There can be no doubt that 2017 is the year of cryptomania. Every day more and more investors, especially young earners want to try their luck with Bitcoin, Ethereum, Litecoin and any other crypto coin they can get their hands on. Cryptomania 2017 is fantastic to watch as it unfolds, but dear bitcoin and altcoin investors, would you consider slowing down for a moment to look at your asset allocation?
The moment we want to believe something, we see all the arguments for it, and become blind to the arguments against it. – George Bernard Shaw
I have argued against it: Three Reasons to avoid Bitcoin or any other cryptocurrency
I have argued for it: Bitcoin: Is it a Ponzi Scheme? A Pyramid Scheme? Or a Bubble?
Have some considered both sides: If Bitcoin becomes expensive and popular in future, should I buy some now?!
And have offered simple way to invest with (wrong) guidance: How to buy Bitcoins in India: A simple DIY approach to Bitcoin investment
and how to invest in crypto: Investing in Cryptocoin vs Trading in Cryptocoin
Cryptomania 2017: Asset allocation table
A Mirae fund is used for the large-cap Why? Becuase it is good: Mutual Fund Review: Mirae Asset India Opportunities Fund
A Franklin Savings Plus fund is for the debt part. Why? Becuase Franklin India Savings Plus Fund :A Debt Fund For First-time Investors?
A Quantum fund is used for cash. Why. Because it invests in good, solid debt: PlumbLine November 2017: a handpicked list of mutual funds
What you see below is the initial purchase in Jan 2016 and the values and asset allocation every quarter after that. The yellow rows are attention-grabbing but get to it the last.
Cryptomania 2017: Other poor investments!
Bitcoins growth is so spectacular that I first need to plot the other instruments. These are in normal scale.
Cryptomania 2017: Bitcoin the Giganotosaurus!
Now with Bitcoin added, I thought the log scale (shown below) will help, but it does not!! Bitcoin drawfs other instruments (for the period considered)
Asset allocation with Bitcoin: January 2016
The asset allocation pie charts say the story the best.
Asset allocation with Bitcoin: December 2017
Now scroll back to the table above and look at the yellow rows. I will wait.
Back? Okay, now this is the point of the post: Due to the incredible growth in Bitcoin, a 1% allocation (which was peanuts) in Jan 2016 has become a coconut in Dec 2017 with 21% allocation.
If you lose a peanut, you will not bother to search or feel sorry for yourself. Please don’t tell me you will feel the same if you lose a coconut!
What am I trying to say?
Book profits now (normal speak)
Book profits now (Yoda speak)
I had assumed no investment in crypto or anywhere else after Jan 2016. How will the Dec. 2017 pie chart look if you include those?
Hey, this is not part of my asset allocation dude!
What is that I hear you say? “This was only a small amount and not part of my asset allocation calculation”. Okay then, it was only a small amount, to begin with, so who cares about its value today? Sell it off and give it you a charity. Better still, give it to me – your favourite obnoxious pig-headed blogger.
It is only a small amount. Does not matter how large it is now, isn’t it? So you don’t care if it comes back to that small amount again, right?
If it would hurt now to see it go from your hands, it IS part of your asset allocation. Wake up and shift at least part of your gains to safer asset class like equity (boy I never thought I would write that!) or even better to debt before the risk you took goes waste. And it will, even if Bitcoin is 100% legit. See why: Investing in Cryptocoin vs Trading in Cryptocoin.
Asset allocation matters.
It is the only metric that determines the health of your wealth.
Invest in cryptocurrencies with an asset allocation and rebalance it as fast as your wealth grows.
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