Crypto Savings or Buy to Let Property?
As a wealth creation coach, I get asked this question often, “Must I add to my crypto savings or invest in property?
This is a very good question with a surprising answer.
All investment comes down to a few fundamental issues,
What are the returns?
How safe is my investment?
Do I buy hard assets or look to the stock market, or the brand new asset class, Crypto?
Returns – Annual Return on Investment
If you were to call an insurance company rep ( Also known as a registered financial advisor), he or she would tell you that there is always a balance between risk and reward (returns). They would offer you a high risk/high reward stock portfolio, or a low risk/low reward portfolio.
Or my very “best”, a mixed portfolio. Middle-of-the-range , Jack-of-all-trades, safe portfolio containing a mix of Tech stock, property stock, manufacturing, and mining etc
On these portfolios you can expect returns ranging from 2% through to about 9%. 2021 South Africa Inflation rate is around 4.5% , but the real or perceived inflation is around 8%. These investments therefore don’t offer much growth.
Well know Billionaire, entrepreneur and CEO of Tesla, Elon Musk, did 2 important and well publicized things this year
- Tesla bought $1.4 Billion of Bitcoin (public knowledge) and we don’t know how much Elon Musk bought in his personal capacity.
- Elon Musk, sold more than $5 Billion of his Tesla shares .
Perhaps one of the finest minds in the world knows something we don’t?
Back to the question, if I have some cash saved up or some spare capacity in my monthly budget, what should I buy, Property or Bitcoin?
Buy to Let Property vs Crypto Assets
Buy to Let property in South Africa is poised for growth. Covid has done it damage, prices are low and vacancies are high and interest rates are at all time lows. Opportunity knocks, the smart money buys when prices are low and the cost of money is low. So on the face of it, the answer is surely property?
Not so fast, we can’t jump to conclusions that quickly.
Bitcoin is representative of the whole Crypto Assets market, and a glance at Bitcoin’s performance over the last 10 years shows extreme volatility, combined with extreme growth. There have been years of massive growth followed by years of negative returns as the Bitcoin price moves though its 4 year bull and bear cycles. The good years outdo the bad years significantly resulting in long term Bitcoin growth 10 times that of stock and shares.
Surely that means you must therefore invest in Bitcoin?
Again, not so fast.
The answer is “Do BOTH”. Buy Crypto Assets and Buy-to Let property.
Buy Bitcoin digital assets with your own money
Buy property with other people’s money (The bank’s money)
Buy to Let property
When it comes to property, you need to make sure that you buy the right type of property, in the right location and pay the right price and get 100% bond finance for your purchase. If you are a first time investor and want to invest safely and maximise your returns, then Property in a Box is for you. I have covered this topic extensively in our Organic Growth Property Blog and our Organic Growth Youtube channel.
I have personally invested in Bitcoin and made other crypto savings for the last four years and can tell you a simple truth. If you become a part-time crypto trader you will LOSE YOUR MONEY. Bitcoin and other crypo currencies are very volatile markets that operate 24 hours a day 365 days a year.
There is no respite. Unless you are an experienced trader and have a team on 24 hour watch, continually keeping an eye on the markets, you are bound to miss out on opportunities and lose money. The system will eat you alive!
It took me four years of ups and downs and sometimes huge losses to work out the simple strategy that works extremely well and does not require the level of attention and skill of a full time trader.
This strategy of crypto savings is called “dollar cost averaging” and it works like this.
Dollar Cost Averaging
Every month you make an investment of a fixed amount on the day you get paid. The result is that some months you will pay a lot for your bitcoin and some months you will pay much less, but in the long term you will pay the average cost of Bitcoin which has been doubling and tripling every year for the last ten years. Yes this is true, Bicoin’s average annualized return for the last 10 years has been over 200% - ie your investment triples each year. (Ask you financial advisor if he can match that performance! ).
Many people I know, when they discover this simply strategy, stop paying their unit trust savings and/or their retirement annuity savings and started dollar cost averaging into Bitcoin.
BEWARE OF SCAMMERS !
A word of warning regarding all the crypto scammers out there. If you get invited to a seminar on Bitcoin investment, do not go. Don’t fall for syndicated purchasing schemes, or mining schemes, or Bitcoin funds. Simply register a Luno account (using this link to make sure you get to the right website) and buy your own Bitcoin.
Deposit your cash into Luno, buy your own Bitcoin every month and then HODL (hold onto it for dear life). Take the decision that you will never sell your Bitcoin. One day you may borrow against it to release some cashflow, but Buy and never sell Bitcoin is my mantra.
This is strategy is Simple and Effective, you own your own Bitcoin (not some kind of derivative thereof), and start doubling and tripling your crypto savings every year.
There you have it, diversify your investment portfolio, turn you cash into crypto savings and other peoples’ cash into buy to let property.