Is This the Way?

A listener asked something that’s on a lot of investors’ minds? Should I be taking way more risk?

I’m 34 y/o and a couple of years ago a friend of mine took enormous financial risk, betting his life savings on obscure crypto coins (Elrond and Fantom). The bet paid off and he has managed to turn $30k into $6 million. Can you please help me make sense of this? I have always considered myself to be financially responsible, saving a large percentage every month for retirement.

I’m concerned I’m being too responsible and need to incorporate more risk into my portfolio. My Roth IRA/403(b) is invested in 100% stock index funds, but I’m beginning to question whether I need to start allocating toward higher speculative risk investments (individual stocks, crypto, NFTs).

It feels like everything we’ve been told not to do from a financial planning standpoint is paying off right now, so I can’t help but wonder if I’m the fool for following the old school advice of “slow and steady.” 

One more time for emphasis: “Everything we’ve been told not to do from a financial planning standpoint is paying off right now.”

The piece of conventional wisdom that’s been completely turned on its head is “don’t try to get rich quick.”

Somebody tweeted that $1,00o invested one year ago into Shib, the Dogecoin knockoff, would be worth $217 million today. I don’t know if this is true. It seems hard to believe. But then again, these days the markets are full of things that are hard to believe.

You can’t buy a CryptoPunk for less than $391,000. Somebody bought a banana taped to a wall for $120,000. An invisible sculpture, otherwise known as quite literally nothing at all, sold for $18,000.

I can empathize with the listener’s question. We all can. It’s hard not to feel like an absolute idiot for investing in things like stocks or god forbid bonds.

I went out for lunch the other day with somebody who is deep in the crypto universe. He was showing me the NFTs in his wallet and telling me about all the people he knows making vast sums of money. He showed me one piece, I can’t remember what it was, and said, “I bought this for 1 ETH when ETH was $1,000. Now it’s worth 100 ETH.” He could probably hear how crazy this sounded and was kind enough to say to me after a few minutes, “I’m not trying to give you FOMO.”

I do fear missing out, but I’m okay with it. Even dabbling a little in this stuff, I’ve found that it’s slowly taken over my life. Some crypto, a few NFTs, and all of a sudden I’m constantly checking prices and looking to see if I have any offers. I know that if I really went deep into this stuff I would absolutely lose my mind. I have no interest in that. This is a young person’s game.

I have more thoughts on this, but I want to save it for Animal Spirits. I know Ben will have a lot to say on this topic as well. Tune in on Wednesday.