I’m a conservative person by default. I tend to take a position of more risk slowly and incrementally. The positive is that it protects me against a loss. But, obviously my upside is capped.
I’ve had three things influence how I’m thinking about risk recently.
1. Seth Godin’s recent post on Appropriate Risk. I really like how he describes appropriate risk as two fold – 1. the odds of it working out being in proportion with the benefits and 2. the consequences not being so large as to wipe you out.
2. Fred Wilson’s recent post on Diversification, reminding me that having all of your eggs in one basket can end in a mess.
3. Being friends with Barry Avraam. I’m so impressed with how he takes risks. It often serves as a nudge for me to shift another increment on the risk taking scale. 😉
The reason this has been on my mind is because I’ve been thinking of taking more risk with some of my investments. Right now, it looks like this:
- Index funds (S&P 500 and FTSE All-Share) – 77%
- Growth stocks and funds – 18%
- Crypto – 5%
Crypto being 5% is too small to give me a decent sized upside if things go 5X for example.
So, I am going to re-allocate to the below (essentially shifting some investments from index funds to crypto):
- Index funds (S&P 500 and FTSE All-Share) – 69%
- Growth stocks and funds – 18%
- Crypto – 14%
14% feels a bit high. But I have to remind myself that whilst it’s 14% of investments, it actually still represents under 5% of my net worth. Overall, that feels like an appropriate risk to take.
Crypto is a volatile world and I’m not interested in trying to time the market. So, I intend to take a dollar-cost averaging approach and move it over a four month period.
Here weeeeee gooooo.
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