Every Sunday I publish a newsletter featuring the best hacks, tools and insights I discover on my journey as an investor and digital nomad.
This week I invested in two cryptocurrencies, BEPRO Network and Ecomi, both already up 500% and 230%. With younger demographics leading the crypto hype, I’ve been thinking about how each generation has a unique investment thesis based on the socio-cultural-economic circumstances they experience in their formative years.
To explore a younger investor’s mindset, in this newsletter, I’ll share the logic behind how I’d invest $1M.
First, I’ll cover the basics.
My objective. A blend of capital appreciation and income generation, with a preference for passive investments.
My risk tolerance. High. My consultancy provides me with the financial stability to take large risks. I’m looking to win big and willing to take some hits on the way there.
Time Horizon. Long. I’m only 25 and don't require an immediate return on investment. I’m happy to be patient and benefit from compound interest.
Next, I’ll consider the broader economic environment.
Global markets slumped in March 2020 with the Coronavirus outbreak, but rebounded in the following months. While the US continued this uphill trend, European and Asian markets have lagged behind.
A significant portion of US appreciation is attributed to rising multiples - the profitability of US companies hasn’t improved, people are just paying more for them!
Most recently, there’s growing optimism about the US economy in the wake of Biden’s $1.9tn fiscal stimulus and the country’s swift vaccination rollout. Consequently, we’ve seen a surge in bond yields due to expectations of inflationary pressure facing the US economy.
It’s clear to me that investors are hungry for returns - they’ve got a lot of cash and money is cheap. This search for yield has resulted in frothy valuations and, since we’re yet to fully recover from the coronavirus pandemic, I’m concerned as to whether we’re in a bubble. This, coupled with inflation expectations, means I won’t be investing in bonds or in gold.
TLDR: How I’d Invest $1M
10% - Cryptocurrency: Allocated to Bitcoin and Ethereum, held in high-interest accounts
25% - Financial Markets: Allocated between Index Funds and ETFs
50% - Real Estate: Allocated to two European properties rented on Airbnb
15% - Angel Investing: Allocated to 10 early-stage start-ups ($5-50K each)
My objective here is capital appreciation - I believe the wide-scale adoption of digital currency is an eventuality. The Crypto bull case is well-explained by Tyler Winklevoss in this YouTube video and Eric Peters in this podcast.
In early 2021, the capitalisation of global equity and debt markets totalled $200 trillion. With the Crypto market capitalisation nearing $2 trillion, they now represent 1% of the global market portfolio.
According to the Black-Litterman model, if you don’t have views on investment performance, the global market portfolio is what you should hold. The model is smart, however. It adjusts according to the growth rate you expect for a given investment and your level of conviction in that assumed growth rate.
With this in mind, I’ll allocate 10% of my portfolio to Bitcoin and Ethereum. I’ll hold these assets across centralised (CeFi) and decentralised (DeFi) lending platforms that allow users to earn interest on Crypto. At the moment, it seems reasonable to expect a 10-15% interest rate, and I’ll spread my assets across a few platforms to reduce counterparty risk. For CeFi, my favourite platforms are Celsius, BlockFi, Nexo and Binance. For DeFi, there’s Aave, Compound and dYdX. Kraken, the Crypto exchange I’ll use, has produced a useful beginner’s guide to Aave.
Factors I’ve considered in making this decision include:
Low investment barrier: Cryptos are divisible - I can trade smaller fractions, allowing for easy portfolio adjustments and a low investment threshold
Liquidity: Crypto exchanges operate 24/7 - I trade my assets at any time
Diversification: Crypto offers diversification away from stocks and bonds
My objective is modest and passive capital appreciation. I don’t want to go down the rabbit hole of analysing stocks and prefer to benefit from compound interest. I’ll therefore invest in ETFs and Low-Fee Index funds.
For Index Funds, while Robo-advisors like Wealthfront or Nutmeg are viable options, I prefer to use Vanguard for their low fees and flexible fund selection. So far this year, Value stocks have outperformed Growth stocks. And the Financial, Energy and Industrials sectors have been the best performing. I expect this to continue, driven by a reversal in last year’s trends, and will allocate accordingly and adjust thereafter.
I’ll purchase properties and rent them through Airbnb. My objective here is passive rental income rather than capital appreciation. While COVID has hurt this business, it’s also accelerated the remote work trend and ignited people's desire to travel and explore. Thus, some countries are already seeing rental yields return to normal.
As a digital nomad, I’ll occasionally use the properties myself - for a change in scenery and to save on rent - and European timezones are preferable. This, coupled with portfolio diversification, is why I’ll get two properties instead of one.
To avoid seasonality, I’ll invest in “Urban” properties. London, Istanbul and Yerevan are off the table, as my family are already invested there.
With all this in mind, Lisbon, Dubai and Barcelona strike me as the three best options. I've got friends in each of these cities too - so I could have them help me coordinate with agents, guide me on the property market, and assist with any rental issues.
Outside my personal preferences, these are two articles I’d recommend reading: The 15 Best Places to Invest in Real Estate in 2021 and AirDNA’s 2021 Trend Report.
The benefits of Angel Investing are extensively covered online by the likes of Jason Calacanis and Peter Thiel. Following Tim Ferris’ ‘How to Create Your Own Real-World MBA’, my objective is to learn as much as possible about start-up finance, deal structuring, rapid product design, etc. while also networking with the most astute players in start-up investing.
“The best investment you can make is in yourself.”
— Warren Buffet
I’ll invest $150K into 10 companies. Unlike Ferris, however, I do not plan to “lose” this investment. Based on research by Angel Resource Institute, FIBAN, and Right Side Capital, I expect an investment holding period of 5 years, a 22% IRR, and a 2.2x ROI.
To minimise my downside risk, I’ll rely on various rules, checklists and mental models - such as those from Kogito Ventures or Muhan Zhang. To maximise upside, I’ll focus on sectors that I’m bullish on and companies that I’m able to add value to. This includes HealthTech & Longevity, Future of Work, Plant-Based & Lab-Grown Products, Creator Economy, Psychedelics and Cannabis, and Electric Vehicles.
I’d love to hear from you
How would you invest $1M? How would you construct your portfolio? What’s your favourite asset class? Do you think the socio-cultural-economic circumstances you experienced growing up impacted these decisions?
Note: This is not investment advice! My decisions are influenced by my specific circumstances and experiences... Growing up in London in the 90s, working at hedge funds and banks, and now advising $1Bn+ AUM family offices, VC Funds and start-ups through Django Digital.
Nomad Hacker News This Week
👻 Ghost, a platform for creators to build a modern subscription business, released its v4.0. It looks awesome and I think I’ll finally move my website from Notion to Ghost on the back of this!
🇪🇸 Spain declares its reopening for tourism when at least 30% of the population is vaccinated.
🇪🇺 The EU reveals its new vaccine passport to be rolled out for summer travel. The proposal aims to make travel easier between EU and non-EU Member States. The UK was noticeably absent from the plans.
🇹🇭 Thailand plans to drop quarantine in popular destinations for all travellers beginning in July.
What I’ve Been Reading
🤔 Your Thinking Rate Is Fixed. “You can’t force yourself to think faster. If you try, you’re likely to end up making much worse decisions. Here’s how to improve the actual quality of your decisions instead of chasing hacks to speed them up.” (1,800 words).
🧠 Could You Learn Every Subject? This short post explores what it would take to become a polymath with a basic understanding of “every major intellectual area”. It begins by listing and ranking disciplines by your knowledge in them. It’s a nice and simple way to think about something that could easily send you down a rabbit hole. (1,300 words).
🤓 The Educational and Economic Necessity of Lifelong Learning. “In one generation, the average job tenure has gone from ten years to less than three years.” Ann-Laure Le Cunff considers how to be an effective lifelong learner in the face of uncertainty and new market dynamics. (1,500 words).
What I’ve Been Listening To
💸 Ted Seides interviews Eric Peters on the macro case for Bitcoin. The first episode in a four-part series on Crypto for institutions. I’d highly recommend the first and fourth to anyone looking to get a grounded insight into trading Crypto. (00:58:57).
🔮 Kevin Rose interviews Aftab Hossain on all things NFT - what they are, why they’re collectable, and why you should care. Aftab’s a leading voice in Crypto, with a special focus on decentralized finance ("DeFi") and Ethereum technologies. (01:02:41).
🌐 How does immigration affect developed countries’ institutions? Alex Nowrasteh explores the effect of immigration on cultural and political institutions. As the son of immigrants, I found this particularly interesting! (00:28:10).
The Tools I’ve Discovered
🏡 AirDNA is a free tool that provides valuable insights into the performance of over 10 million vacation rentals across 80,000 cities worldwide. I’ve been using it to help my clients at Django Digital decide the best locations for property investment worldwide.
📆 Coinmarketcal is a free website to build a cryptocurrency calendar of upcoming events that might push up a coin’s price. It’s evidence-based and community-driven.
🐦 Excerpts From The Twitterverse
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