Specialise

I am tempted to say this is a follow up Blog from the Diworsification Blog. Perhaps it is closely related.

We are often tempted to do everything at once, whilst possible, it can yield below par results. I think I read from one of Nassim Taleb's books that the reason why Professors have average salaries is because they are generalist, they do not specialise. Conversely, neurosurgeons rake the dough, few can do what they do. I have an opinion on this argument; generalisation is good, it allows you to have a conversation with anyone about anything, the limitation of course is that you know little about anything. On the other hand, whilst specialisation is good, it can actually narrow your thinking. If I know more, a lot more about Chemistry, I may end up not knowing about Messi's departure from FC Barcelona to PSG; this is not necessarily a big deal but it does present me as an ignorant and oblivious person. I digress. 

Warren Buffett and Bitcoin

Warren Buffett often says that he does not invest in something he does not (fully) understand. This approach has served him well in his career, I wonder how he feel about the missed opportunity on Bitcoin. Bitcoin has had a great run, a $1 billion investment could have set him really well, I wonder if he ever think about that.

I now trade cryptocurrencies, or whatever formal term is. I do not prefer a certain coin, based on its underlying technology or intended use, I just buy what is on an uptrend. My watchlist has Bitcoin, Ripple, Litecoin, and Etherium. I currently hold ETH & LTC; when most coins fell below the 200EMA, ETH held well. After it closed below that level, it was the first coin to recover and I bought on the close above the level. Eventually the other coins started to recover as well. I found myself wanting to buy these coins at these levels, a low risk entry level that offer significant asymmetric risk-to-reward. For diversification it is probably a good move, however, we have already discussed the pitfalls of diworsification. So I chose to stick with ETH and forgo the other coins. I realised that it will be easy to track one coin, also ETH had moved well past +3R return but still far from the short term target, the previous high. Once the target is reached I may consider covering the position and looking at another coin that promises good returns at low risk.

The Apple of my eye

In addition to EasyEquities USD account, I trade US stocks using eToro. So much for the plural when I actually trade one stock, Apple. Prior that I had few stocks; Cisco Systems, Plains GP, and have traded other stocks like Bank of America among others. I had to cut all the other stocks so I can focus on one company. The move was fueled by the fact that I have limited capital in that account, stretching it between different companies was not going to be productive. I have already published a video on how to invest when you have limited capital, I must walk the talk. So far the position is profitable, and it looks like it will be like that for some time, until it bends, I will be receiving dividends from it. Apple is near an overhead resistance, the earnings were okay, I expect the share price to break above this level.

Specialise. Focus.

The #R10KChallenge and the drive to reduce diworsification have made me to rethink my approach. I still have over 20 stocks in the ZAR account, I am still trimming some, closing poor performers, trying not to add new stocks. Eventually I will reach a level where I can buy few large positions, I will still manage to diversify. The trade off  is the regular dividend payments; with few stocks, I will not be receiving dividends every week. The upside is that if and when dividends come, it will be fat dividends! It will also be much easier to compound my investments as the gains will compound relatively quicker. 

Whilst I will not be investing in companies I understand like the Oracle of Omaha, I will still take trades without bias, up to the point where I run out of free cash. I will hold those positions until either the stop or take profit level is hit.