What caught my eye this week.
The question of ‘enough’ is a perennial one in the circles this blog moves in.
Seriously! We can barely check into a Personal Finance and Investing Blogger Cult Meeting before a heated debate breaks out over how much is enough given sustainable withdrawal rates, official inflation versus lifestyle inflation, ‘one more year’ syndrome – or even whose round it is.
(The argument that buying a round of drinks will tack three months onto a future retirement date is an entry-level Jedi mind trick for the likes of us).
In the latest outing for one of the most popular-but-vague words in finance, Ashby Daniels at Retirement Field Guide deployed ‘enough’ towards finding wider contentment, writing:
Enough is a term that has very little quantitative definition, but much subjective definition.
Often, we can’t tie a specific number to enough, but we know when we are there. It’s subtle and yet definitive. It just hangs there waiting to be acknowledged or ignored.
But the important point is that we know it exists. It’s just a matter of whether we want to pay attention to our inner voice or ignore it completely.
Here’s a funny example that backs up Daniels’ point.
Long-time readers will know I’ve an on-off fascination and struggle with Bitcoin, and cryptocurrency more generally.
Back in December 2017 I um-ed and ah-ed about whether Bitcoin was in a bubble – and whether it was even a real financial asset.
A lot of digital data has flowed under the bridge since then, but the future of crypto is not what I’m thinking of in this post today.
Rather, it’s about what I did next.
You see I decided I wanted to own a bitcoin.
I could always see a possible future for bitcoin, especially as a store of value, and every day it survives the case is reinforced.
And I see owning Bitcoin as like making an investment into the part-ownership of a digital payment solution of the future.
But I have absolutely no idea how to value the stake accurately – and nor does anybody else as far I can tell.1
So I decided I would own one bitcoin. There will only ever be 21 million of the made-up blighters, and 18 million of them are already out in the wild (or lost). Owning one out of 21 million seemed meaningful if the boldest predictions came true, but it wouldn’t kill me if the price crashed again.
This was a regret minimization approach to ‘enough Bitcoin’.
I’m not bitter
I built up to owning my notionally-shiny single bitcoin in fractional dribs and drabs during the second half of 2019 and early 2020, through more than half-a-dozen buys at much lower prices than today.
So of course when the Bitcoin price took off later this year, I was miffed that I hadn’t bought two, five, or even 10 or more bitcoins.
But I was more relieved that at least – at last – I owned one of them!
And when the price of the ephemeral asset fell $2,000 in 24 hours this week, I was a little surprised to lose a meaningful wodge of
paper digital wealth so quickly.
However since I only owned one bitcoin, the impact of the dive was lost in the noise of my overall portfolio.
My conclusion? I have enough Bitcoin!
What if FIRE doesn’t work? – Monevator
Currency risk and ETFs, trackers, and other funds – Monevator
From the archive-ator: Gagadom and the Grim Reaper: suppose they come early? – Monevator
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!2
UK to face worst recession in 300 years as Covid crisis continues – Newsnight
Private pensions ‘set to lose £96bn’ from switch from RPI inflation measure – Guardian
Global stocks close in on best-ever month [Search result] – FT
Flat sellers could still face holdups despite safety form change – Guardian
Sir Philip Green’s TopShop empire Arcadia Group faces collapse within days – Sky News
Move over millennials – The Irrelevant Investor
Products and services
NS&I rates plummet: what are the best alternatives? – Which
How to buy a [German] Bitcoin ETF – ETF.com
Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade
Who will miss coins when they’re gone? – New York Times
Mortgage lenders increasingly shun the self-employed – ThisIsMoney
What is securities lending, why do ETFs do it, and is it risky? [Search result] – FT
Glass houses for sale, in pictures – Guardian
Comment and opinion
Secondhand no longer second-best for UK’s ‘circular economy’ consumers – Guardian
Live it up – Humble Dollar
Why active funds will continue to underperform – The Evidence-based Investor
Are investors at risk of a ‘green bubble’? – ThisIsMoney
When you double your money in five years after since starting to invest – Much More With Less
Operating under the influence: The British Brewing bubble of 1885-1913 – The Lookout Investor
We begin our lives as growth stocks, but end our lives as value stocks – Of Dollars and Data
What happens to small caps after a huge monthly gain? [US but relevant] – AWOCS
Trends that end – Humble Dollar
Early retirement isn’t boring. Brexit and Covid are – Simple Living in Somerset
Naughty corner: Active antics
The best-performing investment trusts of 2020 – IT Investor
Michael Mauboussin: Why value investing still works [Search result] – FT
FOMO is back… but what if this is the start of a bull market? – Howard Lindzon
Running the slide rule over litigation financing small cap Manolote Partners – SharePad
Note: Any comments on Covid should only go on our special thread, please.
What the world can learn from the Covid-19 pandemic [Search result] – FT
Latest data shows Covid back under control in UK – Covid Symptom Study
Why even a small thanksgiving dinner [or Christmas…] is dangerous – FiveThirtyEight
AstraZeneca Covid-19 vaccine is 70% effective on average, early data show – Stat
Why the Oxford/AstraZeneca data has scientists scratching their heads – Nature
Oxford/AstraZeneca Covid vaccine ‘dose error’ explained – BBC
How did they make the Oxford vaccine so quickly?: behind the scenes – BBC
North Dakota Covid mortality rate highest in world, with 1 in 1,000 residents dead from the virus – Newsweek
Sweden’s population is losing confidence in the country’s Covid strategy – MarketWatch
Inside the Great NBA bubble experiment [Basketball, but interesting] – GQ
BOE: Bank notes pose ‘low risk’ of spreading Covid – Guardian
Kindle book bargains
Don’t have a Kindle? There’s a £20-off right now, so it’ll cost you just £49.99.3
Happy Money: The Japanese Art of Making Peace with Your Money by Ken Honda – £0.99 on Kindle
Putin’s People: How the KGB Took Back Russia and then Took on the West by Catherine Belton – £1.99 on Kindle
Fight the Fear: How to beat your negative mindset and win in life by Mandy Holgate – £3.59 on Kindle
The Finance Book: Understand the numbers by Stuart Warner – £4.19 on Kindle
Off our beat
50 years of video game revenue visualised [Infographic] – Visual Capitalist
Why Reddit will now pay workers the same salary no matter where they live – CNN
Robocop sets sail – Hakai Magazine [Via Abnormal Returns]
Don’t fear the robots, and other lessons from a study of the digital economy – New York Times
“Traders should never be allowed to run banks.”
– Terry Smith, Investing for Growth
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- Note I’ve bolded the word ‘accurately’. I have heard all the arguments about the cost of hashing or comparisons with the total value of gold or the number of millionaires in the world, and so on. They can’t all be precisely right… [↩]
- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩]
- This is the ‘with ads’ option, which sends marketing messages to the sleep screen. You pay £59.99 currently to get a Kindle without ads. [↩]
Interesting link to the FT about value investing still working.
Vanguard appear to think differently, as they have announced the closure of their four Factor ETFs including Value from February 2021
@Hariseldon – Um, the FT article specifically says that value factor investing is (in the author’s opinion) not equivalent to *value investing*, as practiced by Graham, Schloss, Buffett, and co.
I have some sympathy with the point of view. However purists won’t like it, as it reintroduces magic dust and hand-waving into value investing. 😉
Maybe we have indirect exposure to Bitcoin anyway – by owning traders inside our indexes automatically and by owning the shops that Bitcoin investors will spend their gains in
There’s “enough gains” and “enough stress” I think
I agree Bitcoin is a scarce (and eventually shrinking) resource with considerable brand equity that is slowly going mainstream. But not without its problems.
Rather like indexing, I suspect the best approach is to invest, forget and take a look in five years.
Longer term (a decade or so in the future) I reckon quantum computing or similar will be used to crack it open. But by then the brand will have been semi-seamlessly attached to something else.
@Matthew — Yes, that was my attitude during the first Bitcoin boom/bubble. I thought even if all these Bitcoin hodlers get rich, they’re going to have to spend their money on ‘services and stuff’. Through that lens, Bitcoin entering the global financial system is almost like a new country with its own currency popping up in the Pacific and sending planeloads of tourists around the world to spend it. Would I think I needed exposure to this currency? Perhaps not. Anyway during 2018 I finally spent some time boning up on the tech/sector and decided to see it as much as a tech play. No passive investor needs Bitcoin exposure, that’s for sure! This is definitely my active mindset coming through here.
@C — Yes, I don’t actually include mine in my unitised active portfolio; in my tracking spreadsheet it sits outside the portfolio, along with my flat, my NS&I index-linked certificates, etc. Perhaps that’s inconsistent (I hold gold inside my portfolio) but it reflects how I feel about it Bitcoin. It’s got as much in common (potentially) with a depreciating Tesla as it does with gold or Amazon shares. Plus, as you say, I don’t want to think about it or trade it, I just want to leave it be and see what happens. Time will tell. Still wish I’d made this decision 10 years or so ago when old college friends were mining it etc! (I comfort myself with schadenfreude — they spent theirs when $10 or so seemed an unimaginable price for it…)
Why Bitcoin? Why not one of the other cryptos? Or even, why not a basket of cryptos – part Bitcoin, part Etherium, part Litecoin etc etc (starting to sound too much like a passive tracker now….)? Bitcoin has brand appeal for sure, but is this the only differentiating factor? Is there a tight correlation between all these that it doesn’t matter which you invest in?
Personally I don’t know enough about the future potential value of cryptos so if I was to dabble I would probably go for the basket approach rather than all in on one particular version.
Sorry if you have already replied elsewhere, what is your point of view on Tom ‘s comment on the topic https://monevator.com/compare-uk-cheapest-online-brokers/
“Tens of thousands of investors who have ploughed more than £60bn into EU-domiciled funds will not be covered by the compensation scheme post-Brexit in a serious blow to consumer protection.
In a controversial move, the Treasury has agreed to continue allowing 9,000 EU-based funds to be sold to UK investors despite the fact the Financial Conduct Authority (FCA) will have no regulatory oversight of these products.”
@Monevator – please can you say a little bit about how you bought/store your bitcoin?
I have periodically tried – and failed (regretably for the first time back when a bitcoin was c. $800) – to get involved, but every time I get stuck with what exchange to use, how to store it. cloud-based vs. hard wallets etc….
Wondering the same as @Alain, the ETFs I hold in my SIPP are domiciled in Ireland. How does that work with Brexit from a tax as well as a regulatory point of view?
That btcetc etf is available in the UK but only until the end of the year because of the ban on retail crypto derivatives
I bought some inside an isa and sold some on an exchange to reduce CGT liability (although that’s liability won’t be a problem if it goes to zero!)
Yes, I would third the request for some sensible monevator reporting on implications of Brexit for Irish domiciled investments. But perhaps the issue is that we STILL don’t know exactly what they are? Will we even know once it’s clear if we have a trade deal? Does anyone know?
@PC, ETFs have never had FSCS protection.
Just to say thanks for these links every time. Some really great content there. Just been reading the itinvestor- some very useful articles there too.
The risk with ETFs here is that the FCA choose not to recognise the KIIDs and require some other similar documents instead, but following some new UK standard. There is a risk the providers may not play ball, although I think it unlikely as the UK is a big market for ETFs. Retail investors have been stopped from buying US listed ETFs because the US providers chose not to produce compliant collective investment documentation.
@Vanguardfan: I can only concur and you’re right to raise it. It will I assume depend on the deal. There are a vast number of FS implications arising from GB becoming a third country (or more precisely three countries joined as one British Union. NI gets the best of both worlds. Some predict they’ll win out for some future overseas investment relative to England, Wales and Scotland). The deal will only minimise the friction and added costs at best (you can say that in all areas of GB life). Things like passporting. I just noted this article: https://monevator.com/how-will-no-deal-brexit-affect-your-investments/ Whilst there will be a deal (TINA), a low deal rather than no deal, I’m no expert and it may be some points have been ironed out already. But the article still seems relevant.
@Richard — I’m what they call a Bitcoin maximalist. I think other crypto solutions can (mostly) be substituted with Bitcoin+software, and since I believe the success of Bitcoin is a self-fulfilling situation (i.e. the longer it lasts and the bigger it gets then the even longer it lasts and the even bigger it (perhaps) gets) that makes Bitcoin, with a ‘market cap’ of something like $250bn and the clear leader the coin to own for me. With that said I wouldn’t be adverse to buying a smattering of the others, especially Ethereum (as the main alternative paradigm coin with scale) with perhaps 0.25-1% of my net worth. Haven’t yet though.
@Alain — From memory they’d still be covered by EU compensation and of course EU regulation, and as a Europhile (or at least not a Brexiteer) that doesn’t give me jitters. It’s a rubbish situation though for sure, as with nearly everything else that is coming with this national act of self-harm. I believe @TA is waiting until we know what the final agreement is before we re-up on commentary in this area. Anything now would be at best a a speculation/scaremongering piece really, and rapidly date.
@Fitandfunemployed — I’m not crypto expert and just use one of the mainstream platforms. It’s very easy to do so now (though the costs are high compared to more crypto-native ways of exchanging coins).
@Bb — Interesting extra detail, thank you for sharing.
@Tony — You’re welcome.
@Naeclue – Thanks for your thoughts. Yes, many (most?) UK-popular ETFs have long been domiciled in Ireland or Luxemberg. I’ll see if @TA can pop into this thread and share his greater expertise in this area.
Naeclue is bang on – foreign domiciled funds never fell under the FSCS. They’re regulated by their home authorities and compensation schemes accordingly:
For example, most ETFs are domiciled in Ireland and Luxembourg. Their compensation schemes are much less generous. Same is true of funds.
An established platform which appears reputable is appears bitstamp.com. To open an account, you need to provide ID and bank account details in your name from which funds will be deposited or withdrawn.
Never keep the BTC on a platform. Buy a secure wallet device, Ledger – ledger.com and Trezor – trezor.io are both trusted.
Then follow the advice provided by Trezor or Ledger when setting up your device. Your device will have a secure PIN and locks after a number of failed attempts.
If you forget your PIN or the device fails you can restore the wallet by means of a seed set of code words which is pretty much unbreakable. Anyone with the seed code can access the wallet so it must be stored very securely. Most wallet holders will write it down and make 2 paper copies, cut in half so finding one half is of no use, and store in separate locations.
How much BTC to hold? As much as you are prepared to lose if it is banned but this seems unlikely now as it is gaining traction in the mainstream marketplace now.
My choice is to hold a small percentage of my total portfolio in BTC and rebalance it – although I set the rebalancing threshold a bit higher than normal as it’s more volatile than other asset classes.
Alternatively, just buy and hold some outside your investment portfolio and forget about them and just see where the price goes over the next decade or more.
Finally, making the first purchases is like diving off the high board, you’ll probably stand on the side for a long-time hesitating. The price could be higher next week, next year, it could be lower next week, next year, you can’t know. So, if you will lose sleep buying and seeing it halve in price within a month, then do the same as is advised with stocks and drip feed over the course of a few weeks or months. You may equally see the price constantly increasing and wish you’d jumped all in, but that is the risk-reward trade off that you can’t avoid. Buy enough to make a difference if it goes well without over-committing, then you can just enjoy the ride whatever happens.
@tony, thanks for the link back to that article, I think I read it, took the message to be ‘don’t worry, do nothing’ and promptly forgot about it.
So if the 3 year temporary permission is still there, it all seems to be fine (at least in the short term) and presumably if it becomes not fine, during that 3 year period there will be time to sort it out.
Back to sleep again 😉
I cannot see the attraction of Bitcoin as an investment. It doesn’t provide any intrinsic source of return, unlike shares, land or bonds. Only the bigger fool theory and money laundering keeps it afloat. Much like gold really except gold does actually have some use and can be made into attractive trinkets.
As well as being useless as an investment, Bitcoin transactions are horrifically energy inefficient and I would not want anything to do with it for that reason alone.
@naclue – I suppose it might be physically easier to store than gold or lighter to move so in the case of hyperinflation where sterling and dollars are worthless and you’d be mugged for your gold
I’m not sure why someone would choose to use it for legitimate transactions outside of an armegeddon scenario, although I’ve read something about it improving the trust in a transaction somehow (?) – so it might be good for buying second hand cars privately or whatever else one might purchase from another person where trust might be lacking (if you want to buy weed please press the hash key!). Also in bank clearing houses trust is an issue but they of course wouldn’t use something so volatile.
I’ve heard that even vanguard was looking into blockchain for the way it invests, but I’m not sure how or the benefit.
I too don’t know what will become of Bitcoin once mining stops and so don’t know why people wouldn’t use a more efficient coin, or a coin where you actually have to solve a useful problem like protein folding or seti@home
@TI – I guess it makes sense. They are all interchangeable in the sense they do the same thing. Though from the investor perspective you are looking at BTC and saying it looks good value to what it could achieve, and is likely to survive into that future, compared to the other coins.
Is it a bit like electric cars? If you believe they are the future, and Tesla being the clear standout in this field, you would only buy Tesla shares and none of the other auto makers working on electric cars as your electric car ‘position’.
One bitcoin is too many. The high environmental damage caused by the energy wasted in bitcoin mining and the huge energy costs per transaction means I shut bitcoins and their whole ecosystem.
I don’t think one can say Bitcoin is “useless” as in investment. Self-evidently many people have got rich with it, and along the way an alternative global payments and store of value system has been built in a decentralised fashion that is resistant to third-party monitoring and which can be used to token-ize and make unique all kinds of digital assets, which look likely to become more important assets in the future.
Perhaps it’s not a particular person’s definition of an investment, but “useless” isn’t right IMHO.
I’m a simple sort though and I am happy with ‘digital gold’ as my metaphor to lean on. Bitcoin is a energy-hungry nightmare, but then so is gold — mining swimming pool sized amounts of rock for slivers of gold and then spending money building vaults to store it and guard it isn’t free.
I’m not particularly defending Bitcoin’s energy usage here — it gives me the willies too — but then the making of plastic tat for instance to pad out kid’s Christmas stockings with throwaway rubbish is also a waste of resources and energy. There’s a lot of modern activity that one would rule out if that objection was strictly adhered to. 🙂
Thanks for the great site.
Regarding fscs pension protection. I have an old company defined contribution pension with Standard Life with investments in SL branded vanguard funds. Would this be covered by the 85k or the £1mil? My understanding is that it would only be covered for the 85k unless I had an annuity?
> resistant to third-party monitoring
You meant to say third-party tampering – the whole point of the distributed system is that third parties can monitor transactions.
Which is also why it is not obvious to me that cryptocurrencies are really that well suited for illegal activities – all transactions are public.
It’s a bit like Al Capone publishing his financial statements in a Chicago newspaper, but under a pseudonym. That is all very good as long as nobody can link the person to the pseudonym, but once there is any evidence connecting the two everything is documented and the tax authorities will be having a field day. (Okay, in practice you’d probably use multiple identities, but in principle all transactions can be traced.)
Yeah, that’s better. I was just trying to avoid the phrase ‘censorship resistance’ which is pretty incoherent unless you’ve spent some time reading up on the space.
@Robj- I anticipate your’re right. But email that question to Standard Life Aberdeen. Ask both about the accumulation phase and drawdown. Get a written response. My Aviva (former employer DC) scheme in relation to Aviva funds (not third party funds, such as I anticipate your Vanguard SLA offerings) has this benefit “our pensions are classified as “contracts of long-term insurance” and therefore fall under 100% protection under the FSCS. https://www.fscs.org.uk/what-we-cover/pensions/ ” ie no limit.
@ Accumulator (17) yes. Exactly why with something like VWRL/VWRP I am conscious the FSCS protection doesn’t apply, instead the Irish scheme. Capped at E20,000. But if I were worried, it’d be more about platform failure than Vanguard.
I reckon that when/if it actually comes down to wanting to spend in crypto, Bitcoin won’t be many people’s choice – you want something that is cheap to transact and store, you want a much larger supply to dampen the volatility, and you don’t want to be discouraged from spending it because you’re hodling it (it’d be like the reluctance you’d have if you bought things using equities). Having the most valuable cryptocurrency doesn’t make it the most practical option, and that might change multiple times if better coins come up (and people stop using ones that become too speculative).
Greater fool theory might be a self fulfilling prophecy when there’s no earnings to alarm you with p/e ratios, but that’s all Bitcoin is really – it’s continued growth of course depends on continued faith but also it’ll depend on the rate that people save into it. I expect that like with all comodities, people’s expectations of inflation is a big thing and national debt begets qe which begets inflation expectations
We couldn’t predict that Google would be the #1 search engine or that Windows would be the main computer OS, or that internet explorer & chrome would replace Netscape, forerunners do change and we can’t predict them. If you do crypto, have a basket of them.
A fascinating podcast linked to this subject is The Missing Cryptoqueen available on BBC Sounds.
Hopefully all Monevators were smart enough to avoid this billion $ fraud.
Does an attack of the 51% become easier if the number of miners drops over time? I could imagine that as the price rises the reward for doing it increases
Here you are discussing bitcoin, yet according to the BofA study (The Irrelivant Investor) GenZ’s preferred payment method is cash!
NewsFlash: AJBell just raised the annual ISA charge by 40%. Cheers Russ.
Some people get rich betting on horses, buying lottery tickets or premium bonds. That doesn’t mean these are good investments.
@Naeclue — Indeed. That was why I included a whole second part to my statement about its investment merits, explaining the technological progress that Bitcoin has (arguably) achieved.
@Naclue – premium bonds belong firmly in the cash category because only the 1m prize is truly life changing and even that can’t save you more than say 30 years of work so even when you multiply the odds by the number of years it potentially saves you it might beat other cash options but not cautious investment as we know it. If you’re going to keep it only keep what cash you were going to keep, even then it’s not necessarily the most instant access place because of bacs transfers – although cards can cover you (but if you could wait that long it might as well have been in vls20 – I don’t think small volatility in the emergency fund matters too much).
As a lottery, with premium bonds 100% of the stake is returned to punters, so it’s better than true gambling, although the prizes are extremely biased towards the low end to make it more of a viable savings account. If you like a thrill it’ll cost you in opportunity but it’s not the worst and cheap entertainment, but I would keep the opportunity cost minimal
A common misconception. Your stake is actually the tenth of a penny or so per bond per month that is paid into the prize fund on your behalf in lieu of interest. The money that is returned is the deposit you made to a financial institution to earn that notional interest.
@ecomiser – I mean the total prize fund paid out to punters = the total sum of staked sacrificed interest (as you say a fraction of a penny per bond) – whereas with the national lottery or many other lotteries what is paid out is often around half of what is staked – so if one was going to gamble this is the most rewarding one to do, and in the long run you’d expect a median prize rate from it, so what you lose vs other instant access cash savings might be a small something but it’s definitely be small, at least you don’t have to keep switching savings accounts to get a competitive overall cash rate
What I really want is a fund or ETF that owns a basket of cryptocurrencies. Are there any?
I look forward to TA’s post on what has FSCS protection now we are in the sunlit uplands. I also wasn’t aware of ETFs in, say, Dublin, not having the protection so information about such things would be super helpful.