Topic: My bitcoin investment strategy - fixed allocation - listening to ALL your parts - page 3. (Read 5573 times)

I don't do it that way, I've picked some amount to invest in bitcoins recently, it's pretty limited amount as I just bought a car and wasn't very liquid to invest more. Not sure I'd add much more even if I had fiat available though as I was late and price was already high, I'm not much attracted to invest at such prices, wish I had done it when you did.

Now trying to grow that up through trading, not bad so far but it's still small numbers so it's long way to go to make something from it (or lose them all, lol).

In a "normal" investing environment, expecting to double your money in 10 years is considered reasonable. So, doubling your money in a year might be considered very good.

You are wrong. You made a judgement based on your expectations. The fact that it didn't turn out as you expected doesn't mean your that judgement was bad. It means that your expectations were wrong. So, now you have different expectations. How do you know that these new expectations will be more accurate that the previous ones? You can now assume that your ability to predict the future is low and you can plan accordingly.

Here are some considerations when determining a level of risk:

1. If you are highly skilled or highly educated and you are reasonably certain that you can earn money regardless of the economic environment for many more years, then the level of risk you can incur is very high because if you lose all your money, you can always make more by working. If you lack any of those qualities, then the amount of risk has to be less. If you can't (or don't want to) work, then your level of risk must be extremely low.

2. If nobody depends on you then your are free to be as risky as you want. If others depend on you, then you must also consider their well-being.

3. Gambler's ruin: there is always a chance that you will lose everything. If you lose everything, then you have nothing to invest and you can never recover.

You might be interested in the balancer bot:
https://bitcointalksearch.org/topic/goxtool-bot-portfolio-rebalancing-181584
Its using a 50/50 allocation USD/BTC but it would be possible to hack the code to allow different allocation.

You summarize it shortly. I prefer to intellectualize matters in lengthy posts

How much percent do you allocate to bitcoin?

Oh yes, you thought I was again not sticking to my system I appreciate you point that out.

I meant to say I have 45% return on my capital today, and indeed have a target exposure of 40% to bitcoin. All the % makes it confusing I understand.

No risk - no gain. If you are ready to risk and live dangerously,well, it's your money and go for it. Bitcoin is risky thingy, there is definitely chance you can make a killing with it but there's always a chance you could lose a lot.Up to each of us individually what to pick.

Thanks odolvlobo for your good critique. I would not want to lose 40% of my capital. But equally I also do not want to only double my capital when I succesfully invested in something that tenfolded in value.

Today bitcoin has tenfolded and I only succeeded in adding 50% to my capital. That's a bummer frankly. I saw the opportunity of bitcoin end 2012 around $10 and knew that this could easily tenfold. It happened much faster than I had expected, I thought 1-2 years. But I failed to capitalize on it decently. I think I made a serious error originally to allocate only 7% of my capital to such a good bet. In fact I allocated originally 5% and boosted it up quickly to 7% as I realized I wanted to at least double my capital if I proved to be right. Today the price has tenfolded and I didn't even succeed in doubling.

Capital serves as my security, but it also serves as a source of income and wealth creation. Finding the balance between that is difficult.

I am no longer supporting the philosophy 'only risk what you can afford to lose'. Because that will never make you money. It's putting security above risk taking. And security only leads to preservation, not growth. I decided both are equally important to me, so I decided on risking (on average) 50% of my capital on the best speculations I can find. Since the risk/reward of bitcoin is far superior than any other speculation I have seen, I choose to allocate almost everything of my risk capital to bitcoin.  

So if I end up losing 40% of my capital to bitcoin, I will feel bad, I will probably cry. And I will ask myself, was this really necessary? To take such a big risk? And my answer will be: it was a very good bet to take. A bet worth allocating a serious portion of my capital. But sadly it didn't work out. I will have to process the loss, cry it out, not self attack and move on, hopefully finding another opportunity and do exactly the same if the risk/reward looks also very good: Go for it. With my time, with my energy, and with my capital.  


What do you think of my defense? Is it making sense? Or do you see gaps in my reasoning?

Your strategy is a standard diversification strategy for managing risk. It is a sound strategy and I encourage everyone to use it.

My only complaint is that 40% is much too high. Bitcoin is extremely risky. Take a moment to consider what losing 40% of your money might do because there is a good chance that it will happen.

Personally, I have 10% of my money in Bitcoin and Litecoin. I feel that 10% is too much for me (being a more conservative investor), but I am a Bitcoin fanboy and I can't help it.

We have a female in the house

Thanks for replying BitChick

What do you mean with 'yes', do you think my post was too long to keep attention?


Thanks for sharing your strategy. I'm getting the impression your plan b to go all in, was not really a plan but panic buying?

May I ask what your average buy in price has been?

Do you have fears of the price dropping?

Would you have preferred to have done things differently?

Maybe I haven't understood good, English is not my native language. You said that your strategy is 40% in coins and I see that 45% there.

Yes. I learned my lesson and am now sticking to my fixed allocation strategy much better.

I don't understand what you mean with your post?

Thanks blackreplica

Could you elaborate on what you mean with 'overcommitting in extended dips'? And how this came up for you when reading about my fixed allocation strategy?

Why do you think novices to investing would have more difficulty with such fixed allocation strategy?

thanks mate

Wauw, thank you all for the many responses



This is a fair criticism. But you are comparing apples to oranges also.

I went in with only 7%, and then I applied the strategy to sell on highs and buy on lows.

If you want to compare the returns of buy and hold vs my fixed allocation strategy you should also take 7% initial investment for the buy and hold.


Here are the actual numbers. At entry price of $13 and current price of $130 I sevenfolded my bitcoin investment. A buy and hold would have ninefolded my investment.

However, I only sevenfolded because I lost a big chunk of my fiat profit to the exchange clamp down of bitcoin-24. But indeed that's extra risk for any trading strategy vs simply buy and hold. But very bad luck on my part as this is the first exchange where the fiat is frozen and seized. Until now all exchanges that had their bank accounts closed did return the fiat.  

But I take your criticism and it's a good point. I would have been better of today with a buy and hold.

My counterargument to it would be that it can still change. All depends on the future price of bitcoin. If bitcoin goes to $60 for example, a buy and hold strategy will only have fivefolded the capital with entry at $13. But I will have, I estimate, sixfolded my capital then, even after taking a huge exchange clamp down hit. Without the clamp down I would likely have eightfolded my capital by then.

With current price 10 times higher than entry price in only 5 months, a buy and hold wins out. But this is an exceptional rapid increase, that on average does not even happen on a yearly basis. So chances are right now considerably higher for the price to go sideways or down, which will be in my advantage.

Thanks for your criticism, I admit it's a strong argument and I am considering switching strategies to a simple buy and hold, if I ever get the chance to load up btc again at cheaper or depressed levels.

I can't speak for anyone else, but I didn't respond because I didn't see your post until now.  There are so many posts every day, mostly by people who have nothing useful to contribute, that the good stuff gets buried.

The same thing happend to my post yesterday at https://bitcointalksearch.org/topic/the-volatility-reduction-group-market-makers-187530.  Only one short response before it got buried among the rabble.

I would appreciate if you would read my post and respond!

I discovered this morning that there is already a trading bot that does something very similar to your strategy.  It periodically uses limit orders to readjust the portfolio to keep 50% in fiat and 50% in Bitcoin.

I'm using a slightly different strategy.  I estimate that the price of Bitcoin will probably mostly stay between $100 and $300 in the next 6 months.  I have spread my bitcoins out across that range, in the form of buy limit orders backed by fiat between $100 and the current price, and in sell limit orders backed by owned BTC between the current price and $300.  Whenever the price goes up, the sell orders automatically execute, and I use the proceeds to back more buy orders lower down.  When the price goes down, the buy orders execute, and I use those bitcoins to back new sell orders higher up.

The primary difference between our strategies is that my percentage in fiat is variable, based on my predictions about the future trading range.  When the price is $100 or less, I will be 100% in BTC.  When the price exceeds $300, I will be 100% in fiat (except for the 10 BTC I'm holding in reserve in case the price suddenly goes to $1 million).  Assuming the price stays mostly in this range, I should get higher returns.

Our strategies are similar in that, if the price goes to zero, we're both screwed.  We're both left holding lots of worthless bitcoins.  Also, if the price goes straight up, our strategies keep pruning the bitcoins until we're left with fewer than the "buy and hold" strategy.

However, the best way to predict future behavior is to examine relevant past behavior.  We've seen extreme volatility around a steady exponential increase, and I expect that trend to continue.

I would like to hear your thoughts on the differences between our strategies.

Yes.

My husband and I thought we would try to invest in BTC slowly and steadily but then just threw caution to the wind with the prices started to skyrocket.  With all of the talk about BTC being worth $500, $1000, $100,000 or more at some point we felt we had to abandon plan A and go for plan B which was going "all in."  Now perhaps it would have been better to be more methodical about it and not emotional.  We were not able to capitalize when the price dropped because we were not liquid enough to take advantage.  As long as the price keeps going up we are not losing any money.

So, I guess I would say just do what makes sense to you.  If the prices rise, no plan is really a bad plan as long as you end up with more BTC and your plan will certainly allow for that.

So, you don't stick to your system though you said not sticking to it caused mistakes.

Your thread was probably pushed off the page quickly because idiot trolls are shouting multiple threads at the top of their lungs

Yours is a mature, sane strategy, but I still think one should pay mind to how much they are willing to commit in terms of fiat at the outset to avoid overcommitting in extended dips, and that I also personally think that this form of thinking will not be easy to adopt by novices to investing.

ineedausername> give him a break. he admitted himself he made mistakes. We need more constructive threads like this in this forum.

Buy and hold: 1000%
Your strategy: 45%

wonder which one I want