Weather the Storm

If this blog affords me anything, it is the opportunity to write about the things that occupy my attention. Day after day, since 2022 started, I wearily watch as the stock market plummets and any profits and gains from the last several years get wiped out within a matter of months. Like the gray, rainy weather in Seattle that leads some to experience seasonal affective disorder (SAD); so to can the chronic red and sharp declines in the stock market lead to gloom and mental anguish.

By definition, a correction is a market decline that is more than 10%, but less than 20% off of a recent market high. A bear market is usually defined as a decline of 20% or greater. The S&P 500 index is the overall representation of the market’s performance. There are plenty of other terms (i.e. market dip, crash, etc.) that are pertinent but could just as easily be Investopedia‘d.

Again, graphs like the one above present the performance of the overall S&P 500 Index. If you are like me, and your portfolio is a composite of index funds, stocks and bonds, and other asset classes – you may fare significantly better, catastrophically worse, or somewhere in-between.

Individual stocks are prone to much more volatility. A character on an HBO show rides his Peloton, suffers a heart-attack and dies – causing the stock to sink nearly 12% the next trading day. A large group of traders on the r/WallStreetBets Reddit forum helped drive GameStop’s stock surging up over 400% once upon a time. A misinterpreted tweet by Elon Musk stating to ‘use Signal’ confused investors and sent the wrong stock up soaring over 6300%.

More recently it is the Ukraine and Russia conflict and the question of an impending war? The Federal Reserve and possibility of several interest rate hikes? Certainly economy-related concerns but also lots of other miscellaneous events and outside influences can spook investors and cause the fear that lead to sharp market declines and panic selling.

Probably a totally irrational skepticism on my part – but I think the news media has manipulation tactics and selectively seeds content, stock analysts have their own obvious biases and agenda, and of course corrupt politicians have access to insider information that allow them the ability to execute privileged and personally advantageous trades. It is hard to find trustworthy sources to believe. Just my opinion.

In a past blog, I briefly introduced a bit about my investing approach. Certainly trying times like these test our conviction. Lots of different investment philosophies exist – each with their own strengths and weaknesses. I subscribe to a philosophy known as Dollar-Cost Averaging (DCA). You can read about it a bit more here, but essentially you put same amount of money in the same stock (or index fund, etc.) on a regular basis over time, regardless of the share price.

“Our favorite holding period is forever.”
– Warren Buffett

In terms of personal investing, the February-March 2020 bear market was the only one I have actually had to endure. Before that, I was dirt broke and too busy suffering through dental school and multiple residency programs. Even though I know many others are experiencing these same tribulations right now, there is a unexplainable loneliness and depression that sets in when you see these steep market declines. I used Vanguard’s financial advisor services for a short while, and while I ultimately decided to stop and take things into my own hands, I did appreciate that I was not constantly worrying about how the markets were doing.

I dare not try and predict where the bottom of this latest market crash will be. However, I find some solace in knowing, if we stay the course and weather this storm, the market will do what it historically has – deliver some dependable returns.

In a future post, I will go over a few other investment strategies I do to minimize risk, including: invest in syndication real estate deals, invest in REITs and rental properties, and more recently – dare I say it – cryptocurrencies. Diversification is the name of the game!?

As always, thank you for taking the time to read through this post. Hope that some of this information can be useful to you, and please feel free to share in your own experiences!

Interest in the Celsius Network

investing

UPDATE: On July 13, 2022, Celsius and several of its affiliates commenced voluntary Chapter 11 bankruptcy proceedings. See my latest post on the matter at Lesson Learned.

I was never great at staying on track with new year’s resolutions. Sure, we all start out ambitious enough – try and exercise more, eat healthier, take up a new hobby, etc. – but my goals usually start to obscure within a few weeks from their nascence. Perhaps therein lies the problem – I need to be better about being goal oriented. I have read we should write goals down, being specific and keeping things measurable and attainable. For example, my goal is to write at least two blog posts a month this year. Okay 2022, let’s go!

In today’s post, I wanted to introduce a new investment vehicle I started to use last month. However, before I go any further, as always – I am but a mere amateur investor and rookie blogger, everything I suggest should be investigated further and probably presented to a financial professional.

At an ugly sweater Christmas party last month, I struck up a conversation with a friend about investing. As an introvert, I do not always like attending these events. Predominantly, however, I find I not only thoroughly end up enjoying myself but also learning quite a bit of useful information from other people’s ideas and experiences. As was the case here.

Now, terms like cryptocurrency, blockchain technology, non-fungible tokens (NFTs) – some of it still confuses and frankly scares me a little. Nonetheless, it does appear that it is here to stay. Therefore, (and perhaps another potential 2022 goal?) I have vowed to keep an open mind to it and slowly incorporate it into my overall investment portfolio.

Where was I? Oh yeah, at the social event I so courageously attended last Christmas, my friend turned me on to a company (and app) called Celsius. The hook for me was that he had been receiving a steady 10-12% interest on his money, WEEKLY! According to Bankrate.com, the national average interest rate on savings accounts as of last week was 0.06 percent. Another recent interesting statistic, consumer prices jumped 7% in 2021. When our savings do not grow at or above the same rate as inflation, essentially we are losing money because our purchasing power diminishes as time goes on.

Even though Celcius’s motto is to “unbank yourself” from the traditional financial systems, their service is basically a bank for digital currency. The Celcius Network is a platform that offers interest-bearing savings accounts and loan borrowing at remarkably low rates. No withdrawl, transfer, transaction, origination nor termination fees (for their services). They tout a mission statement that aims to act in the best interest of the community; in large part by giving back 80% of revenue to customers in the form of interest.

In exchange for storing your cryptocurrency funds within the Celcius wallet (which the company in turn loans out retail and institutional borrows), every week you receive an interest payment into your account. You can choose to receive payments in like-kind or in CEL (Celcius’s native tokens – an option only available to accredited investors if you live within the U.S.).

A particular class of cryptocurrency, referred to as stablecoins, is a non-volatile and price-stable asset. Essentially, with Bitcoin and Ethereum, the level of volatility may be thrilling for some investors but it hinders its benefit as a medium of exchange for many businesses. At least with stablecoins, the stable value means the coin can always be redeemed for an equivalent currency amount at any time.

After the Xmas party, per my friends instructions, I went home and downloaded Coinbase, CoinbasePro and the Celcius app. I created accounts for each, set up all the two-factor verification security stuff, and set up the payment method within Coinbase to acquire funds from my checking account. Within Coinbase, I “traded” (i.e. purchased) a certain dollar amount of USD Coin (USDC) stablecoin. Unfortunately, while the coins may be added to your Coinbase wallet immediately, they are unable to be transferred out for short while after. Eventually you will receive an email from Coinbase stating

The $xxx.xx buy you made on (e.g.) January 01, 2022 is now available to withdraw or send. Please login to view your total available balance.

After the funds are available to be traded out (usually about a week after the initial trade took place), I opened up CoinbasePro, navigated to Portfolio, and under Wallets would locate the Deposit option. Fortunately, there are no fee’s to transfer from Coinbase to CoinbasePro. From what I was told, a CoinbasePro transfer to Celcius take less of a fee than transfers from Coinbase directly. Also, Celcius lets you purchase USDC directly within the Celcius app but the fees (standard credit card processing fees, bank transfer fees) are higher still then if you are using Coinbase and CoinbasePro. Fees vary based on the amounts being transferred. After the funds are in your CoinbasePro account, you are immediately able to get them into Celcius. Within the Celcius app, you follow the Receive Coins link and (very importantly) make sure to choose the right asset from the drop-down.

Celcius will then alert you that the address is meant to receive only that specific token or digital asset, and anything else being sent over may result in permanent loss of funds. BE CAREFUL HERE!

I hit Copy on the address they provide (making a mental note of the last 3 or 4 digits of the long alphanumeric address), go back into CoinbasePro and then choose the Withdraw option under the Portfolio tab. I select USDC (or whatever asset you choose to trade with), and then select the Crypto Address option. I make ABSOLUTELY CERTAIN that when I paste the address, the last 4 digits matches the one Celcius Network gave me.

Here is the point you will encounter Network Fees, and the amount you send will have to account for those fees being available to be withdrawn.

On some final notes here, as with any investments, there is a possibility of loss of funds. Celcius Network is very established, is reviewed highly, and has an ever-growing following of Celcian users. However, they do not provide any insurance on our deposits, so if the company falls victim to a hack for instance, we may be screwed. Also, the Celcius interest rates vary weekly as well as from coin to coin. When my friend at the party started with them, it was 10-12%; I have consistently been getting 8.50% – which, in today’s market, is still nothing to sneeze at.

Lastly, the CEO – Alex Mashinsky – hosts a weekly broadcast called AMA – “Ask Mashinsky Anything.” I have tuned in to a few of these now, and have been loving the philosophy and transparency of the company, the leadership and support staff appear genuinely happy to work for company, and I get the sense they really do have a solid sense of community well-being.

Again, I am not a professional that you should be seeking any sort of financial advice from and cannot be held accountable if your cryptocurrency get lost in the blockchain metaverse. Please seek independent financial advice before dealing with digital assets. Within my own portfolio, Celcius Network is just another means to diversify a bit.

Thank you for reading this post! If I can help in anyway, with the understanding that I am a newb myself, I am most certainly happy to do so! Also, full disclosure, if you click on (and ultimately sign up for) the Celcius Network hyperlink I provided above (or use Referral ID 173697cff1) – we each receive their promotional reward. I have no other financial disclosures to report. Have a great day!

Investing and Gambling(?)

Lifestyle, Uncategorized

Being born and raised in Las Vegas, growing up around slot machines and poker/blackjack tables, perhaps helped desensitize me a bit to the appeal of gambling. In my early twenties, I worked as a web developer and programmer for a local gaming company and it helped solidify in my head the notion that ‘the house always wins.’ As much as I love the idea of getting rich quickly, I knew that – at least in casinos, the cards were stacked against me.

After we paid off our student loans, I started to take some of that monthly income and began investing. Fortunately, I had already been reading content from The White Coat Investor for years; and his philosophy on refinancing, saving, investing – it was ingrained deeply within me. Now, there is A LOT to investing – certainly too much to cover for a mere post where the author tends to write extemporaneously i.e. here. There are countless books, websites, blogs, podcasts and forums in which to educate yourself and start the journey.

As always, I am happy to share with you the little information I have gleaned over the years. For starters, I subscribe to a FIRE (financial independence, retire early) movement; in which adopting a certain disciplined lifestyle and setting financial goals helps someone achieve freedom from the workforce. Of course raising your annual income, lowering your expenses, increase your saving/investing rate, maximize retirement accounts, reducing your tax liabilities, living below your means, etc. – it all feeds into successfully reaching this goal. Also, familiarize yourself with the 4% rule. In order to sustain a 30-year time horizon in retirement (adjusted for inflation), your nest egg should have about 25x what you expect to spend annually stored away.

Which brings me to my next point – calculate your savings rate and track your monthly/annual expenses. In addition to using our Mint account to budget and track expenditures, I also use an Excel spreadsheet to simply monitor our overall finances (monthly income, account balances, investment gains/losses, etc.). Consciously (and maybe, subconsciously?) seeing these numbers regularly not only keeps us organized and informed, but (for me at least) motivates me to improve/correct some spending habits. Generally my family stays within a 30-50% savings rate every month. Depends how early you start, but I have read a 20-25% rate (at least) is typically what you want to shoot for.

In order to start investing, I created an account (brokerage and retirement) with Vanguard. I love the story of Jack Bogle, the founder of The Vanguard Group – which was really my only deciding factor to open my accounts with them. I imagine Fidelity, TD Ameritrade, Charles Schwab, etc. have just as good (if not better) platforms set up as well. All my ‘long-term’ investing is done in Vanguard. There is some ‘uncompensated risk’ that goes along with investing in individual stocks and specific companies. Theoretically, a company can go bankrupt and you stand to lose everything. My distribution or asset allocation in my Vanguard account looks something like this: 1/3 Vanguard Total Stock Market Fund, 1/3 Vanguard Total International Stock Market Fund and 1/3 Vanguard Total Bond Market Fund. Every month, whatever I can contribute, gets split evenly amongst these three. The growth has been steady enough over the years, and there is a certain serenity in knowing my risk is drastically minimized because index funds are highly diversified. Another reason I have come to love Vanguard is because their fees and expenses to purchase and own these funds are so low compared to some other companies.

About a couple of years ago, I opened up a Robinhood account as well. All my ‘short-term’, active trading takes place there. Every month, a very small percentage of the money I set aside for investing purposes gets deposited here. Honestly, I consider this ‘play’ money – it affords me an opportunity to invest in companies I like (i.e. Apple [ticker: AAPL], Tesla [TSLA], Costco [COST], Netflix [NFLX], Berkshire Hathaway [BRK.A – which I can’t afford, and BRK.B]), and dabble in speculative stocks like GameStop (GME) if I so desire.

It has been interesting to see how my Vanguard (i.e. long-term, passive trading) compares against my Robinhood (i.e. short-term, more actively traded) account performs. The Robinhood app makes it super easy to execute trades; and within that simplicity, I think a lot of people succumb to their emotions and either 1) sell in a panic when the market or stock price is down or 2) buy in big on hyped-up meme stocks that are supposedly ‘going to the moon.’ Investing 101 teaches you either of these can be dangerous and really cut into your long-term gains. Timing the market is impossible. In my own experience, giving myself a fixed allowance every month to ‘dabble’ with has worked well; it allows me to keep myself in check and not get too carried away. If I happen to randomly pick some winners, great! However, in my mind, every single dollar I have placed into that Robinhood account is mentally money I have come to terms with completely losing. And just FYI, my Vanguard account is currently well out-performing my Robinhood gains.

The same appeal, and that ‘rush’ people get in casinos by putting it all on red (a reference to the game roulette in case it was missed) – that is a similar adrenaline high I get when putting a purchase order in on the Robinhood app. It can certainly be addictive, and really get you into some trouble. Which is partially the reason that I have not ventured into cryptocurrency trading, I do not feel I understand that investment vehicle well enough yet.

Arguably one of the most famous investors of all time, Warren Buffett, said quite a few things pertinent to my topic today. He said:

On Earning: “Never depend on single income. Make investment to create a second source.”

On Spending: “If you buy things you do not need, soon you will have to sell things you need.”

On Savings: “Do not save what is left after spending, but spend what is left after saving.”

On Taking Risk: “Never test the depth of river with both the feet.”

On Investing: “In the business world, the rearview mirror is always clearer than the windshield.”

Of course we all want to maximize our returns while minimizing our risks. However, there will be investment fees and expenses, market corrections/depressions, and asset classes that underperform just to name a few. Most investments just need TIME. The concept of compounding interest works; and for those individuals passionate enough to educate yourself, responsible enough to control your lifestyle, relentless and patient enough to withstand (and minimize) the failures along the way – I think they will earn the right to FIRE.

Thanks for taking the time to read this post! As a full disclaimer, I do not possess a business degree, have no formal financial training, do not stand to benefit any monetary gain from the companies mentioned above, and – for some – would recommend you seek assistance from a financial consultant or trained professional before beginning this endeavor. As always, feel free to ask any questions or leave any comments for me!