Quote from: JayJuanGee on July 26, 2023, 09:32:04 PM

Quote from: mindrust on July 21, 2023, 04:05:49 AM

If the interest rates are lower than the inflation rate, then borrowing money makes sense. It is because you can buy them real assets with the loaned money and make profits. That's completely legal and it is a way to game the system. Right now the banks in my country let me do this and I am getting rich because of it. Of course somebody else has to pay for it and they are those who couldn't get any loans from the banks. I doubled my wealth doing this last year and it worked. Thanks for the cheap money bitchezz

Yeah, but did you buy back your 10 BTC, yet?

There are a lot of ways to dabble around with the accounting in order to say that we made a lot of money, but are we really being honest with ourselves?.. also think about short-term, versus medium term, versus long term. Sure. I am not saying that whatever you did is not working.. but do you have BTC? That's where it is at.. especially if we look at BTC as an investment from a longer time horizon... say for example accumulating BTC in 2018-2020 (or even before that) and being able to mostly HODL those accumulated BTC (perhaps even continuing to add value to the stash/stack) through the next 5-10 years or longer.

But isn't there more to the inflation > interest rate equation? At first glance some people might deem an investment in real assets in this inflation > interest world to be a 0% or low % risk investment like arbitrage, but in reality that isn't the case. When inflation outpaces interest rates, it is quite risky to still take a loan and invest in already inflated real assets. Otherwise, when inflation > interest does not yet exist and you are among the people who are first of those who adjust their expected inflation, it can make sense to take a loan and then take profits in a timely manner as soon as inflation > interest becomes reality. Because those who take loans and think they are making a smart move because they buy inflated assets at interest rates being lower than the inflation rate, can quickly run into liquidity and depth shortages. That is why the real estate market might soon crash again and we can already see that with luxury watches and several other items that one or two years ago were deemed almost bullet proof short to midterm investments.

Eventually, it remains a gamble to a degree. It is good when someone exploits the situation and makes money off of it. But analyzing the economy and finding that inflation > interest holds true is also no 0% risk environment. Those who bought those watches two years ago are stuck now most of the time. Not only do the inflated prices fall, but also (logically) the demand is drying out. Some told me to have a look at watches as they were themselves looking into it and now they put their activities on hold.

In short, when inflation is already much higher than interest rates, it is usually too late for most people to take the gamble because it is likely that economic policy will be adjusted to close the gap between inflation and interest rates and when inflation is so high that everyone is already able to discern the discrepancy between interest rates and inflation rate and conclude their could be potential for financial gains, that potential has most likely been exploited by higher net worth individuals and professionals long before the gap became obvious to everyone.

But this in general and the example of the watches lead me to the diversification part...

Quote from: JayJuanGee on July 26, 2023, 09:32:04 PM

Quote from: Plaguedeath on July 22, 2023, 03:47:19 AM

If you worried all of your money would gone since investment is risky, there's called diversification.

You are not technically wrong, yet I am not sure if you said that correctly.. because beginner investors (who are not gamblers) might not want to take a lot of risk with their investment(s), so they might be trying to consider how to NOT put their principle at very much risk, so the very first investments that anyone might make might be moreso considered to be savings rather than investments, so dollar accounts with interest or bonds, and once they get their dollar related investments (savings) up to a certain level then they might be ready, willing and able to start taking more risks.

Sure there are some folks, including younger folks, who might not adequately consider the risks, so they consider investing as a kind of gambling and they enter into various risky investments while mostly preparing for UPside price movements and not really adequately calculating and/or considering various downside scenarios.

I think that all assets carry risk, but what also counts is individual literacy in a topic and, after all, one's own conviction of an investment. Watches in my opinion are one of these things that are very far from guaranteed to go up in price for many years in a row or even a decade. This is my opinion. Bitcoin, in contrast, is an infrastructure technology that stood the test of time already and when I had to choose between a very expensive watch, a decent real estate or Bitcoin (all equal amounts) in times of high inflation (and even interest rates being lower than inflation), I would go with Bitcoin in this very moment. Watches can turn into a highly illiquid market, so can real estate, but Bitcoin will at least be liquid, I have a real time reliable indicator of its price (which is essentially always lacking for real estate because prices develop in a delayed fashion compared to the overall economy) and I am convinced that it carries almost infinitely more upside potential than real estate or watches.

For me diversification would currently mean building/adding to a stack in Bitcoin at regular time intervals as it also comes into play that far spread diversification isn't cheap. You are not diversified when you buy 2 Bitcoin and a trash real estate for the same value only for the sake of holding two different asset classes. Whereas a real estate giant might very well feel diversified when investments go into different types of real estate. Luxury, mainstream, city center, countryside, ...

The age matters a lot. I can tell from the people that I talk to, the younger they are the more they are willing to take a gamble in crypto and also the less they are willing to put serious effort into learning about it. But I would be lying if I said that I didn't improve myself over time as well, meaning that I also was a bloody beginner at some point underestimating risk-reward ratios a lot (or not care about it too much I guess?)