Investing. There are so many voices in such a crowded marketplace. Buy this. Sell that. Don’t buy this. Learn about that. Equities, bonds, currencies, commodities, mutual funds, index funds.
“Balance” your “portfolio” according to “modern portfolio theory”.
And cryptocurrency! What about cryptocurrency?! As my new friend Roman said, “crypto’s fire emoji x3”.
Let’s take a step back though. Let’s step back from the precipice and set the stage here.
Like you, I started learning about trading back in grade 5. Because, really, what 10-year old isn’t interested in the stock exchange?
You might be asking, “Why were you interested in the stock exchange when you were 10, Jared”?
To that, I would respond by saying, when you grow up on welfare, and your entire existence is framed by the relative lack of capital, when you see your single-parent working 3-4 jobs to keep the lights on, to keep food on the table, when you spend the majority of your childhood self-educating through books and movies and videogames, learning about the flow of and access to capital is a somewhat obvious place to take your studies.
So that’s what I did!
In grade 5, I put together a report on why I wanted to be a venture capitalist. Did I know what a VC was? Did I know what they did? Did I understand the path to becoming a VC?
No. No. And no.
But! But but but, as a young child with a bright mind, a thirst for knowledge, and a hunger for achievement, I did find their job description very interesting..
Today, wikipedia defines the role of a venture capitalist as, “a person who makes venture investments, and... a core skill within VC is the ability to identify novel or disruptive technologies that have the potential to generate high commercial returns at an early stage. By definition, VCs also take a role in managing entrepreneurial companies at an early stage, thus adding skills as well as capital..."
What 10 year old wouldn’t find that interesting? I mean seriously. Growing up in Alberta, we’ve had such a robust economy over the past 60 years. Sure, it was mostly natural resource based, but that’s fine. Resources are the engine of our contemporary economy, and to have resources is better than not having resources. Other places, locales like Toronto, Montreal, Vancouver, Calgary, sure, they might’ve had a bit more going on culturally, technology-wise, diversity-wise, etc., but, regardless, having a strong foundation that the local economy is founded on is and was a great place to start.
Even though I was being raised on welfare, our taxes were low, education and healthcare were free, quality of life standards were exceptionally high, even for someone below the poverty line, and life was good.
Sure, there were hard times. But, adversity exists to make us stronger. When I was 9, I remember coming home from school on my birthday, all excited (because of course), to find my Mom, sullen, dejected, defeated, crying and expressing how sorry she was that she couldn’t afford a birthday present for me that year.
What do you say to that? What do you say as a nine year old, when the most important person in your life is so humbled, looking only for your acceptance and your grace?
Do you continue to believe the lie that we’re all told growing up, that money and ‘stuff’ and toys and video games and new clothes and new shoes are what matters?
Or do you make the decision to prioritize experiences and relationships above material possessions?
For me, it was simple. From that point forward, I began to look at money as a tool, as a means to an end, as a resource that would ebb and flow, something that would enable the pursuit of your true goals: happiness, achievement, balance, and eventually, family.
I know, I know. Not your average 9 year old. Then again, this was not necessarily your average life path.
So, fast forward a decade, and I’m off to university. Why? Because! Because of course. Of course I’m going to university. I’ve done exceptionally well in school from day 1, and back in the mid 2000’s, there wasn’t yet the anti-post secondary wave of sentiment that has washed across our modern society and demographic.
Back then, it was still the onliest and bestest option for a young person like myself.
Fast forward 3 more years, and I now have a Finance Diploma. Why? Because finance was sexier than accounting, HR was boring, Marketing was fluffy, and because finance was sexy.
You know what’s not sexy?
Graduating with a finance diploma in 2008, the year of the great recession.
But, hey, again, adversity exists to make us stronger.
After a year off, after paying off my student debt (and o my god, did this ever feel good), I began to feel a familiar pull back towards the university campus. Being a university dropout/college graduate definitely left me feeling like I had some unfinished business.
Hell, when I was 18 I got nominated to go to a 2 week Global Young Leaders Conference. Of course I had unfinished business! (To be honest though, I was actually the backup-backup nominee and am eternally grateful that the first two candidates balked at the trip. Sometimes life works in mysterious ways!)
So, I get myself back into the university system.
Because, I wanted to surround myself with people who challenged me. I wanted to be around the best of the best. I wanted to rub shoulders with the high caliber people who would one day be the movers and shakers and business leaders of tomorrow. I wanted to push myself and embed myself within that culture.
Again, it goes back to where I grew up. When you grow up poor, you live with and play with and grow up with poor people, and poverty is a cycle. It’s actually a vicious cycle. Fortunately, it’s not so bad here in Alberta. But if you travel to the US, like I did, if you could see what life was like growing up in the ghettos of New York, you might feel differently about small town Alberta.
So, now I’m university. I’m taking an accounting degree.
Because I did my homework and reached out to all the mentors within my grasp and listened to what they had to say. I was told that accounting would compliment my finance. And it does!
But I’m not just taking an accounting degree. I realize that this is my chance, this is my moment, this is my opportunity to surround myself with the people that I felt would give me the best chance for long-term growth.
So, I join a fraternity. I nominate myself, interview for, and accept a position in the business students exec. I move onto campus and fully commit to extracting and nurturing as much social capital as possible while studying. I quit my job working in the oilfield during summers and I join the co-op program. Last thing I want to do is graduate and have no work experience after all. And to compensate for the financial setback, I take out student loans.
This wasn’t my first experience with student loans. Going to NAIT gave me an introduction. But NAIT and the University of Alberta are dissimilar animals. It’s apples to oranges. And I had a different goal this time. I wasn’t trying to get through as affordably as possible. I was trying to get through, earn my degree, but more importantly, walk away with the experiences and relationships that would truly define my coming years.
When you grow up with nothing, debt isn’t as scary as it might be for someone who’s always been taken care of.
Ever hear about a mortgage? I had, but I didn’t actually know. We had always rented. So sure, yeah, why not take out $70,000 in student loans? Whatever it’s going to take to get me to the finish line, I’m there!
And I don’t regret it for a second.
Again, when you grow up with nothing but the love and care of your family and the hope and wish that one day you might be able to provide for the people who provided for you, you’ll sign on whatever dotted line is put in front of you if it means you’ll be able to pursue your dreams.
Like football players, this is the situation that low income students walk into when approaching a university degree.
And so I did it. I kicked ass, took names, made friends and lived the dream. I somehow managed to do great in school, make amazing friends, hold multiple extra-curricular positions, and launch a startup coming out of business school, a startup that took me around the globe and introduced me to the world of entrepreneurship.
It wasn’t long before I started learning about investing and startup capital, started meeting angel investors, and eventually, my first (and second) venture capitalists.
Which is where this whole story began.
A little kid looking for a way out of poverty stumbles upon the world of venture capital and grows into a young man who’s now the founder and president of a Canadian Corporation and is now sitting at a table, across from a venture capitalist, giving his best elevator pitch, feeling simultaneously like he’s completely in his element and in way over his head.
Suffice to say, the business grew, until it didn’t. The search for the proper team members wasn’t fruitful, until it was. There were many offers of investment that were declined. There were countless opportunities that were explored, events attended, customers spoken to, Rhynopacks replaced, orders placed, language and time barriers transcended, money borrowed, loans repaid, until finally, while juggling 8 or 9 or 10 balls, one dropped. Which led to a second ball being dropped. And before long, all the balls were lying on the ground, the magic was over, and I was left wondering what the heck had just happened while I was (gratefully) working night shift road construction thinking back to a time when just 5 months prior, I was in China, fielding an investment offer from my fraternity brother who would become my chief angel investor and VP Supply Chain.
Everything was great, until it wasn’t.
And even then, it was incredible.
Because adversity exists to make us stronger.
Or at least that’s what I was telling myself, staring down the barrel of a $70,000 student loan!
But hell, again, I’d do it all over again in a heartbeat. Everything happens for a reason and where I’m at today, stably employed, with amazing friends, and an amazing education, unbelieveable life and business experience, and a wealth of opportunities flying at me from every angle, none of this would have been possible had I continued down the path I was on dropping out of University and graduating NAIT.
Mortgaging your future to get an education and to surround yourself with winners was the only choice for me.
Times change. And everyone is different. But for me, it was and still is the best decision I’ve ever made.
Which brings me to the here and now and the repayment of my $70,000 in student debt. Over the past 3 years, I’ve been able to chip away at it where today I’m owing approximately $58,000 with an aggregate interest rate of approx 5.7%. This means that every year, my ~60k in student debt earns about -6% interest, or grows by about ~$3600, $300 per month.
My investment strategy, and everyone’s investment strategy, should be built around beating inflation, which historically, comes out to about 3% per year. What is inflation you ask? Again, referring to wikipedia, we find that inflation “in economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.”
What does this mean?
Basically, it means that as the government increases the money supply, and based on a multitude of macro-economic factors, the price of goods and services will increase, on average, approximately 3%, per year.
This is why a bottle of pop used to cost $1.50, then eventually it was $2.25, and now I have no idea what it is because pop is terrible for you and really only exists because large corporations take advantage of the ignorance of the average consumer. I’m sorry if you drink pop, I don’t mean to be condescending. It’s a personal choice made in the interest of my long term health and short-term athletic performance.
So, why do you need to beat inflation?
Every year, your wealth devalues by approximately 3% relative to the consumer price index (a common measure of inflation).
Because, when you have your money sitting in a bank account earning less than 1% interest, the market is inflating by approximately 3%.
Your money is safe, sure. But, it’s shrinking based on the inherent value it holds relative to what it can be traded for.
So, flash back to my student debt. Every time I pay down my debt, I’m saving myself ~6% interest (which can be thought of as earning 6%). Now, if you’re a sophisticated investor, odds are, you’d be happy, cheerful, jubilant, hell you might even be ebullient to earn 6%.
Because, your investment is growing at twice the pace of inflation.
It’s probably useful at this point to talk about commonly accepted targets for the rate of return on various investments.
Bonds and t-bills: 1-2%
Mutual funds: 3-7%
Real estate: 4-9%
Index funds: 5-8%
That’s just a rough guide. And there’s more to it. And someone with an ounce more (or maybe even a bit less) would probably chime in and correct me, which I would welcome. But basically, as you move up in risk, your expected return will increase. But, with increased risk comes the risk of earning a lower or possibly negative return, especially when talking about investing in a specific company. The reasons for this are obvious. One company is volatile. An index or mutual fund is comprised of many, many different assets and asset classes.
Remember “balancing” your “portfolio” according to “modern portfolio theory”?
This is that.
So back to my example, here I am, month in, month out, year in, year out, chipping away at my debt load. But, because of the interest, every time I put some money down, a significant portion goes to interest. Imagine trying to climb out of a deep, steep sandy hole. Each time you step up, you slide back down a little bit.
This is why carrying debt can be such a negative. It can be almost impossible to escape from it’s gravitational pull, especially with the continually rising costs of tuition.
But I’m doing it! I’m employed, I’m happy, I’m balanced, and I’m paying off my debt. Everything is good!
And then comes along bitcoin.
You’ve heard about it. You’ve read about it. Maybe you even own some! It’s been such a paradigm shifter that the mainstream media and everyday-man is still behind the 8-ball when it comes to understanding what it is or why it exists.
Basically, and I’m no cryptoexpert, but basically, cryptocurrency exists to allow individuals to transfer wealth autonomously and safely across the globe, without the need for financial institutions. It initially enabled the purchase of illicit goods and services, but now, is becoming more integrated with the mainstream economy.
It’s value lies in its technology, the principles it’s organized on. Essentially, cryptocurrency democratizes capitalism. Purchases and the transfer of wealth has been enabled on a peer-to-peer basis, free from the prying eyes of financial institutions or regulators.
Because of this, it’s unlikely to go away, and more likely to continue to grow in importance in our world. Currently, the total value of all cryptocurrency amounts to approximately $400B, while the value of all currency tops $84T.
So there’s a long way to go before this crypto thing becomes even close to a major constituent of our global money supply.
Which brings me back to my situation and my investment theory. Again, a rational investor would be more than satisfied earning a 6% return on their investment.
But, bitcoin has jumped up 35% in the past 2 days, and approximately 20x (or 2000%) in the last year.
Do I want to continue investing 100% of my money against negative 6% interest?
Or do I perhaps want to invest 90% of my money against my debt, and put away 10% into bitcoin?
If you can understand the philosophies underlying this decision, then you understand modern portfolio theory.
Eventually, once I’m out of debt (my personal goal is to get there within the next 34 months), I will begin amassing a balanced portfolio (there’s that term again..) of cash, mutual funds, index funds, securities (stocks), and cryptocurrency. Balancing out your total portfolio across different asset classes hedges against any one asset’s possible depreciation and mitigates risk about as well as you can in the modern investment world.
But today, sitting where I’m sitting, the only option that makes any rational sense is to divert a small portion of my monthly discretionary income into something that has the growth potential of bitcoin and/or cryptocurrency.
And so, with that realization in mind, after finding out that where two days ago bitcoin was trading at just under $12,000, and today is around $16,000, I’ve made the decision that has been almost 20 years in the making.
Today, I made the decision to invest in bitcoin.
After doing my research, I went to open up an account with coinbase, largely considered the to be the world’s leading digital asset brokerage.
Unfortunately, their service was unavailable. I wonder why?
So, after doing a bit more research, I opened up my first investment account with coinsquare, a digital asset brokerage based here in Canada.
This time, I got in clean, registered up for an account, submitted pictures of my drivers license, a selfie, and my most recent utility bill, and I was all fired up to make my first investment when I got shut down by the system.
Apparently their servers are experiencing an unusually high demand.. I guess I must not’ve been the only person to make this decision today.
Patience is a virtue. It’s now the waiting game for me, waiting to hear back from them that my account is verified so I can connect my bank account and trade some BTC for some CAD.
Sure, I may have missed the boat.
Or, perhaps bitcoin keeps climbing, past $20,000, on to $40,000 and beyond?
Who knows? I certainly don’t. But I’m willing to take a chance, I’m willing to learn. Because really, that’s what life’s all about.
If I lose a little here, it will be a fantastic lesson. And if I gain? Well shit, I’ve already gained just walking through the process and getting myself started.
The future comes fast, and there’s no time like the present.
Whatever adversity you’re facing, whether emotional or psychological or physical or financial or otherwise, know that it exists for a reason. Know that nothing happens in this life that is not in accordance with the nature of the whole, with the nature of the universe, with the nature of the tao.
Perseverance. Resiliency. Grit. These are the tools of the modern day investor, of the modern day vitruvian man. If you get knocked down? Pick yourself up once you gather your strength. And if you’re down there for a while? Enjoy the flowers. Maybe you’ll learn something.
As Benjamin Franklin said, “an investment in knowledge pays the best interest.”
Stay curious. Be grateful. Practice intention.
Get it, girl!