Topic: Securities Newbie. HELP ME INVEST! - page 2. (Read 4345 times)

Interesting thread.

What you should absolutely figure out before you begin investing

I am a Van Tharp student when it comes to creating your own investment strategy. As he says, you should have 3 things written down before you begin investing:

1. Entry strategy. What will you buy? Why? When will you buy it?

2. Exit strategy. When will you sell? Why?

3. Position sizing. How will you manage your portfolio so that no single investment can fuck you up?

Besides this, you need to know your risk appetite. Do you have low or high risk taking appetite?

Once you know your answer to these above points, you can begin investing.

My personal thoughtprocess

Now to my thought process and a bit of my investment strategy and outlook.

I try to allocate 10% of all my money to very high risk investments. When I first read about bitcoins, I started buying it with my 10% money. Over time, because of the very fast bitcoin price rise, share of bitcoins today in my total investments is more than 10%. But I feel comfortable with it and don't plan to re-balance my portfolio until a few exit trigger points are hit.

With bitcoins itself, I had planned to divide the pie into 3 parts (and each pie would have its own entry and exit strategy and trigger points).

i. Holding bitcoins.
ii. Holding bitcoin mining equipment.
iii. Holding other assets that pay returns in bitcoins.

I had thought of keeping these pieces of the pie about equal.

Unfortunately - the 3rd piece of the pie hasn't done so well. S.Dice. Bitbet. Ziggap. Bitpride. Btcquick. Investments on BTCjam. Loaning BTC on the forum. I've looked into all of this at one time or another. And they have been disappointing.

Btcquick is the only one I'm slightly optimistic about - because of its high upside if the promoter takes care of 3-4 risks that kind of a business faces. But others are over valued. Or the opportunity cost vs its risk is too poor. For ex: S.Dice may not be over valued. But it has a poor opportunity cost compared with other investments I can make.

Loans - I just don't have the time to do the due diligence.

I had looked into coinlender too - and I think its a pretty good investment vehicle. I would jump on placing my bitcoins over there if I knew what is TradeFortress's personal insurance providing capacity limit - and if it is backed by any thing.

Anyways, because the 3rd pie doesn't do so well, my position sizing strategy isn't working. If tomorrow the govt of China busts ASICMiner, my portfolio would crash beyond my risk taking appetite. So I am looking at doing a few things to keep things in balance for me. One of these things has been creating my own asset (Win.Avalon). But thats not enough to balance the ASICMiner going bust risk. So I'm doing a few other things, but too soon to talk about it.

Anyways, moving on. A bit about my entry and exit strategies in the bitcoin world.

Bitcoins.

My (long term) theory is that bitcoin price is backed by the miners profit margin. If bitcoin prices don't give miners a fair profit, they won't sell - which would make the bitcoin prices rise. And if miners make insane profits, more miners will get in. So I buy or sell bitcoins based on the miners profit margin chart on blockchain. I do glance at moving averages but bitcoin is too volatile to make them effective to fine tune the buying or selling time - like they are if you buy shares on the stock market. So right now, my entry or exit strategies can't be setup automatically via an exchange API.

Bitcoin investments.

My entry strategy for which assets to buy depends on the following: is the upside big enough? Is the issuer trustworthy, smart, capable and motivated (needs to be all 4)? Whats the business side risks? And most importantly - volume check - how much can I buy to safely sell without crashing that asset - if I need a quick exit?

My exit strategy deals with my upside calculations I do when deciding what to buy. I try to calculate how much a business would make and based on that, I determine my sell number. I will sell as soon as that number hits. And won't wait for a peak. Or I will sell if the asset issuer doesn't execute as well, or as I've learned from Bakewell - takes on any external risk.

"When" exactly to buy / sell trigger points are still not as fine tuned. There is no "technical" data you can run to fine tune the exact buying or selling trigger points because of low volumes and very few traders. So you have to rely on your gut more than any movement of the stock - as one trader looking for a quick exit can depress the price.

Hope this post helps the beginners. Let me re-iterate the most important investment lesson: don't begin investing before you have your entry, exit, and position sizing rules written down. (And once you have them written down, be disciplined with them.)

Bumping this for other securities Newbies.

Asicminer should be the safest stock to invest in, but the current price is quite high, I would not recommend you to go all-in.

And BTC is not a currency. Moving right on to more Captain Obvious contributions of great value and import. Head still inserted firmly up ass.

Thank God for you, Peter.   

Ok, you asked for my opinion, so:

First, as others have so helpfully said, "read, read, read." Read everything you can about the principals and history of a particular "company," before doing anything. Unless- you have a highly risk oriented speculative bent. (Also as others have suggested about me.)

I really don't know anything about VMC, except that from my point of view it's AMC, and AMC has had a really poor start.

Here's something else I experienced:

I'm highly technically oriented, so I wanted to mine BTCitcoin. After considering the hardware for a while, I could see that the ASIC based miners would blow the doors off anything else you could put your money into. In addition to that good hardware is difficult to come by because miners don't want to part with the golden goose.

So, round about mid January 2013, while looking into hardware, ButterflyLabs popped onto my screen possibly dozens of times. No other ASIC offering did. I looked into the price, calculated potential return, thought a bit about hardware development times (I'm an engineer), noticed they were claiming to ship in mid March, noticed they probably began working on it probably in May-June 2012, thought it was possible, and bought one.

It doesn't matter which one. No, that's not true. Thank goodness I didn't buy a Mini-Rig! The way I calculate it, you'll need a heat sink the size of a room and a power supply for a large home for that baby. You won't be on a normal 15 Amp outlet circuit, or even 4 of them. You will be calling your electricians. It won't be UL listed.

What really matters is that the advertising worked great, but the performance has been irritating at best. I notice that AMC/VMC may be on that path...

Here's the deal though, I could be wrong. I often am. I sure was about ButterflyLabs.

And because of that, I look again at things that I've chosen not to invest ("speculate" for those of you with softer stomachs) in. Sometimes I just buy a little (very little) to have some "skin in the game." I'm glad I did that with BTCitcoin itself. It's been great! 



PS, A note about "investing" vs "speculation":

You are kidding yourself that there's any difference, except: The idea that "investing" portrays is that you can predict the future.
Really, "invest" is the word that your broker uses to sell you something and "speculate" is the word your dad uses to let you know you're on your own!

As I've said before, the future is so much easier to predict after you see it.

Who, me? Does anybody actually look at signatures?

One word of advice: Read through some of MPOE-PR's posts, there is some good advice in there (but there are some times when she is an idiot, so be careful)

Thanks for all of the advice, everyone. I am also looking into BTC investing and this has give me a good place to start my research.

very good peace of writing....I agree with you..  there are a lot of people buying VMC in those days, what you think of VMC..I found they put a normal desk computer's picture to use as demonstration of their product... Do you think they will be another scam?

So where are the financial statements? Those are not it. There is no balance sheet or income statement that I can see. And that is not a company either.

This would be completely false, and a clear illustration as to why we don't encourage noobies making judgement calls.



Locate ass. Retract head. Breathe in.

My goodness things are complicated enough without you guys going off on an tangent about bitcoins vs. fiat as a metric.

@OP: The only thing I'd like to say is that non of the companies here are actual companies nor do they publish financial statements. Essentially you are relying on the honesty of a few people and the security of sites like btct.co. So it's not investing. It is speculation.

This x1000.

If you are asking internet strangers how you should 'invest' your volatile bitcoin into non-regulated volatile bitcoin securities, you are asking to get burned.

I like to look at it this way: sometimes people don't see clearly what's ahead for a particular security, which can be different from what's ahead for the company or the issuer. That can give me the opportunity to profit.

Often it's like being out in the woods: some days you get the bear, some days the bear gets you.    Just make sure you get away before it eats you.  


Thanks Deprived!

This however has pronounced macrostabilization effects, especially as the size of the economy grows. Two years ago BTC denominated securities were epsilon, and the BTC went from 30 to nothing when MtGox fucked up. This spring BTC denominated securities were over 1mn BTC (S.MPOE like 750k, S.DICE like 500k etc) and when MtGox fucked up again the price went temporarily to 50 then bounced back within days.

So it's not merely a case that the values of BTC securities are set by the exchange-rate. There's some significant effect, and as MPEx grows and as it extends its influence on Wall Street the situation will likely reverse, and we'll have exchange rates set by the performance of BTC securities. As it should be, after all.

My thoughts are that the vast majority of investments sold on BTC exchanges are in practice tied to fiat (exceptions being securities which don't hold significant physical assets or trade in physical assets - e.g. shares in exchanges themselves and trading funds).  It's pretty much inevitable that this is the case - as nothing of any note has a price that's actually fixed in BTC so the value of BTC itself is entirely driven by speculation/confidence.

As a result the performance of the vast majority of BTC securities will continue to be predominantly set by the exchange-rate.  When BTC rises profits (in BTC) will fall and price will fall - and vice-versa.  Which is why I continue to stick to trading rather than investing - it's easier to make profit from the bad judgment of other investors than from the actual securities.  Most investors' idea of valuing a security is to look at what the bid and ask are at and the value is somewhere in between.  Which is often correct if determining book value - but useless when evaluating something as an investment or trying to make a decision on whether to buy, hold or sell.

Hey, one other thing:

Technically, everything in BTCitcoin here has exposure to fiat. However, the activity here is a concerted effort to remove that as a problem. There are attempts to switch away from fiat being made.

Really, all I'm trying to do is find good ways to measure profitability without converting back and forth to fiat. Predictions become very difficult when you do, mainly because of the extreme volatility of the exchange rate.

As someone keeps in their signature: The Volatility Monster is gobbling up all my BTCitcoins!

Didn't you also say that there's a form of timing involved?

This is what I learned from you:

When the supply is available for the demand in ASICs, the mining companies become heavily fiat biased.

I looked at that in a different way:

When the difficulty grows beyond the predicted rate of increase (of difficulty), the miners become unprofitable (in terms of BTCitcoin).


However, in either case, there's a timing involved. And I also claim that it can be exploited currently (opportunity!)

There's also risk, and in fact I believe that risk can be quite high. Especially if we don't pay attention.

And you are right. Miner prices have dramatically changed, with the exchange rate. Those who bought earlier have been rewarded both with easier difficulty and with lower miner prices. And that's exactly my point about your A vs B example. Timing of mining gear matters. And it especially mattered from Feb to now. I think that may continue and even accelerate for a while, making it quite difficult   to predict profitability.

Still, the best of the best is ASICMiner. Mining, equipment production, sales, early mover in the market, plans for the future.  

I also think that when things begin to settle down a bit, the BTCitcoin securities market companies may perform better than anything else for a while.

What are your thoughts there?

Maybe we're just using 'denominated' for different purposes - you meaning the currency they're traded in and me meaning the currency in which their value is defined in practice.

So let me reword our difference.

You claimed mining securities have low fiat-exosure.  I disagree - they have as high fiat-exposure as you can get.

Just because you buy something with BTC doesn't make it BTC-denominated.

If you buy a Dollar bill with BTC the bill is still denominated in USD.  Same with mining securities.  Their value is pegged to USD not BTC - no matter what the issuers pretend or which currency trades are transacted in.  If BTC rises vs USD their value falls.

Given that mining securities have 100% exposure to fiat it's hard to see how your claim they have less exposure than some other investments could be correct.  Are there securities whose value is more than 100% tied to fiat?  If BTC double vs USD do you honestly believe S.DICE bet volume more than halves (S.DICE being something you claimed had more exposure to fiat than mining securities)?

Your claim that they were priced in BTC was made when you stated that hash power was priced in BTC.  Hash power is pretty much ALL that mining companies have - so rather obviously their price is denominated in whatever hashing power is priced in.  Which you said was BTC - but it's usually fiat (even if transacted in BTC).  Try finding somewhere that sells hashing power priced in BTC - and keeps same BTC price if BTC moves majorly in either direction vs USD.