I sold all my Index Funds and went all in on Bitcoin in 2022
My Investment Philosophy
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The above quote reminds me of my early investing journey.
My investing journey has evolved ever since I first started investing in 2018.
For the past 3 years, I have found my investment philosophy (I think). But that doesn’t mean that nothing would change anymore.
If we look back to our lives, we will realize that we’ve changed by a lot or at least a little. Our beliefs or what we value have changed whether we realized it or not.
How we invest also changes and may continue to change.
Investing is an experience. And there is no best teacher than experience. You can read all the books and take all the courses, but you will learn nothing unless you actually invest.
Investing is not an exact science.
There are no specific rules to follow that will make someone successful in investing.
You can ask 100 successful investors how they did it and they each of them will give you different answers.
Investing is a figure it out game for yourself.
So, what’s even the point of sharing my investment philosophy or reading my Substack if I can’t show you how to make money?
I can’t tell you exactly how to do it, but I can guide you.
I can show you the map, but you still need to do the travelling.
👣 My 2 Step approach to investing
Here is a short evolution of my investing journey so far:
Investing in index funds > stock picking (around 30 stocks) > Now I am down just to 1 investment*
*(technically 10 or less but the 1 investment makes up almost 99% of my liquid net worth, excluding real estate).
I invested first in index funds because this is what I’ve been told to. It was the mainstream advice, so I took it. But I didn’t feel comfortable with it because my money didn’t grow.
I ask myself why I am investing in it, and I could not find the conviction to stick with it.
That’s when I stumbled upon to my investment now and have built the courage to hold on through this investment because unlike when I had invested in index funds, I have conviction on my investment now.
🏋🏻♂️ My highest conviction investment
If you’ve been a reader of this Substack, you know what my only investment is.
And it is none other than Bitcoin. There is truly no second best in my opinion or rather based on my conviction.
If you want to learn more how I arrived on that conviction to go All-In on bitcoin. Read this post
Again, this is not a post to tell you where to invest
But the main key takeaway I want to hammer in this post is this:
Challenge what you’ve been told to
Looking back, this was my mistake. I didn’t challenge what I’ve been told to.
Don’t just accept what you’ve been told to do.
The only way to challenge what you’ve been told to is to research and learn. Argue both sides.
Research why it will work.
Research why it won’t work.
Once you have done all the work. Then decide for yourself if it is really an investment that you understand.
It’s now easier more than ever to research because we have information on our fingertips.
It’s also tricky because there are a lot of “expert opinions” out there.
To have conviction, you truly need to understand what it is you're investing. Don’t just invest because it is where your favorite vlogger invests in also.
To me the key questions I asked myself to challenge my conviction with Index Funds is asking:
Why will Index Funds continue to perform in the future?
I just could not find an answer to this. I could not build a conviction to put all my wealth in index funds.
Investing in index funds is a diversification. You're investing in 500 biggest companies if you are S&P500 index funds. It is not an investment that has conviction because how can you have conviction to know that all the top 500 companies that make the index funds will perform well
Do you know what those 500 companies does? How do they make money? What will cause their share price to increase?
Those are questions I cannot answer for myself. That’s why I can’t build conviction to invest on S&P500 index funds.
The argument for index funds is that S&P500 is that they have work in the past.
The question is what makes this companies grow?
When you do a little digging, the returns of the S&P500 comes from the top 7 companies.
Index funds are market cap weighted not equal weighted. This means that the growth of S&P500 comes from a few successful companies. These are the winners. So, you're probably better off if you spotted this companies early on that makes up the return of the index funds.
But the point is how will you know which are these companies? Which one will be the next Amazon, Microsoft, Google, Meta or Nvidia?
Some people can find the next big companies, but most can’t.
Even me I don’t have the confidence that I can do this let alone a working man that work 8 hours a day 5 times a week and has a family to feed.
That’s why I get it that most people will be better into index funds. Because most don’t have the time to do the work. Even if you have time, there is no guarantee that you can find a better investment than index funds.
But the argument I made and conclusion I made is that there is actually better thing to invest in than passively investing into than Index funds and that is Bitcoin.
THIS IS NOT A GURANTEE AND THIS IS MY OPINION (RATHER MY CONVICTION). I AM WILLING TO DIE IN THIS HILL THAT BITCOIN WILL OUTPERFORM S&P500.
IF IT DOESNT. I GUESS I WILL JUST END UP POOR. BUT THAT IS THE RISK I AM WILLING TO TAKE.
Another argument against index funds or the S&P500 is that they are just tracking the growth in money supply. In other words, if you use money supply as your benchmark (not CPI inflation), you are just breaking even. This is not a popular view but it is certainly a different perspective to view the performance of S&P 500. It’s the same with the real estate, how much of these returns in the real estate and S&P500 is just monetary inflation?
📚STUDY WITH AN OPEN MIND
In 2022, I went all in on bitcoin. I sold all my index funds.
Unlike other investments that I made where I bought then I sold after days, weeks, months or years (in case of index funds), I haven’t sold my bitcoin. In fact, I continued to add more from my salary since 2022.
I added aggressively by using intelligent leverage.
I was able to do this because I build my conviction by studying bitcoin. Despite the FUD around bitcoin, I wasn’t shaken.
Once you really took the time to learn and study bitcoin, you will realize that it is easier to understand bitcoin than index funds.
I can sleep soundly at night knowing that almost 99% of my net worth is in bitcoin.
I can’t do the same if I have my net worth in index funds.
The way to do that is to have conviction on what you own.
The way to build conviction is to study what you invest in. Even today, I still continue to study bitcoin.
The Green line is the return of S&P500.
The Blue line is the return of my IBKR Portfolio which consist of bitcoin proxies & equities.
Since the inception of my portfolio, my portfolio return is 195.39% versus 54.67% return of S&P500
🐻Conviction through the Bear market
At one point, my unrealized loss in investing bitcoin was at 50%, meaning my investment value is cut in half.
Did I sell?
No because I had conviction. I’m not saying that I did not feel anything.
Of course, it will be uncomfortable to see your investment down 50% but I never thought of selling or quitting.
That’s where you need the conviction, when things aren’t going well.
When you are down on your investment. It’s easy to invest when markets are pumping. Most people won’t even buy when price is going down. We buy clothes when they are on sale but somehow, we are afraid to buy investments when price went down.
🎇CONCLUSION
The key point that I want to make on this post are these two:
Challenge what you’ve been told to
Build conviction by continuous studying and learning
If you have takeaway to this post is not to be hurt that index funds sucks, bitcoin wins. I don’t want you to invest in bitcoin just because I told you so or someone else told you.
My point is that you need to build the conviction yourself whether that is investing in bitcoin, index funds, real estate etc.
Challenge what’ve you’ve been told to whether that is investing in index funds, gold, real state.
You have to reach your own conclusions in investing.
The way you do that is the by building conviction, if you can build it on index funds or real estate or any other investment, good I am happy for you.
I won’t argue that bitcoin is the best and everything else sucks.
The key point I just want to say is that do you really believe and have the conviction to put all your money in index funds? Or you are just doing it because someone told you so?
If you can’t find the answers, maybe it’s time to look for alternative to what you’ve been buying. Don’t just buy something because some gurus on the internet or group or Warren Buffett told you to do so. Do the work yourself. Find the answers.
You’d rather be wrong thinking for yourself rather than be wrong because someone told you to do so.
That’s it for this post. Hope you find this valuable.
Thank you for reading!
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