If I only had two hours a week to manage my investments...

I was catching up with a friend today who told me he is starting to spend more time to learn about investing. This piqued my interest, because these conversations often go in different directions - some people have a solid plan that is based on realistic goals and viable strategies, and others have unrealistic expectations based on strategies that are guaranteed to lose money (“I’m planning to make 5% a month by copying an FX trader I found on Telegram”). Because I’m known as the trading and investing guy in some social circles, people often ask me for advice. The typical investor I talk to usually has six to seven figures in savings and only 2-5 hours per week to think about investing because they have a full time job. I figured I should create a list of “do’s and don’ts” and a framework for what I would do if I was in that person’s shoes to maximize returns and minimize stress.

Do: Face the realities of investing. T-bills yield 5.3% right now, and the S&P 500 averages a 7-8% total return over a multi-decade time frame. The people you hear about out there making stratospheric returns are either investment professionals who have spent years honing their craft or are on a hot streak that will only last a few years. Many financial gurus you find on social media are simply not honest with their claims of past performance.

Don’t: Overcomplicate your investment portfolio. I made this mistake a while back when I started making hedge fund and VC investments left and right, thinking this would be a good way to diversify my trading profits. I ended up with dozens of investments I had to keep track of and many of them underperformed my expectations. Even worse, that alternative investment activity took time away from focusing on my trading, which resulted in me having a losing year. Don’t let investing detract from your main thing.

Do: Make the S&P 500 or Nasdaq a large part of your portfolio. At least 25%. The SPX has dominated other global equity indices over time, thanks to the size and scale of the US economy, technology leadership of US entrepreneurs, and the friendly regulatory environment of the US. The way the index is designed will get you significant exposure to the best global companies that have managed to compound their advantages over time - Microsoft, Amazon, Meta, Tesla, Nvidia, to name a few. The US also has a strong culture of share buybacks, which means the supply of shares in the US actually goes down over time, compared to other countries where the supply of shares tends to increase over time due to share issuance and IPOs.

Don’t: Speculate in FX. Just don’t. FX is the biggest and deepest asset class in the world, which makes it the most efficient market and the hardest to make money in. If you talk to anyone running a retail FX exchange, they’ll tell you that they just warehouse every trade because FX retail traders lose money consistently. During my career trading at banks, I knew traders with many years of experience who still couldn’t deliver consistent positive returns year after year. After I left banking, FX became a smaller part of my trading strategy over time because the opportunities are just not as good as other asset classes. If full-time professionals find FX a difficult asset class to trade, there is no way that you will succeed in the long run as an FX trader.

Do: Invest in crypto. I know a lot of my readers already trade or invest in crypto, so I’m talking to the small minority who don’t own any meaningful amount of crypto. Crypto is unlike any other asset class because it trades in violent but predictable cycles. Owning crypto in a bull market can deliver asymmetric and outsized returns unmatched by any other asset class. If you’re not involved in the crypto markets, ask yourself what are the personal beliefs that are holding you back. For example, if you believe that crypto has no intrinsic value, then take a step further and ask yourself how one defines and measures the intrinsic value of anything that is bought and sold in this world (you can’t). You don’t have to actually believe in the philosophies behind bitcoin to make money from it. Crypto is an ideology to some people and merely a speculative vehicle to others.

However, don’t just buy and hodl crypto up and down through the cycles like a roller coaster. Most coins will draw down 80-95% during a crypto bear market - even bitcoin had a drawdown of 77% in the last cycle. Accumulate bitcoin and other crypto at the bottom of the cycle and get out near the top. Easier said than done of course. There are two ways to get good at spotting cycle bottoms and tops - having experienced previous cycles and knowing what they looked and felt like, and studying metrics that show the flow of capital and measure sentiment and leverage. A good rule of thumb for getting out of the market is to sell 1/3 when it looks like sentiment is overheated, sell another 1/3 when things get silly, and sell the last 1/3 when it feels like we’ve seen the top. Do this, and you’ll compound capital much faster than if you stick to traditional asset classes only.

Don’t: Use Tiktok or Instagram as a source of information and knowledge. Those platforms are not where serious investors and traders go to share their knowledge. Twitter and Youtube are a mixed bag - they are great sources but you need to sift through a lot of garbage. Substack, certain financial podcasts, and Realvision are places where I’ve found good quality content for a great price (or free).

Do: Allocate at least 20% of your investment capital into stores of value such as gold and real estate. If you’ve read my primer on gold, you’ll know that it holds its value and appreciates against fiat currencies during periods of monetary debasement and financial repression. It’s not the sexiest investment (the past month being an exception), but on a multi-decade time horizon, gold has outperformed most asset classes and equity indices.

Don’t: Invest in long duration Treasuries (20 years or more) expecting to hold to maturity. Long duration Treasuries were a great investment in the 80’s when you were able to lock in double digit Treasury yields, but today’s yields are nothing special. Are you really going to clip that 4.6% in 30 yr Treasuries for the next 30 years, or will you eventually find something else better to invest it in, and sell before maturity? Let’s not kid yourself - it’s more likely the latter. With the debt to GDP ratio at 120% and the US spending 14% of its budget on interest payments, it’s unlikely that Treasury bond will outperform other real assets and stores of value.

Do: Making money in the markets is one of the most magical things in the world and I sometimes have to pinch myself to believe that I’m doing what I’m doing. Unfortunately, investing and trading in liquid markets creates little to no societal value. If you’ve made meaningful money trading and investing, give back and donate some of those profits to good causes.

Anyway, it’s late and I need to sleep. If I think of any more do’s and don’ts, I’ll write a sequel to this post.

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Disclaimer: The content of this blog is provided for informational and educational purposes only and should not be construed as professional financial advice, investment recommendations, or a solicitation to buy or sell any securities or instruments. The blog is not a trade signaling service and the author strongly discourages readers from following his trades without experience and doing research on those markets. The author of this blog is not a registered investment advisor or financial planner. The information presented on this blog is based on personal research and experience, and should not be considered as personalized investment advice. Any investment or trading decisions you make based on the content of this blog are at your own risk. Past performance is not indicative of future results. All investments carry the risk of loss, and there is no guarantee that any trade or strategy discussed in this blog will be profitable or suitable for your specific situation. The author of this blog disclaims any and all liability relating to any actions taken or not taken based on the content of this blog. The author of this blog is not responsible for any losses, damages, or liabilities that may arise from the use or misuse of the information provided.