MROTD: 11/24/21

MROTD: My God son turned 16 a while ago and is currently looking for a job. So I gifted him $400 early in the year to invest and ran an experiment with him. It might be something you're interested in doing or putting your own spin on so I'll share what I did.

Here is how I explained it to him:

Let's say you have approximately $100. I would put $25 in cash, $25 in precious metals, $25 in crypto and $25 in the stock market. Let me be more specific. Maybe you save $25 in cash, buy one silver eagle, put $25 in bitcoin and $25 in tech (chips, conductors, etc.) and stock futures (mining, energy production, etc.). I'm giving you $100 for each and you can do most of this through Cash App.

Let me give you one of the first responses you will receive from people if you were to give them any one of those four options.

It'll go like this:

"You are a fool if you put any money in (insert any one of the 4 areas)"

"Why do you have cash? Inflation is eating away at it. You need to invest that money."

"Why are you putting money in the stock market? The market is heavily manipulated and due for a course correction. Put it in crypto."

"Why are you buying Bitcoin? Bitcoin is purely speculative and isn't based on anything tangible. The moment confidence in it gets shaken, it's becomes worthless. Buy something tangible like gold or silver"

"Why are you buying gold/silver? It's a relic of the past and doesn't make you money like crypto or real estate."

Yes, all of those 4 areas have harsh critics with valid critiques. The point is not to bet everything on one horse. You're trying to establish a baseline. From there, you can decide which areas you want to be more bullish in and which areas you want to be more bearish in. You might decide you have enough cash reserves and reduce the contribution in cash from 25% down to 10% and direct the difference elsewhere.

When I ask him questions, the responses show me he's thinking. He told me prices are going up and his cash doesn't buy as much (inflation). The silver coins have gone up, but it's hard to spend without trading it in and losing value. The cash is easy to spend(liquid), but also easy to waste. He made a very good return on his stocks only to see it crash and only recently start to return(volatility and the need for patience).

These are all things I wish I thought about when I had my first job at his age. Gold is really just a hedge against inflation and an insurance policy. The increases in gold and now especially crypto reflect a distrust in the gov't and those behind it to faithfully and fairly execute economic policies that are in the best interest of the public at large. We aren't there yet, but my guess is he will get to that point soon. In any case, I believe we are due for a heavy market correction soon. If so, where will people turn? Gold and Crypto. Let's say confidence in Bitcoin fails, where will people turn then? The Stock market and gold.

I'm looking forward to seeing what his thoughts will be in what's sure to be some trying times ahead. Kitco on youtube has also been good for him to just get different perspectives on these things and formulate a plan that will match his risk/reward profile.

I told him the goal doesn't have to be to hit a homerun every time you are at bat. Stringing together several base hits can get the job done. The strategy I'm giving him is about giving yourself the greatest amount of financial cover and, at the same time, steadily increasing your net worth over time. He's 16 now, but imagine if he expands on this mindset over the next 30 years and starts now when he has no bills or obligations. He'll be able to retire by my age and he won't have to ever be on a magazine cover or drop an album to do it. If I were to retire now, it would be PB&J and Ramen because I didn't have the same benefit I'm giving him. I learned later in life, but made few mistakes that would end the game before I got a chance to play like I've seen with many of my peers. For him, when he retires, it could be lobster and steak.

FYI: I am not giving you financial advice. All the financial advisors on youtube have to say that.😄 Don't put your rent money in bitcoin, okay? I'm just telling you what I did and what he learned.