What is the Right Size or Amount to Invest in Cryptos?
I always get this question from friends. How much should they invest into cryptos? The real answer is a set of questions.
How much do you have to invest? What is your goal? How much of it are you willing to risk?
Let us get into some concrete examples.
If you have 10,000$ saved and if you want that to be 100,000$ or 10x in a short span of time, then you have to make a concentrated bet into one stock(tech or biotech) or cryptos and pray the general market also is in your favor.
If you put that 10,000$ into a diversified portfolio of stocks, bonds, and commodities, then you will get at best risk-free interest rate plus or minus a few percents. But then, you also only lose that much, market return plus or minus few percents when the market is not in your favor. Whereas, you lose everything with concentrated bets or leveraged bets when markets turn against you.
Basically, if you sit on the table marked 10,000$ and aspire to sit at the 100,000$ table and that too within a short span you have to take risks and make concentrated bets. Same is the case if you have 100,000$ and want to move to the 1,000,000$ table and from one million to the ten million marked one and from ten million to the hundred million one or from hundred million to the billion dollar one.
So what is that number you are willing to lose fully or which number table do you want to sit at? Basically, all that comes from defining your goals or defining your world and what is important for you or what you want to achieve financially?
I will tell you what my thoughts are and you can make decisions for yourself based on your goals. If I had a 100,000$ saved in the bank, I still had to go to work, same is the case with a million dollars. When it reaches ten million dollars I can choose to work and put the ten million into a diversified portfolio.
Then the question is do I set aside something before I take the next bet.
True entrepreneurs do not and cannot set aside something when they believe in something and set their minds to achieve that. They are usually not looking at the money, they are looking to solve a problem and that is their passion. They are not chasing money. Money comes to them when the work they do adds value to other peoples lives.
If Elon Musk tried to put aside some money from the sale of paypal before investing in Tesla, SpaceX and SolarCity, there is a low probability he would be a multi-multi-billionaire in such a short time. Remember, he went all in with everything, not even keeping aside anything to pay rent even.
As I said in the beginning, How much you invest in a potentially high-risk high-return venture depends on your goals and your risk tolerance. You make big bets, you stand to make big gains and also stand to lose mighty big. Personally, when I believe in something I make an all-in push with my personal money. Otherwise, what do I mean by believing in something?
This is how you judge people who make claims on any investment advice.
Do they put their money where their mouth is? Do they walk their talk?
Never invest with a person who cannot put everything into their beliefs or ideas.