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Author Topic: Permanent portfolio: When you can't afford to lose money  (Read 117 times)
Bezobraznike
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May 07, 2018, 08:03:38 PM
 #1

   I just finished with reading this article:
-https://www.investmentu.com/article/detail/28526/harry-browne-permanent-portfolio#.WvCtVJeZG00

   "Dividing investment money into two categories:
-Money you cannot afford to lose.
-Money you can afford to lose.

   This Harry Browne talks about traditional economy. He made me think about it and I replaced
that traditional with crypto-currencies. Money younot afford to lose should go to main coin`s,
with money you can afford to lose you can risk a bit more.
   
"Once each year, you rebalance the portfolio. If any part of the portfolio has dropped to less than 15%
or grown to over 35% of the total, then you reset all four segments to 25%."

    This is something I didn`t try, but I see the point. In article he explains:
   "Because this asset allocation is diversified, the entire portfolio performs well under most circumstances."
Can we claim the same for crypto-currencies? My opinion is yes.
   
   Great article, I hope after reading it you will think the same. Some people already know`s a lot about this
kind of strategies, but as someone new I am still learning about many thing`s.
   
   My current portfolio is:
-60% in real-estates
-10% in banks and precious metals
-30% in crypto-currencies

   Do you have any suggestions, comments or proposals how portfolio should look. What would be
a winning combination for the future?

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May 07, 2018, 08:07:52 PM
 #2

These are good thoughts. I think they are mostly applicable to people who have some experience though. Investing in a market that can be essentially the same as gambling day to day for newbies who might just pull out if they see it decrease in value overnight means that until they're "ready", they should invest only what they can afford to lose. They're gonna make mistakes - even the pros do. But, for someone a bit more confident and understanding of the system, I hands down agree with you.
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May 07, 2018, 08:11:43 PM
 #3

Agree, money we can't afford to lose may be invested in more known coins (For me ether, litecoin would be better for safety than bitcoin).
Invest money you can afford to lose in ICO's, less known coins which you think has the potential of massive use and rise.
But main idea is here how much time we can to hold it so psichologycal aspect plays more important role here too with luck of course.

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Bezobraznike
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May 08, 2018, 12:47:12 PM
 #4

   It does not matter whether it comes to gambling or investments most important thing is to have control over your money.
Better control gives more chances for safer and higher profit. All we have to start from somewhere, experience is something
that is gained trough work and sacrifice.
   Money management is what we should practice. My question is how to make your portfolio in this time`s. I am still learning
a lot about it. Diversifying is not just a word, that should be a practice with all our possessions.
   Should we get more involved in crypto-currencies? Should we be safe and have more assets in real world or crypto world?

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May 29, 2018, 11:43:56 AM
 #5

Quote
"Dividing investment money into two categories:
-Money you cannot afford to lose.
-Money you can afford to lose.

This really makes sense. There are certain instances that we cannot affort to lose all the money we have to trade in. So, for us to be able to handle that, dividing it into two categories will somewhat be useful and will set aside your emotions. It matters that we handle those two dividided categories of money wisely.

But then, I really believe that good management, good technical analysis should be incalculated for you to be able to gain more in your diversified portfolio.

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May 29, 2018, 12:46:17 PM
 #6

Should we get more involved in crypto-currencies?
It is up to you if you want to get involved in crypto or not, but it might become useful to you in the future if you got more involved with it.
Should we be safe and have more assets in real world or crypto world?
I think your current holdings are fine as is but if I were you, I would lessen my portfolio in real estates for a better balance and it will be safer if you don't put a large percentage of your portfolio(above 50%) on one asset.
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May 29, 2018, 11:59:19 PM
 #7


   "Dividing investment money into two categories:
-Money you cannot afford to lose.
-Money you can afford to lose.

   This Harry Browne talks about traditional economy. He made me think about it and I replaced
that traditional with crypto-currencies. Money younot afford to lose should go to main coin`s,
with money you can afford to lose you can risk a bit more.
  
"Once each year, you rebalance the portfolio. If any part of the portfolio has dropped to less than 15%
or grown to over 35% of the total, then you reset all four segments to 25%."

    This is something I didn`t try, but I see the point. In article he explains:
   "Because this asset allocation is diversified, the entire portfolio performs well under most circumstances."
Can we claim the same for crypto-currencies? My opinion is yes.
  
   Great article, I hope after reading it you will think the same. Some people already know`s a lot about this
kind of strategies, but as someone new I am still learning about many thing`s.
  
   My current portfolio is:
-60% in real-estates
-10% in banks and precious metals
-30% in crypto-currencies

   Do you have any suggestions, comments or proposals how portfolio should look. What would be
a winning combination for the future?

Investment gurus refer to "income you can afford to lose" as "disposable income". There are many investment and financial freedom methodologies for how disposable income should be handled. Whether it should be invested, saved, utilized to start a business or do something different. Its difficult to generalize these abstracts as people tend to have unique DNA and different strengths. Many of the same traits are encouraged: getting out of one's comfort zone. Willing to suffer and be uncomfortable in order to achieve one's goals. Being focused and disciplined in terms of how time is allocated.

Generally investors and financial freedom advocates are attempting to beat inflation and multiply wealth via saving/investing/etc. Focusing on areas where difficult problems can be solved in order to create the greatest long term value to humanity may be defined as a decent roadmap to success.

Looking at crypto the most difficult issues to solve are things like higher transaction rates, difficulty in confirming identification or obtaining collateral for issuing crypto loans, operating deregulated markets which keep crypto efficient, fast and guarantee low fees. As far as buying crypto goes that could be an extremely good investment over the long term. Deficits and debt held by governments continue to mount. If a crash ensues--people will look for a safe place to store their wealth and fiat probably won't be the first place they look. And so crypto could yet see a massive increase in value if the event of state defaults or crashes occur. It may not be the most moral thing to profit off these types of unfortunate circumstances but whether or not things will ever really change or be addressed who knows.

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May 30, 2018, 01:49:20 AM
 #8

   I just finished with reading this article:
-https://www.investmentu.com/article/detail/28526/harry-browne-permanent-portfolio#.WvCtVJeZG00

   "Dividing investment money into two categories:
-Money you cannot afford to lose.
-Money you can afford to lose.

   This Harry Browne talks about traditional economy. He made me think about it and I replaced
that traditional with crypto-currencies. Money younot afford to lose should go to main coin`s,
with money you can afford to lose you can risk a bit more.
   
"Once each year, you rebalance the portfolio. If any part of the portfolio has dropped to less than 15%
or grown to over 35% of the total, then you reset all four segments to 25%."

    This is something I didn`t try, but I see the point. In article he explains:
   "Because this asset allocation is diversified, the entire portfolio performs well under most circumstances."
Can we claim the same for crypto-currencies? My opinion is yes.
   
   Great article, I hope after reading it you will think the same. Some people already know`s a lot about this
kind of strategies, but as someone new I am still learning about many thing`s.
   
   My current portfolio is:
-60% in real-estates
-10% in banks and precious metals
-30% in crypto-currencies

   Do you have any suggestions, comments or proposals how portfolio should look. What would be
a winning combination for the future?

there are many ways to look a better porfolio,and its up to you to choose,of which kind of investment thats most suitable to you most,but in my own,i rather prefer the digital currency investment,to secure my dreams in the future because i want to have a fund  for the future needs of my family,even all things in this kind of investment is risk,but i want to grab this kind of oppurtunity  to be involved in cryptocurrency,because my future is here,so therefore how about in you,its up to you to decide  where is most affiliates in your own agreeableness.

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May 30, 2018, 02:22:24 AM
 #9

  I just finished with reading this article:
-https://www.investmentu.com/article/detail/28526/harry-browne-permanent-portfolio#.WvCtVJeZG00

   "Dividing investment money into two categories:
-Money you cannot afford to lose.
-Money you can afford to lose.

   This Harry Browne talks about traditional economy. He made me think about it and I replaced
that traditional with crypto-currencies. Money younot afford to lose should go to main coin`s,
with money you can afford to lose you can risk a bit more.
  
"Once each year, you rebalance the portfolio. If any part of the portfolio has dropped to less than 15%
or grown to over 35% of the total, then you reset all four segments to 25%."

To rebalance 15 to 25 and 35 to 25 is very hard, because you need to sell what is going well, and buy more of what is performing badly.


   My current portfolio is:
-60% in real-estates
-10% in banks and precious metals
-30% in crypto-currencies

   Do you have any suggestions, comments or proposals how portfolio should look. What would be
a winning combination for the future?

Zero bonds? I think zero bonds is crazy.

,consider some money in stocks.
ETF index funds are safer, as they are a mix of the best performing stocks.

30% in crypto is very aggressive too...


Take a look at my post about correlation and Modern Portfolio theory.
Bitcoin can reduce the risk of your portfolio


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May 30, 2018, 02:25:35 AM
 #10

The first rule warren buffett likes to say about investing is "don't lose money," and the second rule is "never forget rule one." I also believe that preventing losses should be the main objective of every investor.

This does not mean that investors should never take any risk of loss. Because any investment is risky, what we can do is to minimize the risk.
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May 30, 2018, 02:30:44 AM
 #11

Cryptocurrencies are an extremely risky investment, so it's definitely the right place where to invest if you can't afford to lose money.
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May 30, 2018, 02:59:13 AM
 #12

This is the prerogative of long-term active and passive investment. This is a passive strategy built on diversification. Not using market time.

This is a defensive investment strategy that also generates a decent return. But remember, the goal is stability.
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May 30, 2018, 08:49:05 AM
 #13

Also from the same article:

Quote
This is that old active versus passive investing prerogative. It’s a passive strategy built on diversification. It doesn’t use market timing.

It’s a defensive investment strategy that also happens to produce a decent return. But remember, its goal is stability.

Ultimately, if your goal is to simply retain value over the long run then a portfolio that looks similar to this model could work. However, you are definitely not going to be profiting the maximum that you are able to if you were to be able to take advantage of market cycles as well.

I honestly don't think that 30% in crypto is that big of an issue, provided that you diversify properly and pick your investments wisely. With the other sectors, I do suggest having some more precious metals (diversify between silver and gold), and also stocks & bonds. This kind of portfolio isn't going to make you crazy profits since if one sector goes up, it essentially hedges against all the rest. So don't expect massive returns from it at all.

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May 30, 2018, 08:54:01 AM
 #14

Well, I'm pretty sure everyone's already doing this or like this one way or another. I myself invest money i can afford to lose. Then i make it grow and cut gains a little at a time or reinvest them sincs it is income i got fron money i can afford to lose. What i did is basically, achieving ROI as soon as possible then reinvest the rest.

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May 30, 2018, 10:19:05 AM
 #15



   
   "Dividing investment money into two categories:
-Money you cannot afford to lose.
-Money you can afford to lose.
I think I agree with some of the position being painted there but I also did not see any thing special other than he just presents it in a more lucid and clear manner because by default every investment advice that has been announced on the forum has always been invest what you can afford to lose in crypto which has by default divided your money available for investment into two categories.

   
   My current portfolio is:
-60% in real-estates
-10% in banks and precious metals
-30% in crypto-currencies

   Do you have any suggestions, comments or proposals how portfolio should look. What would be
a winning combination for the future?

Your portfolio classification is really cool and shows that you have put your money in place you have less confidence but the truth is the real estate market has crashed before, so also banks and precious metals. But again, we need to start changing our mentality about investment in crypto that the money involved should be what you can afford to lose as this is affecting the confidence in the sector.

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May 30, 2018, 10:43:11 AM
 #16

Hmmm... it seems to be a very wise strategy, because it sounds so balanced and tested. I deffinately should try that on my own experience
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May 30, 2018, 11:02:23 AM
 #17

   
   My current portfolio is:
-60% in real-estates
-10% in banks and precious metals
-30% in crypto-currencies

   Do you have any suggestions, comments or proposals how portfolio should look. What would be
a winning combination for the future?

Your portfolio looks good but not great in context of the dynamic economy we are going through right now. While I consider real estate is a great asset to have but it also serves another purpose of having a decent living space. So it may not always serves as an investment unless you sell it off. However, having 30% in cryptos and only 10% in banks are really very aggressive according to me. It should be other way around, while 30% in banks and precious metals and 10% in cryptos. I can understand that cryptos can outperform bank's return but at the same time it is very fluctuative in nature. So you may earn 40% return from cryptos in good times but you may also loose 40% in bad times.

Also try investing in stocks of blue chip companies and mutual funds. It comes with tax savings benefits and also offers a decent return compared to what banks can offer. The main point of my suggestion is to diversify your portfolio by reducing your exposure from the cryptos. Add stocks, corporate deposits, mutual funds and obviously Insurance. Even though Insurance is not considered as an investment asset, but it proves its worth during unforeseen events.   

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May 30, 2018, 09:32:35 PM
 #18

Keeping the sectors in your portfolio equal every year, by selling off the overpriced investments, and by buying more of the undervalued ones can be a good decision to make. The major issue though, is that what if you buy at a really inopportune time?

For example, if you buy gold into your portfolio when it's clearly in a bubble, no matter how well you manage your portfolio, that's likely going to end up a loss for you unless you decide to hold for the long term.

Also, it's sort of misleading as you can still lose money with this combination - it merely reduces the risks. It doesn't eliminate them altogether, that's something that you need to know before investing in anything, or building your portfolio.

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May 30, 2018, 10:26:31 PM
 #19

Agree with the basics, but think you need to balance your portfolio more often in the 'cryptosphere', the markets move much quicker than traditional investments. If you waited a year you could be a multi millionaire or broke.

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May 31, 2018, 01:19:23 AM
 #20

   
   My current portfolio is:
-60% in real-estates
-10% in banks and precious metals
-30% in crypto-currencies


Each portfolio needs to be based on its own merits and risks assessed. I don't think there is a magic formula. Only time will tell.

In the US Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012.

1890s Australian banking crisis.  Population contracted by 12% and the Melbourne property market fell 51%. It took the market 19 years to return to its peak of 1889. Sydney’s property market also fell, but by the smaller amount of 36%.

Property that is unable to be rented out (still have to pay real estate based taxes) or has a value below the mortgage value is a liability.

Property that is able to grow food or firewood in a crisis can be an asset.

The Greek government extended bank closures and a €60 (£43; $66) daily limit on ATM withdrawals. Banks can close and money in banks can be lost in an financial crisis. A lot of people lost their savings.

Cash can be subject to hyperinflation in a financial crisis but it can also be useful in a natural disaster.

Executive Order 6102. Executive Order 6102 is a United States presidential executive order signed on April 5, 1933, by President Franklin D. Roosevelt "forbidding the Hoarding of gold coin, gold bullion, and gold certificates within the continental United States".

Untraceable bullion can be hoarded and used (illegally) on the black market when such regulations are made.

Crypto currencies won't work well in a solar flare, cyber war, power crisis, major internet infrastructure damage etc.

Crypto can potentially be very profitable.


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