Not to be confused with my Fine, Let’s Talk about Trump post.

I’ve held off on writing about this one for quite a while now. That doesn’t mean I haven’t been reading/listening up on the topic. Cryptocurrency has taken the financial world by storm and it’s THE topic of the day. If you haven’t heard of it then I salute you, because I, too, would love to live in the mountains with zero contact from the outside world. That said, people hire me to tell them what to do with their money so it’s my obligation to be in the know about what does or doesn’t make sense for their portfolios. Most is garbage to be sidestepped (hint, hint).

Let’s just cut to the chase: The real question of the day is “Should you buy Bitcoin?” Or, maybe a diversified portfolio of cryptoassets?

Maybe. But it’s an answer dictated by your own personal finances, not whether someone like me says it’s an attractive “investment.” Have a look at these questions:

• Do you have a fully stocked emergency fund?
• Are you saving enough to fully fund retirement by your desired retirement age?
• Are your insurance needs being met?
• Has your brain been infected with FOMO?
• Have you run out of paper currency in your own personal money-burning pit in the backyard?

If the answer to each and every one of these questions is “YES,” then go right ahead. GO BIT-CRAZY with some of your discretionary income if you so please.

The point here is that you should expect to earn absolutely nothing from something that has no cash-flows, no proven track record of being a cost-effective medium for exchange, has MASSIVE volatility (how much it moves up and down), is wildly popular on your social media platform of choice and its success is effectively based on more people buying after you. This is why I say you “expense it” if you insist on jumping in. Treat it like a movie ticket if you do pull the trigger. Buy as much as you’d take out of the ATM for a night of blackjack. It’s entertainment. If you end up making a couple bucks then that’s great. But please, for the love of Satoshi Nakomoto, please don’t treat it like a balance sheet item, where you allocate a meaningful percentage of your net worth (and your attention) to. Trust me when I say that you are likely not able to handle the ups and downs of allocating a lot of money to something like Bitcoin.

Let’s quote Luke Skywalker:

Although, he (probably) didn’t realize it. 

Screenshot via YouTube

Netflix is out with a new Jerry Seinfeld stand-up special. I loved it. Is there anyone else is the world who can pull off “clean” comedy like Jerry? I don’t think so.

Little did he know, Seinfeld made a wonderful investing analogy for the “active vs. passive” debate where investors battle over whether it’s best to own index funds or to try to pick winning individual stocks. When talking about his own anxiety at the prospect of making small talk with random members of the audience, or the public at large, he states:

“I can talk to all of you, but I can’t talk to any of you.”

Do you see the parallel? Applied to the decision of active or passive, Seinfeld’s analogy works like this: “I can invest in all of the stocks, but I can’t invest in any of them.” It’s such a clean statement that, frankly, I’m steamed to have not thought of myself.

It’s incredibly hard to pick winning individual stocks, just as it’s hard to begin a conversation with a single stranger. So much can go wrong. What’s easy, though, for Jerry and for most investors, is addressing the individuals as a group (whether they’re people or stocks). When you have a the microphone and an audience, just as an investor has a single basket of thousands of stocks, it’s much easier to control the narrative and keep your emotions in check.

Trying to get a single person to laugh on the street is a volatile situation. How many times in a row could you bomb before realizing comedy wasn’t the right profession, and quitting altogether? Maybe you actually had what it takes for a promising career, but hit some bad luck on the street. Put in front of an audience, however, just one person of the group not laughing won’t sink a career. And, you guessed it, when you own an index fund, one company going bankrupt won’t ruin your portfolio. How many times could you make a bad stock pick before exiting the market while potentially missing out on a lifetime of gains? The downside is staggering.

Be like Jerry: Succeed by talking to (and investing in) all of them. Who knows, you may end up amassing more Porsches than him someday.