Discover more from Moné Weekly
Moonshot Alert #6 - Core Investments 📈
Welcome to Moonshot Alerts where I break down 10X opportunities in investing, business, and lifestyle design. Part of this edition is free, but the full edition is only available to community subscribers. Members get access to the entire archive of alerts & two Q&A calls every month.
Happy Friday everyone!
One of the questions I get the most is - “what should I invest in?”
Truthfully, there are a lot of answers to this question depending on your personal goals and situation.
However, there is a core group of investments that are typically recommended to everyone.
They are used by wealth managers, private banks, savvy individual investors, and some of the world’s investment titans.
Their performance is backed up by decades of research.
They are also easy to invest in, and low in headaches. In short, they are perfect for long-term investors.
Today, I’ll show you what these are, exactly which ones are best, and the step-by-step to get started.
If you’re familiar with the book The One Thing - you might be familiar with the concept of “the one thing that makes all other things easier or unnecessary.”
Well - these core investments are the one thing.
⭐ Why should you care which investments you pick?
Choosing which investments to invest in (stocks, real estate, bonds, private equity, crypto, etc) is one of the most important financial decisions you’ll ever make - because each investment has a different risk/return profile.
You see, we know - in advance - how much each investment you pick is going to make - and how much it’s likely to fluctuate in price.
We know, for example, that over long periods of time,
stocks in rich countries return 9.6% per year
real estate investment trusts return 8.5% per year
high yield bonds return 5.5% per year
gold returns 3.2% per year
On top of that, we know that generally speaking, investments with higher returns come with more volatility - that is, bigger swings in prices.
To reap the benefits of 150% annual returns in bitcoin, you have to live with periodic drops of 50 to 90% - something a lot of people can’t tolerate.
Other investments - like real estate or angel investing - come with strong upside, but other downsides, like the inability to sell your assets quickly (a feature called illiquidity).
This means that we can build a portfolio of investments based on how much money we want to make, and how much risk we’re willing to take.
As a result, the portfolios of individual investors and say - pension funds - are generally very different.
Pension funds that need to regularly pay out funds typically need linear returns of 7-8% per year. They will seek to minimize volatility in any given year.
They’ll employ strategies like risk parity, the strategy pioneered by Ray Dalio, that builds a portfolio around the targeted return an institution needs every year - and how much downside they can live with.
On the other hand, individual investors with a long-term horizon who can stomach volatility can accept lots of year-on-year variety in returns.
That’s because individual investors:
don’t have career risk
can heavily concentrate on one or a handful of positions
can buy practically any asset, no matter how small
have no benchmark they need to compare themselves to
In theory, individual investors like you and I can accept 50% down years if we’re up 300% the next year.
However, individual investors either typically take way too much risk (e.g. betting their entire portfolios on one small crypto) OR not enough (investing their pension investments in bonds - a low-return asset).
What you invest in should be balanced between how much money you’re looking to make in the long-term, and how much you’re willing to lose in the short term (due to price swings, not because you sell).
In the process, we’re looking to eliminate the chance that we ever lose all our money.
And that’s where core investments come in.
Core investments are the investments that will serve as the foundation of your portfolio.
They have high long-term returns compared to their levels of volatility (price swings).
They’ll guarantee that no matter, over the long-term, you will make money with an acceptable level of risk.
These core investments are typically the same for everyone.
They are widely used across wealth management firms and private banks to build clients’ portfolios.
And because of their superior risk/reward profile, they outperform most professional managers out there, year after year after year.
So let’s dive right in…
Moonshot PRO Alerts has a lot more insights:
👴🏻 Warren Buffett’s famous wager - and why it matters to you
🎁 What are core investments exactly? 🎄🎅
💰 Why core investments are brilliant
💎 How much of your portfolio you should allocate to core investments
⛏️ Which core investments you should buy
💡 How to buy core investments
⚡ Summary (in case you’re short on time…!)
🎙️ Date of our next Q&A call
Products I use (almost) every day:
Interactive Brokers. I exclusively use Interactive Brokers to buy and hold my stocks. It is the best investment platform in the world, with the most tools and the lowest fees. To receive up to $1,000 worth of Interactive Brokers stock (up 100% in the last year) for free, open an account using this link.
BlockFi. I use BlockFi to earn interest on my Ether (Ethereum). If you want to earn interest on your crypto (up to 5% per year on your Bitcoin and 4% on your ETH), open an account at BlockFi using this link.