S/O Should everyone buy crypto: investment options

[iamonlyone]

Bootsie wondered in a post what a good (better than crypto) "hedge against inflation" investment might be. What are your thoughts? Real estate? What about gold/precious metals?

[Bootsie]

Because real estate markets are highly localized, real estate assets can be hard and costly to liquidate, and it is difficult to diversify in the real estate market, I do not think real estate is usually a good hedge against inflation for the average family's portfolio.  

In the past, commodities could play a good hedge, particularly if there was a commodity driving inflation (like oil) and you held that commodity.  With inflation that is dirven by a massive increase in the money supply, I am not sure what the best move is.  I think holding currencies outside of one's home currency (or assets denominated in another currency) may be one of the strongest hedges right now.

[iamonlyone]

1 hour ago, Bootsie said:

Because real estate markets are highly localized, real estate assets can be hard and costly to liquidate, and it is difficult to diversify in the real estate market, I do not think real estate is usually a good hedge against inflation for the average family's portfolio.  

In the past, commodities could play a good hedge, particularly if there was a commodity driving inflation (like oil) and you held that commodity.  With inflation that is dirven by a massive increase in the money supply, I am not sure what the best move is.  I think holding currencies outside of one's home currency (or assets denominated in another currency) may be one of the strongest hedges right now.

Thanks for your insight. Could you explain a bit more? I don't know anything about holding foreign currencies. Do you mean changing dollars to another currency? Or banking in another country? Also, what would be an example of "assets denominated in another currency"?

As far as real estate, we invest in a pragmatic way: We decided to pay off our home about 10 years early so all of our long-term savings isn't in the stock market. Also, we invest in Groundfloor, which offers short-term real estate investments. We earn interest rates of 7-8% there.

My brother invests in gold and has encouraged me to look at that option, but I'm not fully convinced.

[Rosie_0801]

39 minutes ago, iamonlyone said:

Thanks for your insight. Could you explain a bit more? I don't know anything about holding foreign currencies. Do you mean changing dollars to another currency? Or banking in another country? Also, what would be an example of "assets denominated in another currency"?

When I was young, cute and still at uni, one of my professors told me that the Australian dollar was one of the most highly traded currencies in the world because it was so stable. 

[Bootsie]

36 minutes ago, iamonlyone said:

Thanks for your insight. Could you explain a bit more? I don't know anything about holding foreign currencies. Do you mean changing dollars to another currency? Or banking in another country? Also, what would be an example of "assets denominated in another currency"?

As far as real estate, we invest in a pragmatic way: We decided to pay off our home about 10 years early so all of our long-term savings isn't in the stock market. Also, we invest in Groundfloor, which offers short-term real estate investments. We earn interest rates of 7-8% there.

My brother invests in gold and has encouraged me to look at that option, but I'm not fully convinced.

For some people holding foreign currencies may simply mean having foreign currency bills tucked away in their safe deposit box. It has become increasingly diffcult for US citizens who do not have residency (or some other status) in a foreign country to have a bank account in that country; the banks in other countries do not want to expose themselves to the regulatrions the US places on them to report on the holdings of US citizens.  Some people own real estate in another country, which would be an asset denominated in the country's currency.  We are in the situation where DH worked in Canada for several years, so he has a small retirement account which is in Canadian dollars.  It really depends upon unique situations of what someone might have as a possibility.  For most people it is either purchasing stocks of foreign companies or purchasing a mutual fund that is comprised of foreign companies.  There are also a few ETFs that are currency ETFs.

Over the long run, I do not know that holding gold or silver coins has been a great option (although there have been pockets of time when thy have done well), but there are some mutual funds of companies involved in gold or other commodities that I would prefer over the coins themselves.  

Much depends upon someone's individual circusmstance, however.  For, example, if I worked in the oil industry, I would not worry about owning oil related investments, because I have exposure to that industry through my job.  

[Bootsie]

6 minutes ago, Rosie_0801 said:

When I was young, cute and still at uni, one of my professors told me that the Australian dollar was one of the most highly traded currencies in the world because it was so stable. 

The Australian dollar is in the top 10--usually about #5.  I think a lot has to do with Australia being a large exporter of mined commodities and importer of oil.  

[Ausmumof3]

Hydrogen seems to be a very developing industry down here. It seems to be the preferred option for green energy. But I have literally no idea about investment so I’m just throwing that in the mix in the hope that someone more knowledgeable can reflect.

[iamonlyone]

Thanks for the explanation! We do have stocks/mutual funds that include foreign as well as domestic businesses, so I guess we have somewhat ticked that box...

And thanks for chiming in, Rosie. Off to read about trading currencies. I didn't know that was a thing!

Edited October 15, 2021 by iamonlyone

[Resilient]

Here's a bottom line. Risk/reward.  Color me old, but I'm not willing, at my age, to risk what I can't recover to any anticipated (but uncertain) reward.  I don't have time or energy to recover the loss, and the incremental reward won't be enough to make my life a whole lot different.  It's a game.

The points brought forward about hiding/laundering wealth is both interesting and credible. 

The point about not investing in something you don't understand is relevant.
The point about not investing in something that has zero nada nothing to back up its value is relevant.

Remember that if you lose 50%, it will take you 100% return to recover.  Someone please tell me where I can find that investment.
$100; lose 50%: you have $50.  You have $50--what will it take to get back to $100?

This is why we have a stellar financial advisor, and are thankful. And we don't buy crypto.

Edited October 15, 2021 by Resilient

[Bootsie]

3 minutes ago, Resilient said:

Here's a bottom line. Risk/reward.  Color me old, but I'm not willing, at my age, to risk what I can't recover to any anticipated (but uncertain) reward.  I don't have time or energy to recover the loss, and the incremental reward won't be enough to make my life a whole lot different.  It's a game.

The points brought forward about hiding/laundering wealth is both interesting and credible. 

The point about not investing in something you don't understand is relevant.
The point about not investing in something that has zero nada nothing to back up its value is relevant.

Remember that if you lose 50%, it will take you 100% return to recover.  Someone please tell me where I can find that investment.
$100; lose 50%: you have $50.  You have $50--what will it take to get back to $100?

This is why we have a stellar financial advisor, and are thankful. And we don't buy crypto.

But then what do you invest in?  What are you investing in that doesn't have  risk that you may not recover?  Do you have any cash?  What is backing up its value?  If you have money in a savings account, what is backing up its value?  

I am not a crypto fan myself, but the arguments I am hearing about not storing wealth in crypto apply to many of the other ways people store wealth; we are just used to them and don't think about it.  

[Resilient]

Just now, Bootsie said:

But then what do you invest in?  What are you investing in that doesn't have  risk that you may not recover?  Do you have any cash?  What is backing up its value?  If you have money in a savings account, what is backing up its value?  

I am not a crypto fan myself, but the arguments I am hearing about not storing wealth in crypto apply to many of the other ways people store wealth; we are just used to them and don't think about it.  

Every investment has risk.  But we also have good sense.  

Eg. Pandemic shuts down in-person commerce.  Fact.  So what do you invest in, given that you know this fact?  Online vendors.   
Eg. Pandemic shuts down in-person commerce. You invest in online vendors.  How will the goods get to the customers? Corrugated boxes.

You invest in online vendors and paper manufacturers. You make money.

Some people have the energy interest to keep up with the 40,984 permutations of these questions.  I don't.  That's why I found the best advisor I could find.  She has done *almost* as well as Mom's generally-available counselor.  Almost  

Here is the way I saw crypto (even though my anxiety went up with all the online fascination with it):  You buy some imaginary currency with nothing to back ti up except "YOU MAY ALREADY BE A WINNER MY NAME IS JOE HOW ARE YA!?" as its product.  It reminded me too much of the guys who come to my door and ask for money and offer me a receipt. "What will you do to earn the money?" "I'll give you a receipt." "I don't need a receipt.  I need my lawn mowed."  (crickets).  

I get buffaloed by internet promises as fast as the next guy/gal.  I'm not immune. But this makes no sense.  That said, a lot of things make no sense anymore.  What do we do with negative or 0% interest?  I don't know.  THAT IS WHY WE HAVE A STELLAR FINANCIAL ADVISOR.  And yes, I am shouting. FYI and FWIW, I and my significant other have MBAs, master's degrees in Finance and continuing interest in the subjects. We would bore anyone to tears.

[Bootsie]

26 minutes ago, Resilient said:

Every investment has risk.  But we also have good sense.  

Eg. Pandemic shuts down in-person commerce.  Fact.  So what do you invest in, given that you know this fact?  Online vendors.   
Eg. Pandemic shuts down in-person commerce. You invest in online vendors.  How will the goods get to the customers? Corrugated boxes.

You invest in online vendors and paper manufacturers. You make money.

Some people have the energy interest to keep up with the 40,984 permutations of these questions.  I don't.  That's why I found the best advisor I could find.  She has done *almost* as well as Mom's generally-available counselor.  Almost  

Here is the way I saw crypto (even though my anxiety went up with all the online fascination with it):  You buy some imaginary currency with nothing to back ti up except "YOU MAY ALREADY BE A WINNER MY NAME IS JOE HOW ARE YA!?" as its product.  It reminded me too much of the guys who come to my door and ask for money and offer me a receipt. "What will you do to earn the money?" "I'll give you a receipt." "I don't need a receipt.  I need my lawn mowed."  (crickets).  

I get buffaloed by internet promises as fast as the next guy/gal.  I'm not immune. But this makes no sense.  That said, a lot of things make no sense anymore.  What do we do with negative or 0% interest?  I don't know.  THAT IS WHY WE HAVE A STELLAR FINANCIAL ADVISOR.  And yes, I am shouting. FYI and FWIW, I and my significant other have MBAs, master's degrees in Finance and continuing interest in the subjects. We would bore anyone to tears.

But, if markets are efficient, as soon as I know that there is a pandemci that will shut down in-person commerce, so does everyone else does and everyone else invest in online vendors at the same time and drives the price up preventing y from making money. 

What backs up your currency?  The fact that you have a piece of paper?  That is visual proof of its existence, but doesn't really back it up any more than crypto currency is backed up.  I don't like cyber transactions.  I am one who realizes she doesn't listen to music nearly as much as she used to when I could purchase an album, put it on the turntable, take it off, hold it in my hands, etc.  Purchasing digital music in I-Tunes is not the same for me.  The same goes with books.  I do buy stocks, however, without possessing shares certificates.  So, in that sense I am really inconsistent.  

[Bootsie]

The average annual inflation rate in the US since 1947 is about 3.4%.    Over the past 20 years, it has been about 1.2%--approximately 1/3 of its long-run average.  I think there are a lot of people who have not experienced significant inflation, or have forgotten what that is like.  It will be interesting to see how the begin navigating their investments if inflation runs above 3.5% for a while.

[iamonlyone]

We do have an investment advisor, but it seems many have been waiting for a big stock market correction for some time, and so I'm always open to learning about new, sound ways to diversify. My majors are English and communication, so no advanced finance understanding here!

[AryanaRiley]

The cryptocurrency market is waiting for the Ethereum network to switch to a new protocol.

[Melissa in Australia]

Reported as suspect spsm

[Murphy101]

On 10/14/2021 at 5:06 PM, Bootsie said:

Because real estate markets are highly localized, real estate assets can be hard and costly to liquidate, and it is difficult to diversify in the real estate market, I do not think real estate is usually a good hedge against inflation for the average family's portfolio.  

In the past, commodities could play a good hedge, particularly if there was a commodity driving inflation (like oil) and you held that commodity.  With inflation that is dirven by a massive increase in the money supply, I am not sure what the best move is.  I think holding currencies outside of one's home currency (or assets denominated in another currency) may be one of the strongest hedges right now.

Well I’ve got a million Iraqi dinars my dad gave me in cash before he died.

I’ve been using them as bookmarks bc frankly I think they have almost zero value if I take them to the bank to get converted to USD and I can’t spend it here. 

That’s the sum total of my “investments”. 🙃