promote the world's first viable decentralized currency.
- deleted 15y ago[deleted]