Why I changed my mind on cryptocurrency

In a word, risk. Cryptocurrencies are inherently risky investments as their prices tend to be very volatile. Volatility of index funds is around 18% annually, while the volatility of Bitcoin averages 64% over 30 days. That being said, Bitcoin has been the most explosive asset over the last decade. The ten-year return of Bitcoin is an unbelievable 533,026% at the time of writing. So how can we take advantage of some of that volatility? Does this mean I’m all in on crypto and going to the moon? No, but I do want to take advantage of increasing my risk without betting my entire financial future.

Controlling the risk

My strategy is to get exposure to the volatility of cryptocurrency without risking everything. There are some potentially massive gains, but there’s also the potential to lose 90% of your money. From weighing these risks I’m investing money that I can afford to lose and no more than 3% of my entire investment portfolio. I plan to rebalance this investment every quarter to ensure a maximum of 3% allocation. Many experts are recommending no more than a 5% exposure to cryptocurrencies in your investment portfolio. Its an effective way to get exposure to the upside without risking everything.

Rebalancing your portfolio is also recommended. My strategy is to rebalance my portfolio every quarter, based on this report. I also plan to sell part of my position if a coin hits a new all time high. With the intention to reinvest the profits when the price drops.

Do I see the risk continuing?

Yes. However, I foresee the volatility of cryptocurrency to drop over time as adoption becomes more and more prevalent. In my opinion, with the decreasing volatility, the almost certainty of regulations, and the increasing adoption from institutional investors, now is the time to start looking at cryptocurrency.

To the MOON!

Many retail investors are getting swept up in FOMO (fear of missing out) and will end up losing money on crypto scams and meme stocks. This mentality treats these markets as more of an entertainment source than an investment, in my opinion. Make sure to do your own research and know what you’re investing in. Have an exit strategy! Do not get sucked into the culture of HODLing (Hold on for dear life), there’s no shame in taking profit to reinvest later on.

Some additional thoughts:

The technology

Blockchain, the core technology behind cryptocurrency is revolutionary. This invention allows for an immutable ledger, which means the blockchain will always retain a record of the transactions that occurred on it. While the most obvious use case for blockchain technology is within the finance industry, there are numerous use cases in almost every industry. Personally, I’m excited about the potential of blockchain with in the medical data industry.


I watched the entire MITOpenCourseware on Blockchain and money. It’s a free course taught by SEC chair Gary Gensler that is extremely helpful! Learn about the three key aspects of money and whether or not you’re a Bitcoin/cryptocurrency maximalist. The entire course is available on YouTube here: Blockchain and Money


The views expressed above are my own opinions and is not to be considered financial advice.

529 plans for beginners

A friend of mine was recently talking about how he’s saving for his 1 year old daughters college education through savings accounts and stock market investments. After asking if he was also using a 529 plan his reaction was “What’s that?” I realized most people don’t know what a 529 plan is, why it is a excellent savings tool, and why it’s a crucial family planning asset.

What is a 529 plan and what is its intended use?

A 529 plan is a tax advantaged investment account that is intended to be used for higher education (and sometimes private primary/secondary education) expenses. These expenses typically include tuition, books, room and board, computers and up to $10,000 of student loans. These expenses do not typically include travel expenses or required healthcare costs to go to school, such as immunizations.

How much can I contribute to a 529 plan?

This varies by state, but in general, there are typically no limits as to what you would like to contribute. If you go above $15K in contributions per year you may need fill out paperwork classifying the contribution as a gift. Another aspect of these investment plans is that anyone can contribute. If you have a 529 plan started for your 1 year old daughter, you can contribute to the plan, the grandparents can contribute to the plan, family friends can contribute the plan. This is an easy way to consolidate savings if multiple people would like to help with college savings.
Almost all 529 plans are controlled by individual states in the US. This means that what individuals can contribute and invest in will vary from state to state. Typically this ranges between $250K and $500K, aggregate.

Can I invest in stocks within my 529 account?

Yes. However, what you can invest in is typically limited by the 529 plan’s provider. Think of a 529 account like a 401K retirement account, you’re allowed to invest in different stocks, bonds, ETFs, etc. but at the discretion of what the provider deems to be safe investments. This will vary from provider to provider.

Can I use a 529 plan for my personal education?

Another friend of mine wanted to take a coding bootcamp to advance his career and was curious about using a 529 plan to pay for it. This is a very intriguing question as most people use 529 plans to save for their kids or their grandchildren. Rarely do you hear about using these plans for personal education.
The answer is, yes! You can use a 529 plan to save and pay for your education and you can change the beneficiary of the 529 plan at any time, if you decide. If you are planning on starting your higher education journey or going back to school this is a great tool to save. If you’re still deciding on going back to school you can check out my earlier article on whether or not going back to school is worth it.
Advanced tip: Take advantage of the ability to change the plans beneficiary at any time! If you are planning to have a child in the future, open a 529 account in your name and contribute some funds. Once the child is born, change the beneficiary to the child’s name. You’ve now effectively created a longer growth run way for your child’s college education investment.

How do I avoid questions from the IRS when I want to spend the money?

Spend directly from the 529 plan! Most colleges will accept funds directly from your 529 investment account. If you withdraw from the 529 plan and then use the funds to pay for college expenses, you will need receipts to show that the funds were used for education to avoid any withdrawal penalties.

What if I need the money from the 529 plan for purposes outside of education?

Not an issue! You can withdrawal all of the principle contributions without any tax or fee. If you need to withdrawal any of the gains from the account, you will have to pay income tax and will also incur a 10% fee for using the funds for expenses outside of education.

Pascals wager and Social Security

When people get close to retiring, they start thinking about social security.  One of the main questions is about when they should start taking Social Security.  For younger people, the Social Security full retirement age is 67.  If you elect to start taking your Social Security benefits then, you will receive 100% of the calculated benefits that you have earned.

You do have the option to take is as early as 62 or as late as 70.  If you take is early, like a lot of people decide to do, you lose about 7% of your annual benefit for every year early.  And if you decide to delay beyond 67, you get about 8% more in annual benefits for every year you delay, up to 70.  Beyond 70, there are no additional benefits, so it doesn’t really help to delay beyond that.

Here’s the question.  What’s the best age to begin taking Social Security?

Most people approach this in one of two ways.  First way – let’s just take it as early as possible because I want to retire ( and maybe get out of my miserable job.)  That’s okay, but it does leave you with a lot less money for the rest of your life.  Like 2/3 of the annual benefit, for as long as you live.  That’s a big downside.

The other way people commonly think about this is calculating a breakeven point.  So if I wait a couple of years, I don’t get those 2 years of Social Security income (and have to either keep working or live off my own savings), but my payout will be 2×8% = 16% more, every year for the rest of my life.  And this amount will be adjusted upward for inflation each year.  So I have to live approx. 12-14 years more to break even on this “investment”.  So if I think I am going to live beyond 80, I’ll get my money’s worth.  Yup.

However, I think that people forget that the longevity stats for living show the average age for men or women to live, when they are at a certain age.  For example, if you are a 67-year-old man, the average longevity is about 81.  About 14 years.  But what that really means is that half the population will live beyond that and some will live for decades beyond that.

This is where my thinking on Pascal’s wager comes in.  Philosopher Blaise Pascal was considering whether God existed, and if he should believe in God.  He reasoned that if he believed in God, but it turned out that God didn’t exist, his loss was that he could have sinned more without much consequence.  But if he didn’t believe in God, and it turned out God existed, he would live for eternity in Hell and misery.  He chose to believe in God.  The downside was much greater than any upside.

So, my current thinking on Social Security is that we should think about this not from a breakeven point of view, but more from a guarding against long-term bad situations, like living under a bridge eating cat food when I’m really old.

I have been diligent in investing for my life, and my health is reasonably good.  I am fortunate to have these, and I know not everyone can afford to think about Social Security this way.  This leads me to believe that the best option for taking Social Security is to delay until age 70, which provides the highest level of annual benefits, which are also inflation protected.  Almost like self-insuring, self-funding a longevity annuity without all the annoying costs and downsides.  And who can beat a guaranteed 8% annual investment return for every year I wait, that will be inflation adjusted every year in the future.  No one.

On the other hand, if your health is poor, I would go for early Social Security so I could live the fullest live in my remaining years.

It seems like taking Social Security at your full retirement age is not optimal.  You should either take it as early as possible (if you know you will not live long), or delay it as long as possible to ensure against a long life of poverty.

Wow.  That’s kind of a downer conclusion, but I do think it is the best way to think about when to take Social Security.


Begin with the end in mind

Stephen Covey wrote a bestselling book called “The 7 Habits of Highly Effective People”, which shares 7 lessons in Personal Change.  One of my favorites is “Begin with the End in Mind.”  This lesson seems to apply to almost everything in life.  Sometimes I think of this as getting the big things right.

I remember packing my VW at the end of a college semester to go home.  Somehow I got everything to college, but it never seemed to fit coming home.  I always ended up with the mini fridge or bike sitting on the driveway.  And I just wanted to get out of there.  Maybe I was in a rush.

But I found that with practice and by beginning with the big things, somehow everything would fit.  My plans weren’t perfect: just start with the big, heavy things.  The smaller things fit in wherever and I always found a way to get them in, without too much effort.

This is a great metaphor for your financial life.  There are so many people telling you all the details of every conceivable thing.  It seems overwhelming.  Add to that the instant interpretation of the ups and down of the market, most of which is just noise.  But it undermines your confidence and you start to feel like maybe you need help from one of the “experts”.  But just like packing your car coming back from college, you don’t need an “expert” and you don’t need a detailed plan that takes everything into account.  Just Begin with the End in Mind.  Start with the Big Things.

So what are some of the Big Things?   Here’s my list.

Retirement:  This is probably the biggest.  As a millennial, you should count on living to 100.  This means you will need a bunch of money to cover several decades of living without an income.  And nobody will give you a “loan” to cover living expenses when you’re retired.  So get started as soon as possible on this one.

Healthcare:  Most of us don’t have many health problems now, but when they do strike, they wipe people out.  It’s just like hurricanes along the coast.  One may not have hit you yet, but you know it will, and when it does, it’s going to be painful.  Living a healthy lifestyle is great “insurance” and makes life enjoyable for a long time.  And having some decent health insurance keeps catastrophes from wiping you out financially.

Debt:  I’m not against debt, but it has to be reasonable compared to your income, and of the right kind.  The right kind of debt is that which builds up your human capital (your skills, employability, etc.), or is for an appreciating asset (like a reasonable cost home, not a speculative or “stretch” house).  Try to avoid any other kind of debt, and pay it off quickly.  Especially credit cards.

College savings for kids:  If you have kids, then help them get a good education for the smallest price possible.  Saving anything, and considering the state university helps tremendously.  But get started when they are born, even with a small amount.

That’s it.  Everything else is the small stuff.  Keep it in check, but don’t sweat it.

What are your thoughts?

Splurge on a new lunch bag and save $2000 a year

Looking for ways to save money? One easy way is to pack your lunch. Packed lunches are not just for grade school kids. Packing your lunch can help your waist line and your wallet. Consider that eating lunch out is $8-$12 a day. This doesn’t even account for the gas to get there or the stress of getting something and getting back to work on time. If you eat lunch out 5 days a week you are spending on average $50/week on lunches. Also, let’s be real, it’s easier to get greasy fast food than to look for a healthy option.

Solution; pack your own healthy lunch. Some will argue that eating out with co-workers or friends is critical to networking and relationships. They are right, so eat out one day a week and pick something special you really like. If you pack your lunch 4 days a week you will save on average $40 per week. That’s $2,000 per year. This is not pocket change. Think of what you could do with an extra $2,000 per year.

Last but not least, some will argue that they can’t cook or have no idea what to pack. Check out all the healthy packed lunch ideas at eatingwell.com. You can have great healthy lunches and save money. One last tip, prepare and organize your lunch at night so all you need to do in the morning is load your lunch bag.

To get started, have fun shopping for the following items:

Next, plan a week of lunches and make your grocery list.

You’re ready.  Enjoy lunch and saving money!