This Is How I Grow My Money by 400%
Five things that I do periodically to grow my wealth
Sticking to a few principles in finance has always helped me remain grounded and objective in my goals. Hence, these are the cornerstone of my financial freedom — a few advantages of these principles that I have noted over my nine years of investing experience are:
- To create wealth in the worst case.
- Remain objective to my annual target
- To learn from the mistakes and iterate to fine-tune the strategies.
I use these five steps guide principles to maintain a healthy return on my portfolio. These are not hardcore beliefs, and with time, they change, and thus I adapt my outlook to the market drivers.
The first thing that I do is calculate the portfolio returns at the end of every four years cycle. If you are a new investor, you earmark the amount you want to invest.
Rationale behind the approach?
There is at least a bull cycle every four years in the Crypto space. Compared to returns in Crypto markets, in traditional markets such as S&P 500, Sensex(Indian exchange), the average annual returns range from 12–16%.
A 16% return is a decent return in the traditional market. Let me give you a quick formula for calculating the number of years required to double your money.
Since we want to have an annual return of 16%, we have to divide 72 by 16 to get the number of years, which will be 4.5 years.
With a good portfolio, every 4.5 years, I can safely double the money if invested in the traditional market; similarly, every four years, there is a bull run in the crypto space and the general return in 4 years in this market is at least 300%; the impact on the portfolio doubles every four years.
The second thing I do is earmark capital to invest in the Traditional market and the rest in the Crypto space. In other words, if I had $1000, I would invest 30% in the traditional stock market and 70% in Crypto.
Why so aggressive investing?
The 30% earmarked is not out of thin air but from a 28% CAGR that my portfolio accrues.
How?
The rationale is that the stock market holdings double in four years, and the crypto portfolio triples. So, $300 becomes $600, and $700 becomes $2100 in four years. Thus the total holding becomes $2700, and therefore CAGR is 28.1% approx.
Since the CAGR is 28.1%, we rebalance the portfolio so that the assets risk-reward ratio is low. This rebalancing will enable us to have a healthy return at four years. Let me illustrate you with an example:
Worst case situation:The $300 investment in the stock market is in Blue chip stocks which are relatively safe and have high potential. Thus the probability of capital downfall is negligible, while the likelihood of having a 100% return is more.
So let us assume that $300 becomes $600(“A”) in four years.
We diversify $700 investment in Crypto in two assets; one is a safer asset such as Bitcoin or Ethereum, while the other is a high risk-reward asset such as Terra(Luna).
The likelihood of capital deterioration of safer assets is negligible here in Crypto. Thus, let us assume that the $350 investment in Ethereum doubles in 4 years, which is very likely and thus become $700(“B”)
Let us assume that our high risk-reward bet takes a plunge, and at the end of four years, it gets corrected by 60%. The $350 investment becomes $140(“C”).
Overall portfolio at the end of four years,in the worst case, will be:
A+B+C = 600 + 700 +140 = $1440.
So even in the worst case, at the end of four years, your portfolio grows by 44%.
Normal case situation:Returns defined as A and B remain the same. The return defined as C changes in the best fit case. Let us assume that Terra(Luna) goes 5x at the end of four years. So, the $350 investment becomes $1750.
Overall portfolio at the end of four years, in the normal case, will be:
A+ B+C = 600+700+1750 =$3050
So even with a mild assumption of return, at the end of four years, your portfolio grows to 300%
The third thing that I do is a conditional step. If the cumulative return at the end of four years is more than 400%, 25% of the current portfolio is taken out and deposited in stable coins in DeFi platforms. Doing that will enable my original investment to grow passively with zero risk. This profit will also allow us to reinvest in a drastic market correction.
The fourth thing that I do is Staking. Since the portfolio is relatively into safer assets, including the high risk-reward, I rarely adjust the portfolio during the four years. Hence, staking those assets will allow my portfolio to grow passively and thus a hedge against a market correction
In this illustration, you can stake Ethereum and Luna in different platforms.
The last thing that I do is a high-risk action. I invest 5% of my portfolio in ICO with a predetermined target of 10x. Investing in ICO requires intense research and updates of the current market trend and industry. This step is not recommended if an investor is a complete beginner.
The reward potential of ICO is very high, and at the same time, the risk associated is also very high. The money allocated can either deteriorate by 90% or may grow by 100x. The recent ICO that I invested in was Cardashift, a project of the Cardano ecosystem.
Closing thought:
Investing is a mindset and disciplined approach that require dedication and effort. In those darkest times when the market is terrifying and volatile, we learn more about our mistakes and style of investing.
So when your portfolio is in crisis, do not panic; instead, observe where it went wrong and resist the temptation to take action emotionally.
If you need inspiration, then you can read the story of John. D. Rockefeller whose incredible history motivates me every time during the market upheaval.
I will leave you with this thought.
“Do not be afraid to make mistakes”
Disclaimer: None of the content, in part or whole, articulated here is any financial advice. This article is about personal investment philosophy and a medium to generate awareness in the financial journey. Please consult your financial advisor before making any financial decision.
Apologies for the above disclaimer!
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