Why would I buy an asset? Poll, discussion and help

[Hubus]

Hi there,

Why would I buy an asset?

In this poll, each user has 3 votes for his/her top reasons. Changing your vote later is allowed.

(If you are interested in what an asset is and how it's done, you can find some information in this thread: https://bitcointalk.org/index.php?topic=1006327.0 )

http://wiki.nxtcrypto.org/wiki/Glossary#Asset

As I am interested myself, but see many confusing things here, I try to make the reasons to buy or not to buy an asset clear for myself and others.

I also think, there are many irrational factors and manipulative things going on in this area and I would like to reduce this for the best of the good ideas.

It's clear that an asset helps the issuer of that asset, but what does the buyer get out of it?

So here are some reasons I can think of. You can help to complete the list if I forgot something important, but I am not always active here.

And don't forget to discuss it. I still have questions, too.

My first question is about the intrinsic value, compared to a fiat money enterprise share/stock: When I own an asset, do I own a part of the enterprise by that? That means, is there some value in the asset beyond the speculation that someone will pay dividends or buy the asset from me? That also means: Do I get a share when the asset issuers sell or liquidate their business? (I guess that currently, there are no such things or guarantees at all in this unregulated market. Is it even legal...?)

Have fun.

[altsheets]

You selected too many options. For this poll, you may only select 3 options.

:-)

[altsheets]

Interesting poll.

This is what I initially selected:

 I want to help the asset issuer (crowdfunding good ideas)
 I expect to sell it at a higher price, I speculate (buy and sell)
 I expect the dividends to return my investment
 I don't have access to fiat shares/stocks/crowdfunding, so I use cryptoassets
 I want to learn about assets and to buy a small amount is the best way

but if I have only three choices I'd go for this:

 I want to help the asset issuer (crowdfunding good ideas)
 I expect to sell it at a higher price, I speculate (buy and sell)
 I expect the dividends to return my investment

[Hubus]

Interesting poll.

This is what I initially selected:

 I want to help the asset issuer (crowdfunding good ideas)
 I expect to sell it at a higher price, I speculate (buy and sell)
 I expect the dividends to return my investment
 I don't have access to fiat shares/stocks/crowdfunding, so I use cryptoassets
 I want to learn about assets and to buy a small amount is the best way

but if I have only three choices I'd go for this:

 I want to help the asset issuer (crowdfunding good ideas)
 I expect to sell it at a higher price, I speculate (buy and sell)
 I expect the dividends to return my investment

Hi altsheets, thank you for your interest and participation   ! Would you mind logging in your three chosen answers (I think you haven't) or do you want to keep it like this?

Any suggestions for additional possible answers?

[altsheets]

... Any suggestions for additional possible answers?

Yes:

( ) I despise banksters who have -legally- stolen from the people for centuries, and undermine democracy, erode social cohesion, accelerate the destruction of nature, and cause wars. Good that cryptos offer an alternative financial market now.

 

Or less emotionally charged:

( ) I like it that cryptos offer an alternative financial market.

 

[Undermood]

I seems most of ppl choose the "I expect to sell it at a higher price, I speculate (buy and sell) ". Ppl are buying assets for the  profit.

[Hubus]

( ) I despise banksters who have -legally- stolen from the people for centuries, and undermine democracy, erode social cohesion, accelerate the destruction of nature, and cause wars. Good that cryptos offer an alternative financial market now.

Or less emotionally charged:

( ) I like it that cryptos offer an alternative financial market.

Hi, I added

'I despise banksters, they are doing evil, I believe cryptoassets as alternative will better the world'.

If you read the answers, you may notice that I put some critique into my questions, so I hope the questions are not too manipulative. But I couldn't resist to change your answer a little bit: Because I think the refusal of banks is a contra argument for a fiat share but not a pro argument for a cryptoinvestment. Only if you wanted to invest your money anyway, you will choose the alternative. So I think, the answers were already there in form of the comparison with the fiat shares/stocks.

Just despising banks could also be a reason to not buy any assets at all. Personally, I believe that the cryptomarket will not be very different concerning "good and evil" in the world. It's another financial system, more a parallel one than an opposing system to the older system. Mainly, good and evil in people and in the world will not change very much just because of cryptocurrencies. Even worse, with uncontrolled cryptomarket, the money laundering and market for weapons will be happy, but the people will suffer from those weapons (or drugs). The greed and lies are in the traditional banking system as well as in the crypto system. Well, that's just my humble opinion.

[Hubus]

I seems most of ppl choose the "I expect to sell it at a higher price, I speculate (buy and sell) ". Ppl are buying assets for the  profit.

Yes, this will be strongest rational argument, I think. And it might be realistic, even though, of course, speculative.

But I have a question to the people who voted that they expect the dividends to return the investment:

Is this even possible? Do you you know of any asset that pays such high dividends that you win so much that the buying price returns? How long will this take? Could you name a concrete example with an existing asset and how long the ROI (return of investment) will take? Did you buy the asset at an extremly cheap price?

And I repeat my question to the people who believe they own a part of the enterprise. Which asset has such rules? Is there really some "real world" value in the asset? Isn't it just worth something if the people believe it is worth something? Will you get anything if the enterprise is liquidated (by selling their office furniture or machines, for example)? Why isn't the intrinsic value zero, as I believe? Please explain...

[autodiv]

People who buy should be looking for an immediate and consistent return. Otherwise they will not hold for long.

Assets that do not communicate with investors for lengthy periods of time get dumped. They would probably be better off using IndieGoGo than crypto IMO.

[Hubus]

People who buy should be looking for an immediate and consistent return. Otherwise they will not hold for long.

Assets that do not communicate with investors for lengthy periods of time get dumped. They would probably be better off using IndieGoGo than crypto IMO.

Thanks for the hint (I bolded the letters), interesting!

[Hubus]

Do you you know of any asset that pays such high dividends that you win so much that the buying price returns? How long will this take? Could you name a concrete example with an existing asset and how long the ROI (return of investment) will take? Did you buy the asset at an extremly cheap price?

I am lucky: Even though I am very new to assets (a few days only), I got an answer to my question today: I got a payment from the LIQUID asset http://www.liquidtech.info/ today, I think it is their first ever dividend. If my calculation is right, I got about 2.8 NXT per share, which is about 1/60 of the price I paid (I did not research the issuer's original price) - which means, it would take about 60 months (they intend to pay monthly) = 5 years for return of investment!

At least now I have an example and a number to count with! I think it would be OK if ROI would be 5 years. Probably more than some other assets will pay, and with an option for more in future, of course. So I might change my doubtful answer...

Anyone with another example...?

[altsheets]

If my calculation is right, I got about 2.8 NXT per share, which is about 1/60 of the price I paid (I did not research the issuer's original price) - which means, it would take about 60 months (they intend to pay monthly) = 5 years for return of investment!

Not quite, no. Compound interest! If you calculated it the way like you did, it would make a big difference if dividends were paid monthly, daily, or yearly. With proper compound interest calculations, that does not really matter.

Let's look at two months first:

If you got back 1/60, the you now have 1 + 1/60 = 1.0166... Reinvest them immediately.
Next month you will get 1/60 again - but this time from a then higher principal!

--> 1.0166 * 1.0166 = 1.0336111... 
so after 2 months already 3.36111 % more ( = 1/29.75.. not 1/30)

after 60 repetitions you would have
(1.0166...)^60 = 2.695970 times more than before (not 2 times)


So the formula is
x^r = m
(1+p)^r = m

with
p your percentage per period
r number of repetitions, or months in this case
m the multiplicator for your starting capital


The other way around - when does it double?

If you want to know r=r_2 the moment when it doubles (m=2), do it this way:

log(x^r) = log(m)
r * log(x) = log (m)
r = log (m) / log(x)

so in your case
r = log(2) / log(1.0166...)
= 41.93

42 months. Here is the 42 again :-)

[altsheets]

For SMALL percentages relatively accurate is the rule of thumb:

70 / percentage = number of repetitions.

in your case:

70 / ( 100 / 60 ) = 42  ... which is not very different from 41.93


for higher percentages, it becomes inaccurate

e.g. 20% per year - how many years to double?
rule-of-thumb: 70/20 = 3.5 years
exact calculation: log (2) / log ( 1.2 ) = 3.802 years

e.g. 50% per year - how many years to double?
rule-of-thumb: 70/50 = 1.4 years
exact calculation: log (2) / log ( 1.5 ) = 1.71 years

[altsheets]

You can play with compound interest in my "interactive funproject 'YachtCalculator'"
--> see posting #34 https://bitcointalk.org/index.php?topic=981128.msg10856040#msg10856040

[Hubus]

If my calculation is right, I got about 2.8 NXT per share, which is about 1/60 of the price I paid (I did not research the issuer's original price) - which means, it would take about 60 months (they intend to pay monthly) = 5 years for return of investment!

Not quite, no. Compound interest! If you calculated it the way like you did, it would make a big difference if dividends were paid monthly, daily, or yearly. With proper compound interest calculations, that does not really matter.

Thank you, I know how to calculate compound interest - and it is rather easy to think it's easy to become rich with it. But this is dreaming, not the reality.

Of course you can be lucky and of course one further advantage of the cryptocurrencies is that the trading fees are low - BUT still, it is not always possible to reinvest the small amounts of dividends immediately (if you don't own such a huge amount of assets), because firstly, the price of one single asset is higher than what you get as dividends. And secondly, the price of the asset will vary with time. And if it's a good and successful asset, it will rise. That means, you will get less and lesser shares of the asset when you reinvest it.

Of course, reinvestment is an option, but for me not an automatic one. I prefer to decide each time after I got the dividend. And then I might switch to another, better asset or reinvest (or even spend the money   ).

But this is again speculation. In my calculation, I just wanted to compare assets in terms of how much dividends they pay. I think this is important for an attractive asset and might keep the interest of the investors high, and therefore also the market price of the asset itself.

[altsheets]

I just wanted to compare assets in terms of how much dividends they pay.

Cool. I understand that.

Interested to see your way
how you compare across assets and dividends
that are paid in different time intervalls.

it is not always possible to reinvest the small amounts of dividends immediately

Agreed. If you instead keep it in form of the base currency, then
you should calculate the interest that you get on the dividends,
while the clock ticks on during the rest of the year.
E.g. with HZ that is 10% per year, so 0.026098% per day. Plus forging.


Watching this thread, interesting questions.

[Hubus]

Interested to see your way
how you compare across assets and dividends
that are paid in different time intervalls.

If you look back, then of course you have to calculate with all values including Dollar or Euro exchange prices of that time point.

But for predictions you can choose complicated or less complicated ways. I prefer the simpler ones and add a 'human component' by interfering and deciding for my personal taste during the time. If assets are paid in different time intervals, I calculate like you, e.g. 10 % per year is 0.02739726 % (why do we differ here?) daily. But daily payout is better than monthly is better than yearly because of said reinvestment compound interest - if the asset owner really looks at the exact time of purchase. Some asset dividends seem to be paid for a whole month, even if you buy them one day before the end of the month (I don't know exactly, but I think they do). Then there is room for more speculation again...

it is not always possible to reinvest the small amounts of dividends immediately

Agreed. If you instead keep it in form of the base currency, then
you should calculate the interest that you get on the dividends,
while the clock ticks on during the rest of the year.
E.g. with HZ that is 10% per year, so 0.026098% per day. Plus forging.

That's why presently the hurdle for HZ assets is quite high - as long as HZ pays 10 % per year on a daily basis... So be fast and generous with your dividends   !

[bite my coins]

what kind of asset are we talking about? land? house? or other type of asset?

[Hubus]

what kind of asset are we talking about? land? house? or other type of asset?

http://wiki.nxtcrypto.org/wiki/Glossary#Asset

So-called assets in the cryptocurrency systems, e.g. for NXT coin or Horizon coin (which is built upon the NXT software). Download their wallet, there you will see the category "assets".

In principle, the assets sold there could be assets of any type like you describe them, if somebody wants to share this and creates a cryptocurrency asset*. But in reality, the asset system there is quite at the beginning in my opinion and you cannot be sure you can rely on them. But on the other hand, this problem exists in the classic financial market, too. There can be also fraud or lack of success.

Mainly, imho, the cryptoassets existing so far are about business concepts in the cryptocurrencies themselves. For example dealing with cryptocurrency exchange systems which earn fees, then the fees are distributed to the shareholders of the assets. And the software developers need the capital to fund their developing business (crowdfunding).

* It would be interesting if somebody would share a house with a cryptoasset. Then you would own part of it, but you cannot get a part from the house over the internet... but maybe if the value of the house rises/falls with time, the price of the asset will rise/fall, too. But what happens if the house is sold? In my opinion, the asset issuer should then pay out all asset shareholders and delete the asset. But whether that is possible with the current construction of the cryptoassets, I don't know. I doubt it   .

[altsheets]

e.g. 10 % per year is 0.02739726 % daily.
(why do we differ here?)

Because I have used compound interest:

10% per year, so 0.026098% per day

(0.026098/100 + 1) ^ 365.2425 - 1
= 0.09999821
~ 0.1
= 10%

0.02739726 % daily.

But with 0.02739726 % daily,
after 1 year you will end up with
(0.02739726/100 + 1) ^ 365.2425 - 1
= 0.105229198
= 10.523 % != 10%.

Please have another look at https://bitcointalk.org/index.php?topic=981128.msg10856040#msg10856040
and https://bitcointalk.org/index.php?topic=1008110.msg10964857#msg10964857