By JP Thieriot, CEO, Uphold
Where should I invest? For the better part of the past half-century, a consensus among wealth advisors emerged, spread and somehow got etched in stone: stocks, mostly blue chips, and a smattering of bonds.
Whether “60/40” or “70/30” or something along that vein, the industry’s standard diversified portfolio served our parents and grandparents well. There’s something to be said for keeping it simple.
But these are not simple times. Our world has become a lot more complicated.
The global pandemic crisis and the response from world leaders – unfettered financial stimulus – have for the first time in decades raised genuine fears about inflation. The economic slowdown has roiled an array of businesses and commodities. Winners and losers rotate in and out of favor. Oil prices and airline shares collapsed. Gold, on the other hand, is soaring. Rock-bottom interest rates have produced asset bubbles pumped with superheated foam. Financial technology, digital assets and an accelerating pace of e-commerce, meanwhile, are fast and forever transforming how humans save, spend and invest.
Today’s investors have more choices and with that greater responsibilities. But they also have greater opportunities.
In today’s world, fractional shares, smart phones and satellite beams mean Amazonians can now own AMZN.
Conservative investment strategies still have a role to play. Who am I to second-guess Modern Portfolio Theory? However, conventional wisdom shouldn’t be treated as dogma. To set anything in granite at this moment in history would be a mistake.
Coming of age in the 1970s, splitting time between North and South America, I can fully recall the unsettling vibe of hyperinflation and political strife. What a soul-crushing, time-devouring chore it was to do something as simple as, say, transfer money between countries. Which is why I marvel at how much has changed in just the past few years and how quickly. The handful of things that passed for banking innovations for going on decades – ATMs and credit cards, essentially – are being put to obscurity right before our eyes.
Today’s global economy runs on an ever-speedier, more robust and reliable digital infrastructure. In almost every conceivable market, this has lowered the barriers to entry. Individuals, corporations and financial institutions alike are standing at attention. Which leads us back to that eternal question: How should I invest?
What is a 21st-century portfolio supposed to look like? I can’t offer any one-size-fits-all answer – and you’d be foolish to believe me if I did.
But I do have some suggestions:
Stocks and bonds, as I’ve mentioned, while old-fashioned, still play a role. They just won’t be the sum total of all your assets. If you select wisely, compounding equities can add extra zeros to the end of your balance and cut down the years remaining between you and retirement. There’s a reason that compounding — of interest or equities — gets labeled a miracle.
Crypto is transcending the realm of techno-nerds. The train, as they say, has left the station. What ten years ago required serious tech expertise – converting bitcoin to dollars – is now only a few clicks away. Anyone with a mobile phone can now buy and hold cryptocurrency. Bitcoin’s value has more than doubled since the beginning of the year, and they’re not making any more of it: There only are, and only ever can be, 21 million Bitcoin in circulation. According to AssetDash, Bitcoin is now the sixteenth-most-valuable asset worldwide. Digital money can be easily traded for traditional denominations, from dollar to yen, yen to yuan, yuan to euro. Some modest (at least 3%-5%) allocation to major cryptos (BTC, ETH) should at least be considered, if only as an inflation hedge. And if you’re worried about instability at home, you may want some of your holdings to be in yen or euro. Investing in international currencies also has never been easier.
Fractional equities have expanded the field of play: If you are interested in Tesla, but don’t have $400 to snag one full share, fractional investments open up a whole new avenue of possibilities. Finance giants like Robin Hood, Charles Schwab, and Fidelity now offer fractional equities, and fractional shares are more liquid than they were just a few years back.
Precious metals are relatively unfamiliar territory for most ordinary investors, but suddenly, whether owing to fraction holdings, ETFs or stablecoins, they are wide open. Gold maintained its value for thousands of years – and yet it has only been in the past few years that the average earthling has been able to put a small portion of earnings into this market. Gold may do well when the stock market fares poorly, so putting a little of your money into metal may keep your portfolio stable.
Okay, here is some one-size-fits-all advice: Don’t make any investments without doing your own due diligence and research. Consider your age, risk appetite, your liquidity picture, near-term needs – all of these factors, spread across the decision tree – all affect your strategy.
Whichever asset allocation approach you take, achieving institutional-style diversification has never been easier.
Every day we are abandoning old habits, once rote but which no longer serve their purpose. Kodak had a good run selling and processing film, and at the start of the last decade the blue chip even gained share in the digital camera market. But they didn’t invent the iPhone.
Don’t be reckless. If you want to take a flyer on a ten-cent altcoin, use funds that you can afford to lose.
As you build your long-term portfolio, don’t assume that the affable, smart-sounding registered representative knows everything. He doesn’t, which is why more often than not you will end up in an expensive mutual fund that tracks the S&P 500. Do not place all your trust in a single product or proposition. Your choices are legion. The financial world is changing. Allocation strategies should reflect this.
Remember: Yesterday’s strategies won’t necessarily work tomorrow.
About the author
JP Thieriot is Chief Executive Officer of Uphold Inc., previously serving as the company’s Vice-Chairman for five years, and Co-founder of the Universal Protocol Alliance, where he spearheads strategy and operations with the goal of onboarding 100 million people to cryptocurrency. Uphold has powered more than $6 billion in transactions, serving 184+ countries. Mr. Thieriot also serves as Co-founder and Director of San Francisco-based Estancia Beef. His prior experiences include co-founding Catalan Advisors, a fund specializing in sustainable cattle production, high-end beef, organic agriculture, and land investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.