Knights of Daro — [10th Dec] Office Hours
You can focus on building either cashflow or assets at a time, building both at the same time is really difficult for a retail investor…but not for an experienced & smart investor.
Want to be one? Let’s start with these fundamentals then…
BUILDING CASH FLOW AND ASSETS
You can build both cash flow and asset at the same time, but if you’re not a full time investor then your focus should be primarily on either one of them.
A retail investor should focus on either cashflow or asset.
Eg- 70K saved from 100K salary every month can be invested in 2 ways-
#1. To achieve capital appreciation over a long period
Eg- stocks, crypto investing, commodities etc.
#2. Achieve short term consistent cash flow
Eg- car on rent, Dividends from bonds, vending machines etc.
To achieve both you need to be a great investor who invests lot of time on daily basis here-
For eg- House on rent, Salon, Business, franchise etc.
Cashflow compliments asset building but to build more cash flow you need more cash flow only, not assets.
Didn’t understand? Let’s take an example-
You invest 70k into securities which gives you consistent cash flow every month, you then take that cash flow and use it to buy other assets which appreciates over time.
But to have more cash flow, you would need more cash flow only, since assets appreciate in value over time, doesn’t provide your frequent, consistent cash flow.
WHY SUCCESSFUL INVESTORS PREFER 4–5X NOT 100–200X ?
It all depends upon which market cycle you are at. Successful investors know they need to invest heavily in the bear cycle.
You need to be pessimistic-
1. About where you are right now in the market cycle, especially in the 1st one.
2. At the end of the market cycle.
Investing at the beginning of the bear market, then investing in top 10-top50 coins/tokens as the market picks, could make you easy 10X-20X.
Most people end up being broke in the 1st cycle
So in your 1st market cycle-
- Achieving 4–5X should be your target.
- Don’t get greedy after achieving it.
- You should be pessimistic about 100–200X returns.
- Always have 20–30% of PF in stablecoins to buy the dip.
ACHIEVED YOUR TARGET? WHAT TO DO NEXT?
If you’ve reached your monthly/yearly goal before the expected time, then move 20–30% in stables to buy the dip and have good portfolio diversification.
Ultimately the goal is to use crypto as a catalyst/tool to achieve what you want.
Everybody has a unique personality and approach, so it depends upon you to further invest that capital to get gains or not.
Still want to invest further?
Then your goal should be to be stay consistently profitable without losing capital, for this-
- Keep following the previous strategies that helped you achieve your target in the first place.
- Don’t invest that capital into projects which you don’t understand
- Don’t invest into something because of greed or FOMO.
KNOW THAT YOUR INVESTMENT CAN GO TO ZERO -
Crypto is a wild wild west, in this market you should-
- Expect the unexpected and make contingency plans accordingly.
- Always consider the possibility that your investment could go to zero.
- Book profits aggressively.
DIFFERENCE BETWEEN BUYING TOKEN VS BUYING STOCK -
Understand that buying a token/crypto is different from buying stock
-By buying stock means you’re buying equity i.e piece of a business.
-Buying a token/coin is different, it can go to zero if a crypto company decides to have another token in place of the previous one.
Eg- DARO 1 and DARO 2 tokens.
-Stocks of a company are finite, tokens/coins may or may not be.
Things responsible for crypto token/coin price fluctuation are-
- Demand & supply
- People’s interest
Whales are anyone who has $500 million invested in the crypto market/coin/sector. Their small actions may move the market up or down in a significant way.
Whales are generally big banks, businessmen who are very well coordinated with each other.
From 14th — 16th may, Crypto market cap moved from $2.6 trillion to $1.2 trillion.
Whales took $1.4trillion cash out of the system which is even bigger than the GDP of some countries.
Crypto holds value because people believe in it, invest in it and trust it and the irony is that crypto is called a trustless market.
This has been the biggest wealth transfer in history in an unregulated market.
THOUGHT EXERCISE-FREEDOM NUMBER
99% of the investors/people are unaware about the fact that Inflation and rise in expenses ends up eating their entire salary/income.
Let us share with you how-
At the age 28-
Income = 20 LPA
Expenses = 10% of income = 200,000
To achieve, retirement corpus of 50,000,000.
you need 25X over the next 32 years.
Note: 25x<28( Your current age)
As you move above 37, you’ll notice that you need to multiply your money more no times than your current age.
This is the benefit of starting early, you have time by your side.
To give you perspective, here’s an example of a person who starts investing at age 80.
They need a whooping 252X to get a retirement corpus.
When we think of our freedom number, we never account for the 20% rise in expenses and 8% rise in inflation every year.
Technically 28% is going out of our pocket every year and that too 28% of the income we get post tax deduction.
This is why people with the F.I.R.E movement end up working back for money because they never took into account the 28% mentioned above.
Funny thing is-
- We’ve only considered annual expenses 10%, which is 70% or more for most people.
- We didn’t even consider the tax bracket as the income increases.
- Have not even considered the LTCG tax you have to pay on your gains.
Start by investing into asset classes which give good returns, eg- startup investing.
Investment instruments are gonna change in the next decade, alternate investment options are there but for now the crypto market can help you achieve this.
If you want to learn how to generate trustfree ROI then you may like what we’re doing at Fidaro.
Here are some useful links to save and reference. Let’s go and help you achieve your goals.