Investing In The Steem Age: Part 4 - Increasing Your Net Worth

Now we're getting to the meat of the matter, what the heck do we do with our money these days?
Dodgy Banks. No interest rate. Manipulated markets. Where do we stash cash every month to build our net worth?

In the last exciting instalment you'll have read about the less-than-successful beginning to my investing career. I'd read the right books, learned the right methods, then ignored it all & paid the price. But, over a lifetime it will be a cheap lesson.

Most people never even attempt to build their net worth. Many accidentally build it by buying a house which appreciates in value massively over a few decades, but that is just luck...not repeatable, not predictable...and VERY UNLIKELY to happen over the next 30 years in a country like the UK (in fact, it's probably mathematically impossible).

As a statement of belief... I don't trust the government to act in my best interest, nor do I trust the financial industry to behave any differently than they have in the past. It's a liberating feeling realising that I can't rely on 'the system' to build my net worth. So I look around & try to figure out what to do.

Firstly...I know I'm going to have to expose myself to risk if I want to grow my net worth. I have to take a calculated risk... there's no other way.

Secondly...I know I'll still grow my net worth month by month, even if some speculations fail. I'll not be risking all my assets on some wild gamble. Instead, some money goes to a fiat currency savings account, some goes into crypto-currency, some goes into investments. Even if I'm wildly unlucky/incompetent and my crypto & investments crash...my savings increases each month & I will pick myself up & try again with the investing.

A late 20th C asset allocation might have been something like:
30% Cash (+3%)
30% Bonds (+5%)
40% Shares (+8%)

A 2016 asset allocation might be:
20% Fiat Currency ( + 0%...in fact it probably loses a little to inflation each year)
15% peer-to-peer lending (+ 4-7% per annum)
15% Gold or silver (+ 10% per annum)
25% Bitcoin (+ 20% per annum, with some volatility)
5% Alt Coins (+80%, no -65%, no +123%, no -100%!... What I'm saying is...volatile, but potentially large!)
20% Equity crowd funding (funds locked-up long term. Invested in Maidsafe, Kraken, Bitpay etc... potential massive long term payouts. But you might have to wait a decade)

Then every year, you REBALANCE YOUR ASSETS. So....Bitcoin goes boom! (again) and goes up massively, you'd rebalance at the end of the year so that your total Bitcoin holdings still equals 20%. You lock up those gains in the other less-volatile assets like p-to-p lending paying out that steady 5% to you each year.

I haven't invented this concept, merely stolen it from the conventional investing world! There are 1000s of variations of course, with people trying to 'maximise their risk-adjusted return'... but I just think it is a sensible strategy in an uncertain/volatile world that will stop you becoming dangerously over-exposed to any one thing (like I was with RBS!)

It's a brave new world out there!