Why Invest In Yourself (What I Learnt)

My best paper investment is riding through cryptocurrency, going from 5-figures in Jan 2020 to 7-figures now. It isn't the best investment since it was risky and went down 50% at least 3 times.

The actual best investment is investing in yourself that is least risky.

Why invest in yourself? Investing in yourself helps you decide whether to double down when prices are cheap. My highest return on investment came when I continue to accumulate Ethereum at its low $140 (88% below my original entry price of $1,150 in Jan 2018). 

Allocation of Money Matters

Many Nobel prizes are won on portfolio allocation or optimisation. There is no perfect investment, and it is important to gain financial literacy to allocate your money. 

An investment that 10x with only 10% of your money is only as good as a 2x investment with 50% of your money. The amount of conviction matters in an investment. I started with 5 digit portfolio of cryptocurrency in 2020 and ends up with 7 digit in 2021.

Early on, I lost most of my portfolio to China stocks and also M&A that failed. I also lost in an investment in a P2P lending company but these are mostly 4 digit, except for the P2P lending. Recently, I also lost 5-figure on P2P lending that got defaulted. 

Holding Power For Risky Investment 

Holding power for risky investment is important as well. A great investment that can go 10x up can also go 10x down easily. Looking at the historical prices of ETH and BTC over time will tell you how much they dipped while I continue investing. The important thing to invest in yourself is also to find an investment with high perceived risks and not actual risks. 

Finding Investment with High Perceived Risks

Perceived risks mean something that in general is bad, but an insider with knowledge can tell the risk is either overstated or not a risk at all. Great investment with high perceived risks could include

  • Stocks are heavily shorted for reasons such as the company cannot perform up to expectation in the short term but still have long-term potential. I feel Tesla is one, though it is possible some of the risks are actualizing if their technology doesn't maintain a healthy edge over its competitor. 
  • Companies that just starting up and have no proven track records or proper analyst coverage. This is more for your side hustle as you know them inside out and usually, the risk/cost is lower than what is perceived. You just have to figure a way to make it work and it exceeds the risks you took in the first place.
  • An alternative investment like cryptocurrency, arts, digital arts. Art is in the eyes of the beholders and it takes a lot to understand whether arts have value. Similarly, cryptocurrency is almost akin to a Ponzi scheme and it takes some luck that the founders or miners don't have any ill intention to cheat or siphon the money away for their own greed.

It is rare you always buy low and sell high. No one, not even Warren Buffett is 100% in his investment. You need to look for asymmetric risk-reward investment (high reward, low actual risk)

As the saying goes "Low Risk, Low Returns". I agree it is rare to find a good-performing product without any volatility.

Uncertainty is usually what makes a great investment, including stock, cheap. However, do not fall into the trap that "High Risk, High Returns" which is false too. Instead, you should look for "High Perceived Risk, Low Actual Risk, High Returns". 

Some questions to ask yourself is whether 

  • Is the investment/product really better to be worth more (e.g. 10x)?
  • Are there risks of the prices going further down due to actual risks?

Some companies that I bought and sold as I couldn't figure their actual risks include:

  • Carvana - Used Car Marketplace in the US. They seem to have the great potential to be customer-centric but I am not sure how they are performing as they are strictly in the US. It will take me lots of effort to gain conviction and knowledge of how they are progressing as I don't see much in-depth coverage in my typical lifestyle (unlike Tesla).
  • Disney - I have seen surveys from ProfitWell showing how much people will pay for Disney+ compared to Netflix. I saw how it dominated countries like Latin America in a short period and even my country Singapore. If Netflix killed most of cable TV, Disney+ will cement them with rights to ESPN, National Geography, etc. They also have copyrights to their characters and these characters lived forever. If this company was purely digital without the burden of its existing TV channels and theme parks, I might go all in. I did see some reports of its mismanagement and am not sure it will manifest without knowing in-depth.

 

Personal Investment in Health and Knowledge for Better Quality of Life

Besides investing in yourself to understand a great investment, you should also invest to better your quality of life by focusing on

  • Personal Health is hard work. The key is to maintain your health to live the lifestyle you want. Death is inevitable and illness is hard to prevent. A healthy lifestyle can only delay their onset
  • Specialized knowledge. I recently feel that self-help is an over-sold topic and you should seek specialized knowledge. Instead of finding common self-help books or articles, try to find the knowledge that is rarely found or related to your investment or companies. It can be via audiobooks, podcasts, YouTube besides the typical books.
    • According to a 2011 Oxford study, reading books at age 16 is linked with getting a professional or managerial position later in life. 
  • Mental Health. Resilience is the #2 key skill in 2021 Linkedin Learning besides digital fluency. As you budget and allocate funds towards your various financial and other commitments, don't forget to keep some aside to invest in your mental well-being.
    • As a parent with a kid, this is difficult as the kid will usually take up 100% of your free time until they got their own friends.

Overall, you only got limited time in this world. How you allocate your time and money personally is more important than a particular investment that may or may not is impacting your life directly. Money is used to save time and time is used to make meaningful relationships.

Author
Sky Hoon. Read Full Bio
Website Owner, Twitter-er
He has been trading since 2008. He started this blog to share the journey about option trading. He dabbled in stocks, bitcoin, ethereum (in Celsius Network), ETF (lazy Dollar Cost Averaging) and also built websites for fun. He used this as a platform to share my experiences and mistakes in trading, especially options which I just picked up.

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