Leverage Your Finance

Written by Lindsay Mayhall on March 21, 2022

The majority of people don't invest in any sort of stocks, bonds, or other financial vehicles. Why is that? It is believed to have something to do with our education system. Our teachers do a fantastic job teaching us basics such as Algebra and English Lit. However, they are unable to help us learn how to invest our money in a practical way in order to gain wealth. In fact, many people think you need a Masters degree in Finance in order to become wealthy through investing. Thankfully though, this is not the case (due to the fact that college tuition fees are astronomical nowadays). In this article, we will steer you away from some common misconceptions about investments so you can finally start building your own riches.

We are NOT all going to retire at 30 years and a portfolio full of money

More than ever before, there are so many misconceptions about what retirement really is. For example, there are two completely conflicting viewpoints regarding the average portfolio size people should expect in retirement. If you ask most people, they will tell you that we all will be retiring with a 30-year portfolio full of money. If you ask the financial professionals and economic experts (and even some politicians at times), you'll hear that Social Security is going bankrupt and many Americans will be working for most or all of their retired life.

Crypto Investing

Crypto Investing is an alternative form of funding. Much like crowdfunding, it allows investors to contribute to a project in return for certain benefits. The main difference is that with crowdfunding, the focus is on creating and sharing something new, whereas investing is about making money. Cryptocurrency is a type of currency that’s completely virtual. It’s made possible by a technology called blockchain, which is used to create permanent and transparent records of transactions.

You may be familiar with Bitcoin, the first decentralized cryptocurrency that was released in early 2009. Similar digital currencies have crept into the worldwide market since then, including an altcoin called Litecoin. As of September 2017, there were over 1,100 cryptocurrencies available over the internet, and the total market value of all digital currencies exceeded $160 billion. The main difference between Bitcoin and Altcoin is that Bitcoin is relatively similar to a sprinter whereas Altcoin are like long distance runners. Altcoins have much more scope for experimentation but when it comes to practical use cases, Bitcoin is way ahead of the pack.

The online exchange CoinBase supports all of these cryptocurrencies, along with many others. You can store your coins on CoinBase or transfer them to a private wallet

Investing in cryptocurrencies can be lucrative and risky at the same time. While there are opportunities for huge gains, there's also potential for financial loss due to volatility in prices and regulatory uncertainty surrounding their legality.

Asymmetric Investment (Tail Risk)

In the financial world, tail risk is a type of risk that arises from events or outcomes that occur at the extremes of a probability distribution. An asset that has a high tail risk will be much more volatile than one would expect based on its average return. The term has evolved to include any investment with an unusually low probability of occurring, regardless of whether it occurs at the end of a bell curve.

The term "tail" refers to the ends of a bell-shaped curve showing results for an investment's probability distribution. In other words, it describes outcomes on either side of the median value. For example, if an investor is expecting a 5% return on an investment, and instead loses 50%, then he or she has experienced a negative tail event.

An investor may seek out investments with positive tail risk if they want to increase their overall portfolio's return without increasing its volatility significantly. If an investor believes they have found such an investment, they may take highly leveraged long positions in order to benefit from the potential gains.

It should be no surprise that the younger generation is booming in the crypto space and the understanding of Asymmetric Investments. Not only will they be its primary drivers, but they'll continue to boom as the younger generations continue to set their course in the realm of finance. We recommend a long-term view as opposed to trying to "catch" every pump and dump (which is often not a sustainable strategy). A more pragmatic investment strategy would utilize some degree of market timing alongside a well diversified portfolio. The market will trend upward over time, but past negative events can have an influence on future performance. Careful risk analysis is key when it comes to making investment decisions. 

Popping champagne too early is always a recipe for disaster. Be patient and have your evaluation criteria set up beforehand so that you won't chase momentum. The best time to start investing is today…