Financial freedom

The best advice you’ll ever get on investing in apartments

Tara House hacking, Real estate 0 Comment
investing in apartments

Smart real estate investing is a superpower. Master it and you can have an income to live off for life and enough capital growth to secure your financial future. Learn about investing in apartments for financial freedom in just 10 minutes with out top 8 investing tips.

Let’s hit it!

investing in apartments

Contents

  1. Living off rental income
  2. What to avoid in an investment property
  3. The problem with negative gearing
  4. How to quickly identify a cashflow positive property
  5. Our top tips for investing in apartments to live off the income
  6. The best advise you’ll ever get on investing in apartments – summary

Living off your rental income

Living off rental income is part of the property investing holy trinity.

It’s when your rent covers all of your costs to hold the property, and then some. In investing terms, this kind of property is known as ‘cashflow positive’. Once your investment is cashflow positive, you get money in your pocket each month. Money you don’t have to earn from a day job. Huzzah!

There are a lot of moving parts to this equation playing out, on both the expense and the income side of your investment.

Firstly, let’s examine your holding costs. Many folks make the mistake of thinking it’s just your mortgage. Without a doubt your mortgage will likely be your largest cost and the biggest determinant of whether a property is cashflow positive. But remember, holding costs also include rental agent fees, city taxes or rates, accounting costs, fixed water supply charges (in Oz), tax accounting costs, advertising costs, vacancy allowances, and repairs and maintenance!

The last three on that list can be a cashflow killer if you haven’t factored them in.

On the income side the most important factor for cashflow is your ability to maximise rent, often by going above and beyond what the average investor is willing to do, or does.

What to avoid in an investment property

The opposite of ‘cashflow positive’ property is ‘negatively geared’ property. Negative gearing is a fancy term to try to make it sound strategic for your property investments to take money out of your pocket each year. You are ‘negatively geared’ when your property produces a loss which can then be used to offset your income tax at the end of the year (producing a tax saving).

Negative gearing may reduce your income tax bill, but that saving is premised on you making a loss on your cashflow at the end of the year! So the question is: why o why would you buy and hold an asset to lose money on it each year? Let’s look at why people buy negatively geared property.

1. Capital gains

The main argument for negative gearing is that the value of the property will grow more than your loss to operate it each year, leaving you net better off. Here’s a demonstration:

Single story home mortgaged at 80% LVR
Cost to purchase (excl. stamp duty & other fees)$500,000
Median annual growth (5 years)$20,000 (4% / yr)
Rental income$18,720
OPERATING COSTSAnnual expense
Mortgage costs (3.85%)$22,512
Rates$2000
Water$1200
Repairs$3000
Maintenance$1000
Agent fees (8.5%)$1591
Total operating cost per year$31,303
Owner’s cost to hold-$12,583
Tax deductions on loss (@ 37% tax rate)$4655
Total operating loss-$7928
Total return after capital gains$12,072 ((-$7928 + $20,000)

You can see in this example that he owner is $12,072 better off at the end of the year if the property grows by its 4% historical growth. This is after costing $12,583 out of pocket to hold the property over that time. That’s a BIG IF in our view and there are much smarter ways to invest in property & build a property portfolio.

2. Time in the market

The second reason people buy negatively geared property is because they believe by paying down the mortgage and increasing rents, the property will become cashflow positive over time. Over 40% of Australian investment properties are said to be paying their owners an income after holding costs.

But if you dig deeper, many of these properties have been held for at least a few years, most for more than 5. The investments have become positive cashflow over time.

For their first years of ownership however, the vast majority of Australian investment properties are negatively geared and actually cost their owners money! And a lot of first time investors can come unstuck in this period, especially if their personal income, rental income or mortgage situation changes!

3. Depreciation

Depreciation is an additional tax deduction on building, fittings and fixtures. Depending on the age and condition of your property, depreciation gains can be significant (but generally decline over time). For example, one year we received around $5000 in depreciation benefits on a 1970s brick and tile property we held until recently. To claim depreciation benefits, you need to engage a professional to do a deprecation report. Not all properties are eligible for benefits.

Deprecation lowers your taxable income, so it further reduces operating losses in negatively geared properties. In some cases, depreciation benefits can turn a negatively geared property into a positively geared property. This can happen if your depreciation benefit is > cost to hold – other tax deductions.

In the example above, if your depreciation is > $7928 (-$12,583 + $4655) then the property would be ‘positively geared’ at the end of the year.

In this example, you will have money in your pocket at the end of the year after tax. You will still be out of pocket during the year to hold the property. One problem with depreciation as a strategy is that you don’t know what your deductions are at the time you buy the property (unless you fork out for a report).

The problem with negative gearing

Where to start! We’re not fans of negative gearing as an investment strategy for so many reasons. Here are some of the biggest:

  1. The out of pocket cost. Can you afford $12,000 out of pocket ($1000 per month) to hold an investment property during the year? A lot of families trying to get ahead just can’t.
  2. The risk. Your losses can blow out easily – particularly if rents decline, vacancy rates increase or mortgage interest rates go up.
  3. It’s reliant on historic property market trends. Ever heard the line ‘past performance is not an indicator of future growth’? What if your investment doesn’t grow by 4% per year over the time you hold it?
  4. It’s harder to grow an investment property portfolio. Losing cash each year will impact your ability to service additional loans, if you want to add to your investment portfolio.
  5. There are smarter ways to invest in property!

How to quickly identify a cashflow positive property

Cashflow is important in property investing because it helps you hold the property without stress, minimise financial risk, and grow your portfolio. If you’re aiming for financial freedom, a positive cashflow property or two can be a game changer and speed up the time it takes to get your financial freedom.

But how do you quickly identify whether an investment will be cashflow positive?

In Oz, we apply what we call ‘the 10% rule.’ You can apply the 10% rule to a property’s gross rental yield when you’re out looking for your next investment. But it is just a rule of thumb. It’s always best to use it that way and do full due diligence before you invest.

As you do your research, what you will find as you scour through real estate ads and data, is that very few areas (at least on Oz) have rental properties returning a gross yield of 10%!

And this is exactly where apartments come in!

Why invest in apartments?

Firstly, we’re not talking about investing in just any old kind of apartments. We’re talking a specific type of apartment, in certain areas with certain features. If you follow our tips, investing in apartments can definitely be cashflow positive and pay you at the end of each month. They can also appreciate in value and provide options to take equity out of your investment over time.

We know all of this because we invest in these types of apartments and live off the income.

So lets get to the juicy bit 🙂

Our top tips for investing in apartments to live off the income

We’re about to run through the type of apartment investment that we hold and that pays us an income each month Before we start – this is not a straight forward or a passive investment strategy. If it was easy, everyone would be doing it….

So here’s our best advice you’ll get on investing in apartments:

  1. Buy multiple apartments on a single title
  2. Go regional
  3. Buy ‘walk-up’ apartments
  4. Buy brick or cement
  5. Find a cosmetic renovator
  6. Buy occupied apartments under market rent
  7. Supercharge your income
  8. Buy in a trust with a company trustee

Now let’s break down what exactly we do and have learned from experience:

1. Buy multiple apartments on a single title

This is critical, so we’ve made it number 1 on the list.

Buy multiple apartments on a single title, ideally on one registered parcel of land (or Lot). We’re talking about investing in a Duplex, a Triplex or Fourplex. Buying multiple apartments on a single title increases your rental and value add opportunities. We’ll get into this further below. It also lowers your buying and holding costs compared to buying single or multiple apartments, each on their own title.

We recommend stopping at four apartments. Anything over four apartments and you start entering the realms of commercial lending (at least in Australia), which can complicate the loan process and make loan criteria harder to meet.

Four key benefits of a single title apartment block

  1. It’s cheaper to buy – buying multiple apartments on a single title incurs lower buying costs than a block of separately titled apartments. Since buying costs such as title registration, mortgage insurance and stamp duty are all attached to property title, you pay these fees once for multiple properties. Buying multiple apartments on a single title can save tens of thousands of dollars in the buying process.
  2. It’s cheaper to hold – expenses such as water bills and council rates (city taxes) are much lower with a single title apartment block. Rates are attached to land parcels (lots) in Australia. A block of units on a single title over one lot attracts much lower council rates each year. You also pay less in fixed water charges, which landlords foot the bill for here in Oz. Multiple titles equals multiple water connection points, each with a separate water bill.
  3. Multiple rental streams – high vacancy rates can kill a good property investment dead in the water. Dual income properties help you manage this risk through diversified income streams. When one is vacant, you have rent from the other and so on.
  4. House hack and live for free: You could even live in one apartment and have tenants pay your mortgage. A $500,000 duplex with $400,000 loan gets you $1213/month rent. Your principle and interest repayments are $1876/month. Your rent is $153/week! You’d need to be onsite manager to realise this outcome but it’s doable.
  5. Subdivide – You can subdivide the right duplex, triplex or Fourplex. Subdividing is the process of putting each apartment on a single title (often called ‘strata title’). This allows you to sell one or all apartments separately if you want to. Why would you do this? Firstly, to increase a valuation on your investment. Three separately titled apartments will often reach a higher book valuation than a triplex on a single title. A higher valuation allows you to draw equity and keep investing…. Secondly, to access capital from your investment. If each apartment is on a separate title you can sell one or two apartments and take some cash off the table.

Note, there are certain features a property must have if want to subdivide in the future for a profit. But that’s a whole different article right there 🙂

Together, these 5 factors increase your potential for positive cashflow, organic growth and manufactured value – the property investing ‘holy trinity’.

2. Go regional

Property markets have experienced some pretty wild growth in 2020 and 2021. If you’re looking for an investment property right now, it’s highly likely that Duplex, Triplex or Fourplex apartments in tier one cities are out of reach. Unless you have a cool $1.5M…

The good news is, people still need a place to live in regional areas! Regional areas offer a lower buy in price for these types of properties. A LOT lower! You can still pick up Dduplex or Triplex in regional areas with sound local economies for around $650,000.

Add to that new remote working trends, and you may find that rents in regional locations are on the rise and are even outpacing city rental increases in some areas.

All of this bodes well for your chances of getting into the duplex or triplex market and of achieving a decent rent. In our view, regional areas with diverse and growing economies are great markets for investing in apartments as unit blocks.

3. Buy ‘walk-up’ apartments

A lot of folks were turned off apartment living during the pandemic. Apartments with shared lifts, facilities and common spaces definitely had a stink about them. People wanted distance from their neighbours. This is where ‘walk up’ apartments come in. A ‘walk up’ apartment is an apartment accessed by stairs or located the ground floor, with its own private entrance and facilities. This means they work for social distancing – ‘pandemic proof’ in a sense.

Walk up apartments were mostly built in the 70s in Australia, at a time when there was just more ‘space’ around and less people. They’re often larger internally than contemporary apartments. Updated walk up apartments can be appealing to renters for this reason.

Look for walk up apartments with minimal common areas. Individual rather than shared laundries, parking and outdoor areas is what you’re after.

4. Buy brick or cement

Earlier we mentioned that maintenance and repairs can blow out to your costs to hold a property. Multi-unit properties can exacerbate this as there are more kitchens and bathrooms, which is where the bulk of maintenance and repairs occur. So when you’re looking to buy, opportunities to reduce maintenance and repair bills are the same as money in your pocket.

One way to lower these costs is buy brick veneer properties instead of timber buildings, which require far more maintenance for wood rot, painting etc. Brick buildings typically require less up keep, making it easier to cashflow the property. You’ll also have a greater chance of retaining tenants with brick construction because shared timber walls can make for very noisy living.

5. Find a cosmetic renovator

Cosmetic renovations involve simple upgrades like cleaning, paint, flooring, window furnishings and tidying or landscaping gardens. Cosmetic renos are a great way to add value to an investment property for relatively cheap. They can also lead to higher rents and better cashflow.

When you renovate a Duplex or Triplex, there can be economies of scale in the renovation cost as well as a multiplier affect on rental increases. Win win for both value and cashflow! Just remember you need to have some extra money left in the bank for renovations after buying the property! Also, talk to your account about the timing of your renovation before you buy. According to Upside Accounting you need to be really careful what work you do to a property in the first 12 months of owning it as ‘initial repairs’ are not tax deductible!

6. Buy occupied apartments under market rent

You have to do some market research to get this tip right, but it can be worth it. What we’ve observed is that some landlords are reticent to raise rents on long term tenants that ‘look after the place’. We’ve also found that somewhat dated properties can also be rented at below market rates.

These are exactly the kind of duplexes or triplexes we love! You’re looking for an opportunity to raise rents significantly, without spending a lot extra to do so.

Tips 5 and 6 go hand in hand many times, and can turn a borderline investment into a cashflow positive one. Something to note is that you may need to move existing tenants on for this strategy. Firstly, to renovate. Secondly, because in many states there are limits to rent increases at lease renewal. These limits don’t apply to new tenants and leases. Instead, you’re free to find a new tenant and set your rent at or above market rates.

7. Supercharge your rental income

Renters will pay more rent for certain amenities. Understanding what these are, and the mark-up for them in your area, presents opportunities to supercharge your rental income. Examples include providing furnished rentals, renting to students by the room, or installing amenities like air-conditioning. You might also consider opportunities for short term rental accommodation, which for us has been the ultimate supercharge strategy and helped us get to financial freedom!

8. Buy in a trust with a company trustee

This is a no brainer if you want to build a property portfolio, protect yourself legally, and minimise tax. A properly structured trust with company trustee can help lower your tax bill significantly, protect you from legal liability, and help with estate planning if you want to transfer asset ownership among family members. Be warned, you will need to lodge separate tax returns for the trust. This will cost extra in accounting fees, which you should also add to the cost of holding the property!

For us, the tax advantages of using these vehicles have produced at least a 10x return on our accounting costs… Wooorrth iiiit!

The best advise you’ll ever get on investing in apartments – a summary

To recap, if you want to live off rental income then investing in apartments may be the strategy for you. But you’re not looking for just any apartments. You’re looking for multiple ‘walk up’ apartments on a single title and lot, located in regional areas. Properties that are: brick construction, in need of cosmetic update, and currently rented below market rates. You’ll need to have some money on the side to update the property and the gumption to move long term tenants on as part of this strategy. Oh, and don’t forget to buy in a trust and look for every opportunity available to supercharge the rent!

Always do your own research into the local rental market and economy. Always crunch the numbers before you buy!

We own a triplex in our investment portfolio and live off the income it provides. It’s almost doubled in value in 10 years and we still have the option to subdivide with pretty minimal cost if we want to sell.

Our triplex

This is active investing but if you want above average results, you can’t just do what the average investor does (buy negatively geared property).

We genuinely feel we’ve that this is some of the best information about investing in apartments on the internet. We hope it helps you on your investing journey to financial freedom! If you feel the same, you can help us out by sharing it around. Oh, and happy hunting!

Until next time financial freedom seekers – have fun, be happy, do good!

Is this the best cryptocurrency for exponential growth?

Tara Investing in Cryptocurrency , ,
best cryptocurrency

If you’re baffled by the exponential growth of certain cryptocurrencies and wondering how you might get in on the action, then this post is for you. The truth is, you won’t find the best cryptocurrency investments using conventional company and stock valuation methods. Crypto is different. You need to take a different approach to find those projects that will reward you with potential exponential growth over the longer term.

One approach to identify potential top gainers in crypto is to pinpoint those projects with strong ‘network effects’ that drive value to users and push token prices to seemingly parabolic levels. But what are ‘network effects’, where do you find them in crypto, and how do you invest? Let’s take a look…

What are network effects?

Network effects put simply are when a product, service or platform increases in value the more people use it.

Direct network effects happen in a reinforcing loop as users join a network and in doing so bring more value to existing and future users. The value of the product grows as more users join, and more users join because of this growing value. Hence the reinforcing loop. Think a telecommunications network, or a transport network.

Users also decide to participate in a network based on the level of benefits or value from ‘add on’ or complementary products or services. This describes the indirect network effects that can come into play in platform businesses that attract complementary products and services that add on to the platform and grow it indirectly. Like with Facebook. You don’t just use it to see your friends posting. There’s messenger, marketplace, advertising, FB groups and so on…

Most importantly, for investors looking for growth assets there is a point – a reaching of critical mass – when user adoption (on multiple sides) goes exponential due to the reinforcing value loops of direct and indirect network effects.

Why network effects can lead to exponential growth

1. It’s numbers game

The number of possible connections in a network like Airbnb equals the number of users on one side (the hosts) multiplied by the number of users on the other side (the guests). Its the same for all two sided networks that produce network effects.. Every user that joins the network makes it more valuable for the next user. If you have a network with 2,000 hosts and 10,000 guests, that equals a network of 20 million possible connections between users.

The number of connections in a network represents the growth of the network and its utility to other users, as well as its value.

2. Network effects are hard to displace

A network effect, once created, is hard to displace. Why doesn’t Facebook have any real competition? Its network effects have established its incumbency – by virtue of its sheer size, reach, reinforcing value loops and sometimes built-in infrastructure. This incumbency means Facebook as a competitor is very difficult to overcome.

Another important point for investors is that incumbents with network effects enjoy large, entrenched advantages due to their existing customer base. Why is that though? According to this Harvard Business Review paper on why some networks thrive over others, an Airbnb competitor would have to enter the market on an international scale—building its brand around the world to attract travellers and hosts.

To achieve that, the competitor can’t just be a little bit better, or even twice as good as Airbnb; it has to be a quantum leap better to convince a critical mass of guests and hosts to move to it.

This is why when platforms or businesses with network effects establish incumbency they’re very tough to disrupt.

So what does this mean for your crypto investments?

Firstly, projects that enjoy network effects (with incumbency) may be around for a longer time because they are hard to disrupt.

Secondly, if you are an early investor, the gains can be exponential due to the effect itself.

Lastly, because of their levels of growth and incumbency, the stock can continue to outperform over the longer term.

Identifying network effects in crypto

One strategy for investors might be find the crypto projects greatest network effects and (potential) incumbency.

The second one – incumbency – is important and hard to nail down. Crypto is new and very few projects have achieved sufficient size or growth to establish true and authoritative incumbency over the competition.

How to identify crypto projects with network effects?

So what factors might determine whether the a particular project has the potential for network effects? What metrics will tell you that a project is being actively used, rapidly built-out and adopted at a rate of knots? Lets take a look at 5 such indicators:

  1. Network users & nodes – the first sign network effects may be at play is the number of project users or nodes growing quickly. Nodes are found on blockchains. Their main purpose is to verify each batch of network transactions, or blocks. They’re necessary for the blockchain to both function and expand.
  2. Unique addresses – the number of wallet or payment addresses for the platform token that have more than a zero balance. For example, the number of individual ETH wallet addresses. It can be used as a proxy for the number of network users. When the network is popular and people are using it, there are more unique addresses. But that’s not completely accurate as one user can have multiple addresses.
  3. Total value locked – or ‘TVL’ shows how much is ‘locked up’ in decentralised finance products on the network (or in the Smart Contract platform). It’s an indicator of DeFi use on the platform.
  4. Daily transaction volume – this is the number of transactions associated with the crypto each day. Transactions volume shows the level of user engagement with the product or platform. For network effects, the trend should be sharply upwards.
  5. Developer activity – if new layers, applications and protocols being built on top of it or alongside and integrating with it this demonstrates indirect network effects that in turn bring more users and more developers. Developer activity indicates confidence in the ecosystem, roadmap and underlying technology.

The best cryptocurrency for exponential growth

So, if a network effects occur in platforms or networks where each user brings additional value and more users in a reinforcing loop, where in the crypto ecosystem might this occur?

The answer: Layer 1 blockchains.

What are Layer 1 blockchains?

‘Layer 1s’ are the blockchain ‘networks’ that form the ‘base layer’ of the crypto ecosystem. They are the networks on which everything else in crypto is built!

The digital asset ecosystem requires robust, secure and distributed blockchain networks to operate on and to ensure asset immutability. Layer 1s meet this need. They are the foundational tech of that digital asset ecosystem.

Blockchain-based digital assets, such as NFTs and stablecoins, are all built and issued on top of Layer 1 platforms.

Layer 1 cryptocurrencies

Tokens native to these Layer 1 networks (such as ETH to the Ethereum network) play a role in securing the networks. Holders that stake their native tokens to support the network operating are rewarded for doing so. Tokens are also used to pay transaction fees on the network (with fees going towards rewards). In some cases, tokens also give holders a say in network decision making.

Buying these tokens are how investors can gain exposure to the Layer 1 project.

Layer 1 projects have been a strong performing crypto category since the May 2021 market correction. With crypto still in the early adopter stage and just a few hundred million users world wide, some argue the exponential growth curve for successful layer 1 blockchains has not yet begun.

There are over 100 Layer 1 blockchains in the crypto ecosystem so next we sort the wheat from the chaff in Layer 1 blockchains that we invest in for their potential network effects. Let’s look at ‘The Leaders”, “The Contenders” and “The Challengers.

How do investors in Layer 1 crypto benefit from network effects?

When you own the native token of a Layer 1 blockchain, you own a share of the future value of transactions on that blockchain. As network effects grow demand for the blockchain and expand the on-chain economy, your share of future value grows too.

Layer 1 cryptocurrencies we hold

“The Leaders”

Bitcoin

Bitcoin is the grandaddy of cryptocurrencies. Lyn Alden gives a great synopsis of the network effects of Bitcoin. We’re not going to go over the arguments here, but we invest in Bitcoin as a store of value, border-less medium of exchange, and an instantaneous and low cost worldwide payment system (think about the avoided remittance fees globally).

Bitcoin is also the OG incumbent. Its total market cap makes up anywhere between 40% and 60% of the total crypto market cap these days. Nothing else comes close in terms leading the crypto market or influencing crypto price trends.

Network effects – tick

Incumbency – tick.

For these reasons, we hold Bitcoin in our crypto portfolio. We think its network effects will continue to play out as more countries like El Salvador recognise the potential value to local economies and to raising their citizens out of poverty. We also see regulators in more countries (like Australia and eventually the US) normalising Bitcoin investment vehicles, which will help on-ramp more users into the network.

Ethereum (ETH)

Ethereum is like a super computer base layer for smart contracts. Critically, Ethereum also has first mover advantage when it comes to Layer 1 projects in crypto, which has given it serious incumbency over the competition. Ethereum is the Top Layer 1 smart contract blockchain by market cap, with daylight second.

Fun facts for ETH investors:
  • Ethereum dominates the DeFi (decentralised finance) and NFT (non-fungible token) space. It has the most protocols and decentralised apps built upon it of any Layer 1 blockchain network.
  • TVL in the Ethereum network is $172 billion. The next largest Layer 1 by Total Value Locked sits at $20 billion. That’s daylight in between peeps.
  • The Ethereum ecosystem is gigantic. The biggest there is in crypto. Indirect network effects – tick.
  • Daily transaction volume on the ETH network has recently surpassed the Bitcoin network, which some suggest means that ETH will ‘flippen’ (overtake) BTC on the Layer 1 leaderboard sometime in the near future.
  • Other Layer 1 platforms are uniformly bridging into ETH. This cements Ethereum’s incumbency.
  • A recent protocol change introduced token burning so that ETH will become a deflationary asset (more tokens burned than new tokens issued). When supply tightens and demand grows, what happens to price?
  • Developer activity on platforms Github and Discord shows Ethereum development at almost double its nearest Layer 1 competitor.
  • ETH has executed and planned significant network upgrades (ETH 2.0), showing strong protocol consensus which is positive for its longevity.
ETH developer activity
best cryptocurrency
Ethereum developer activity reflects the size of its ecosystem and its growth
Eth 2.0 upgrades

Despite the hype, Ethereum suffers from one flaw that threatens its incumbency. The cost of using its network. This cost has driven hoards of users over to much cheaper Layer 1 competitors, like Solana.

Ethereum is fighting back with network upgrades (ETH 2.0) that claim to combat the gas price issues. Along with these critical upgrades, ETH also maintains its Layer 1 dominance the more it works with add on Layer 2 projects like Polygon network to extend its ecosystem reach and offer cheaper network solutions.

best cryptocurrency
Fees on leading Layer 1 blockchains. Source Coin Metrics

ETH is is a core holding in our cryptocurrency portfolio. This is not financial advice peeps – we are just sharing what we are doing. DYOR always!

Now that we’ve taken a brief look at our personal leader board, lets move on and look at some other top contenders:

“The Contenders”

‘The contenders’ are fast growing Layer 1 blockchains in crypto in terms of market cap, ex-Bitcoin and Ethereum. The two Layer 1 projects below are have been growing at pace and starting to jockey for shot at blockchain supremacy, alongside BTC and ETH in terms of market cap.

Solana (SOL)

Solana markets itself as the fastest and cheapest blockchain in the world. These two factors have catapulted its token SOL into the crypto stratosphere since January this year. Solana’s high speed and low cost features have solved the problems of the Ethereum blockchain for both crypto enthusiasts and software developers. As with all network effects, the SOL price has shot up this year as more and more users and developers are attracted to the blockchain.

Solana is building out a rich ecosystem including NFT marketplaces, DeFI protocols, as well as gaming, metaverse and Web 3 decentralised apps. Some of the most popular dApps built on Solana include Aurory and Star Atlas (gaming), Raydium and Serum (DeFi), and Solarnart and Audius (NFTs).

Fun facts for Solana investors:
  • Solana is highly scalable and can already process 700,000 transactions per second.
  • Solana developer activity comes in second to Ethereum on Discord and third behind Polkdot on Github.
  • TVL is over $13 billion which is third highest Layer 1 TVL and represents just over 5% of Total Value Locked across all blockchains.
  • Solana already has around 400 decentralised apps built on its blockchain despite only being launched in April 2020.
  • Solana has a thriving NFT marketplace that is growing in popularity due to the cheaper transactions costs of using the network compared to Ethereum.
  • The price of SOL is already up over 13,000% this year. That’s an exponential growth rate indicating network effects may already be in play.
Solana blockchain outperforms on number and growth of active user addresses. Source Coinbase Analytics

The biggest criticism of Solana is its lack of decentralisation. In crypto, decentralisation is often seen as an indicator a project is a safe bet over the longer term. Decentralisation is gauged by the number of validators on a network. Layer 1 incumbent Ethereum is highly decentralised with over 200,000 validators globally. Solana has just 1200 validators, showing its more centralised structure.

It’s worth knowing that the Solana network recently suffered a DDoS attack when bots targeted the network with 400,000 transactions causing it to reach max throughput and taking the network down for 17 hours. While it was a set back, the attack was of insufficient threat to affect the growth of this Layer 1 protocol, or our investment in it..

Polkadot (DOT)

Polkadot is different to the other Layer 1s featured in this post. It’s more than a Smart Contract Platform. Its aim is to ‘enable a completely decentralized web (3) where users are in control’. Here’s how Polkadot bills itself:

Polkadot is built to connect private and consortium chains, public and permissionless networks, oracles, and future technologies that are yet to be created. Polkadot facilitates an internet where independent blockchains can exchange information and transactions in a trustless way via the Polkadot relay chain.

In a sense, Polkadot is a Layer 0 network because it provides a framework for other Layer 1s to build on and connect to each other. Polkadot’s niche in blockchain technology is ‘interoperability’. Its aim is to build the trustless network layer that links Layer 1s together, making it seamless to move through the crypto ecosystem.

Because its vision is so large, Polkadot is probably the hardest of all of the Layer 1 networks to get your head around. It is also difficult to value using the metrics we talk about above. But the enormous vision, and the calibre of its tech founders, make Polkadot an incredibly interesting digital asset play.

Fun facts for Polkadot investors:
  • The founder of Polkadot is Ethereum Co-Founder and former Chief Technology Officer, Gavin Wood.
  • Polkadot has a $50 billion dollar market cap and is the 8th largest crypto by market value.
  • There are 142 project building inside the Polkadot ecosystem. The list includes DeFi, NFTs, DAOs, Layer 1s, Layer 2s, Metaverse projects, blockchain gaming, Oracles and so on.
  • Polkadot holders have locked over $1B in the first Polkadot ‘parachain’ auctions which will determine which bespoke blockchains get to use the Polkadot network. ‘Parachains’ are the name of the blockchains that get to built on Polkadot. The Polkadot network can support 100 of them. ACALA DeFi platform won the first Parachain auction for a slot on Polkadot.
  • Once it’s fully functional, Polkdot is expected to be able to handle 1,000,000 transactions per second. That’s faster than the fastest Layer 1 in today’s crypto ecosystem – Solana.
  • Polkadot’s token supply is inflationary, growing by 10% a year which is not great for the DOT price longer term.

Polkadot, by its very design, is the blockchain of all blockchains. However, DOT has not experienced the same level of ripping growth this year that competitor Layer 1s like Solana and Avax. We’re excited for Polkdot’s future and hold DOT in our crypto portfolio, but building this ‘blockchain of blockchains’ is going to take some pulling off.

“The Challengers”

“The Challengers are our up and coming Layer 1 blockchains. The smaller cap projects with small but growing ecosystems of platforms, tools and dApps building on top of them.

Avalanche (AVAX)

Avalanche is the new blockchain on the block this year and its concept is a lot like the Polkadot project. It bills itself as a network of blockchains with blazing fast speeds, better decentralisation (more validators) than Solana, and better scalability than Polkadot. If Avalanche becomes all of these things it could be one to add to your radar.

Fun facts for Avalanche investors:
  • Avalanche’s TVL has hit parabolic levels since August 2021, growing from a bit over $300M to $11B! 24% of that is locked in the AAVE lending protocol.
  • Avalanche’s market cap is up 85% in the last 30 days, hitting $23 billion. The price of AVAX reached all time highs this week is now in price discovery.
  • Avalanche has a fast growing ecosystem with loads of DeFi protocols and dApps, tonnes of exchanges and swaps, as well as a growing NFT dApp presence. Gaming is not as big on Avalanche as it is on Solana.
  • Avalanche recently announced $600 million in incentives to encourage development on its network. It aims to coax developers over from Ethereum.
  • AVAX token is used for network fees, capped at 720 million, and burned (on creation of blockchains, assets, subnets and payment of transaction fees). If the tokens burned exceed rewards (to validators) the tokenomics are deflationary. This is generally positive for the AVAX token price longer term.

Terra (LUNA)

Terra blockchain is all about creating programmable (private) money for the internet. It is a growing stablecoin payment system Layer 1 ecosystem. Terra is primarily a DeFi play, making it less versatile than other Layer 1s here like Solana and Polkadot. But it also has a clear niche and need. The Terra token used to pay network transaction fees is called LUNA. Terra’s most popular product by far is the Anchor lending protocol.

Fun facts for Terra investors:
  • Terra holders can stake their LUNA and earn rewards for supporting the Terra network.
  • Terra users can lend their UST (the USD pegged Terra stablecoin) on Anchor Protocol for a 20% APY with little exposure to price volatility. This one product has massively increased the popularity of Terra blockchain.
  • Terra has introduced a token burning mechanism, making it a deflationary asset.
  • TVL is just shy of $10 billion, with around 40% of that locked in Anchor protocol.
  • Terra issues stablecoins pegged to loads of different world fiat currencies – like the EURO or Korean Won. This makes it a cheap and fast global payment system. Terra stablecoins are currently widely used for retail and commerce in Korea and use in other countries is growing. Terra claims to have 2 million users of its stablecoins worldwide.
  • UST is an algorithmic stable coin. It uses an algo to maintain its peg to the USD. The algo could fail. The peg could fail. If it does, you’ll lose value in your stablecoin holdings. If the project fails, you might lose everything. So it is in crypto.
best cryptocurrency

If you want to learn more about LUNA and the Terra blockchain and ecosystem, check out our article “Why Anchor Protocol is the new high yield savings account”. Anchor is a DeFi lending protocol in the Terra ecosystem with a $7B TVL. Well worth looking at.

Constructing our digital asset portfolio

Whether it’s a multichain digital asset ecosystem future, or ‘one chain to rule them all’, we have a few Layer 1 blockchains in our digital asset portfolio.

By virtue of their role in the crypto ecosystem, Layer 1 blockchains could turn out to demonstrate network effects for exponential growth.

As we’ve already discussed, network effects + incumbency can form a potent mix for future price growth.

None of this is financial advice peeps – just sharing our opinion about what we are investing in. What is the best cryptocurrency for exponential growth? Well, do your own research and reach your own conclusion.

Is a crypto hedge fund better than buying crypto?

Tara Investing in Cryptocurrency , , 0 Comment
crypto hedge fund

Crypto hedge funds are booming. A crypto hedge fund is a managed investment fund that offers investors exposure to digital assets without actually owning the asset directly. But should you invest in a crypto hedge fund when you can just buy crypto? In this article we help you with information so you can weigh up your options. We’ll cover what crypto hedge funds are, things you should know about crypto hedge funds, and the top 5 crypto hedge funds by assets under management.

What is a crypto hedge fund?

A crypto hedge fund is a type of investment where investors pool their funds together to invest in cryptocurrency assets. Crypto hedge funds are usually operated by an experienced crypto trader or group of traders who have years of experience trading crypto. The fund manager(s) will use the capital from the crypto hedge fund to buy crypto assets, such as Bitcoin and Ethereum.

Hedge funds are known to employ more aggressive investment strategies than other types of funds (ETFs), differentiating them as an investment vehicle. There are different types of investment strategies from longing, shorting and arbitrage trading to more fundamentals based strategies like relative value or tech analysis. The chosen strategy will impact that risk profile of the fund.

The word “hedge” is used because these funds historically focused on hedging risk by buying and shorting assets concurrently, in a long-short equity strategy. They’re not called hedge funds because they protect investors from all of crypto’s investing risks however.

On top of these trading strategies, crypto hedge funds will often stake, lend and borrow coins and tokens to increase the IRR of the fund.

Crypto hedge funds don’t just hold crypto assets. They can invest in crypto adjacent assets. For example, there are funds that invest in and trade blockchain stocks. These are stocks of companies that provide Blockchain products and services.

Crypto hedge funds are different from traditional hedge funds in that they focus only on digital assets associated with cryptocurrencies.

Crypto hedge funds are booming

According to PwC, there were 150 to 200 crypto hedge funds at last count. These funds have total assets under management (AuM) in the billions.

The number of funds set up correlate directly to the price of Bitcoin which is no surprise. Because Bitcoin is booming, so is interest in these kind of more aggressive funds.

crypto hedge fund

Who is investing in them, and how much?

The funds, by their structure and the way they’re regulated, target already wealthy investors. Because they are seen as ‘risky’, the US Securities Exchange Commission (SEC) limits access to hedge funds to ‘accredited investors’. Accredited investors have a net worth of more than $1 million, not including the value of their home, or annual individual incomes over $200,000.

Basically, if you’re a US citizen but you’re not already rich you can’t invest in in any kind of hedge fund, including a crypto one (but by all means take your cash to Vegas and blow it all on black…).

It follows that around 50% of crypto hedge fund clients are high net worth individuals followed by family offices and ‘funds of funds’. The average investment in crypto hedge funds is $1.1 million.

Crypto hedge funds are traditional investment vehicles. They’re a known quantity to traditional investors and these are the investor types they will continue to attract.

3 things to know about crypto hedge funds, before investing

  1. Fees – You have to pay them and they’re high. You pay both management fees AND performance fees for the privilege of investing in these funds.
    1. Management fees – average 2.3%
    2. Performance fees – average 22.5%. Often increase with a higher IRR.
  2. Buy-in hurdles – if you don’t have at least $100k you’re NGMI – not gonna make it. You won’t meet the hurdle rate to invest. You also need to be an accredited investor in the US (see below) and prove it, which means paperwork! Meh…
  3. Redemption gates – you can’t take your investment out whenever you want. There are rules about when and how much of your funds you can access at one time. This, they say, it to prevent pricing impacts from large redemptions. So it’s there to ‘protect’ clients, but it just goes against the grain a little.

Buying crypto hedge funds or owning crypto?

The trade offs

Let’s look at the trade offs and benefits of crypto hedge funds, starting with most important part first – cost and performance.

If funds charge a 2.3% management fee on average plus a 20%+ performance fee, what does the average hedge fund performance look like, versus owning cryptocurrency outright?

According to PwC, the median performance of crypto hedge funds in 2020 across all investment strategy types was 184%. Here’s how that breaks down:

crypto hedge fund
source PwC

But don’t forget, you’re handing back 20% to 30% of that in fees.

If you had just bought and held Bitcoin your investment would have returned 305% over the same period.

And that’s Bitcoin – the largest large cap crypto of them all. Had you chosen instead to buy and hold a lower cap altcoin, like the Layer 1 protocol Fantom (FTM), your return over 2020 was 1088%.

Here’s something else to consider when it comes to crypto hedge funds. They will invest conservatively for a bunch of reasons; reputation, performance, regulatory obligations etc. In this way, crypto hedge funds are no different from traditional hedge funds.

A recent PwC survey revealed that crypto hedge funds predominantly trade the large cap ‘less risky’ coins that are slower to move and less likely to moon. 92% of crypto hedge funds traded Bitcoin ‘BTC’, followed by Ethereum ‘ETH’ (67%), Litecoin ‘LTC’ (34%), Chainlink‘LINK’ (30%), Polkadot‘DOT’ (28%) and Aave‘AAVE’ (27%).

crypto hedge fund
The coins crypto hedge funds typically trade. Source PwC

So what are you trading returns for when you invest in a crypto hedge fund? Exactly what do you get out this kind of investment (if you do meet the buy in hurdle that is).

The benefits

Time & effort saved

For the fees you pay them, fund managers will do the research for you. They will also manage the blockchain transactions for you. You don’t need to learn anything about crypto – how to use on and off-ramps from fiat, how transact on the blockchain, where to store to coins, etc. etc.

Seen as less risky than coin picking

Hedge funds use more aggressive investing strategies than other funds, but crypto hedge funds are still seen as less risky than owning crypto itself. Why is this?

Firstly, the fund managers do the due diligence for you. They research the companies, projects and code so you don’t have to worry about putting your money into something that turns out to be a rug pull or some other scam. Fraud, scams and rug pulls are a realised risk in crypto for many investors.

Secondly comes diversification. A hedge fund uses the money in the fund to buy into multiple coins, tokens and projects. The concept being, your money is diversified to help reduce single asset risk exposure and soften market volatility.

While they will help you avoid some of the risks inherent in investing in crypto (check out our article on this here), crypto hedge funds are still exposed to broader crypto market volatility. Although they actively seek to manage the impacts, it’s more to dilute than avoid them.

No asset custody worries

You might sleep better at night knowing that you are not responsible for keeping your crypto safe from cyber hack yourself. That’s because buying into one of these funds, you won’t really own any. No need for cold storage wallets, private keys, seed phrase storage, or any of that palaver.

Tax advantaged

This is a weird one. We’ve always had trouble with the concept of picking investments specifically for the tax advantages, but it can be a nice by-product. If you’re a US Citizen, hedge funds can qualify to be held in IRA and Roth IRA accounts.

Crypto hedge fund list

With over 150 crypto hedge funds in the market, it’s difficult to nail down exactly which one might be right for you. This is precisely why there’s a whole industry of brokers available to refer you to their crypto hedge fund of choice (for a commission or trailing fee of course!). To help out, here’s a list of crypto hedge funds but by no means is it exhaustive. Some of the better known and large fund managers not on the list include:

  • Grayscale Investments
  • Pantera Capital
  • Galaxy digital
  • Invictus Capital and
  • Coinshares.

Is a crypto ETF a good investment for crypto beginners?

Tara Investing in Cryptocurrency 0 Comment
crypto ETF

If only 13% of Australians own crypto, are heaps more folks about to jump in? It’s about the same in the US. Bitcoin is just off all time highs after its epic retrace in May 2021. It’s probably time for the FOMO set in. If you’re a crypto beginner and looking for ways to get involved with crypto, you might have heard about the new crypto ETF. The first Bitcoin ETF launched in the US recently. Australia and Canada have followed suit.

However, before you jump on the bandwagon, there are some things to understand about this historic cross-over of traditional and crypto markets. In this article we will review the new Bitcoin ETF, who it might be good for, and 5 reasons any crypto newbie might think twice about investing.

What is an ETF?

An ETF is an Exchange Traded Fund, which basically means that it’s a fund listed on the stock exchange.

An ETF is an investment fund that (usually) owns the underlying assets (shares of stock, bonds, oil futures or gold bars) and divides ownership of those assets into shares. These can be traded on exchanges just like individual stocks.

This differs from buying shares in companies because instead of owning fractions of businesses, you are invested into funds containing lots and lots of companies within a particular investing theme.

As the crypto market has matured, many have called for the creation of a crypto ETF or a Bitcoin ETF.

Can you invest in a crypto ETF today?

The answer to that question depends what country you’re in!

If you are in the US, you can now invest in a Bitcoin Futures ETF – an ETF based on the Bitcoin Futures market.

In the last week, US regulators have approved the first US Bitcoin Futures ETFs: ProShares’ Bitcoin Strategy ETF (Ticker BITO).

Several other fund managers, including the VanEck Bitcoin Trust, Invesco, Valkyrie, Ark Invest and Galaxy Digital Funds, have also applied to launch Bitcoin ETFs in the United States but as yet these are not approved.

The ProShares Bitcoin ETF is a futures based ETF.

The are no Bitcoin or crypto ETFs (either Futures or Spot) approved for investment in Australia, but there are several in Canada and Europe.

crypto ETF
The first Bitcoin ETF launches in the US today

Futures vs Spot Bitcoin ETF

Futures-based ETFs are different from spot market ETFs in that they track futures contracts rather than the spot price of an asset. A Bitcoin futures ETF follows Bitcoin futures contracts rather than the value of bitcoin itself. As a result, the ETF’s price will not correspond to the price of bitcoin.

A futures ETF is a ‘synthetic ETF’ because it’s based on financial derivatives (futures contracts) traded at the Chicago Mercantile Exchange (CME). The fund BITO doesn’t buy and sell any Bitcoin and you don’t actually own any Bitcoin by buying into fund!

A spot Bitcoin ETF is in the works. Word is that trust fund manager Grayscale will soon apply to regulators to have their Grayscale Bitcoin Trust fund changed to a Bitcoin ETF.

What is the difference between a Bitcoin ETF and a crypto ETF?

A Bitcoin ETF will follow the Bitcoin spot price or futures contracts. It doesn’t cover other cryptocurrencies. It’s movement up or down relates only to Bitcoin’s movement.

A crypto ETF will track a broader basket of cryptocurrencies. It’s movement / price is weighted to the fund’s allocation of this basket cryptocurrencies. It make sense that the first crypto ETFs are likely to track a basket of large cap coins or more established crypto themes, like Decentralised Finance coins or Layer 1 protocols. Although there seems to be growing support for an Ethereum ETF to launch next.

Why you may be tempted to buy shares in a crypto ETF

Exposure to a new asset class

Crypto ETFs are new. Hell, mostly they still don’t even exist. But they’re coming, and large investment houses will undoubtedly be successful selling these funds to their clients as a new ‘must have’ asset class in their portfolio. They will espouse a bunch of benefits about an ETF being less risky, easier to buy and out of, more passive – all appealing traits for new crypto investors. Will you be convinced? Let’s look at these.

Diversification

If you buy into a crypto ETF that holds a basket of cryptocurrencies, then on the surface at least your portfolio is more diversified than owning one coin and you minimise risk. How? Your investing eggs aren’t all in one basket. Also, a basket of crypto may slightly dampen the market volatility of exposure to a single coin. That said, large cap crypto and crypto asset classes can move together and move wildly, so you’re not avoiding volatility altogether.

Easy to buy and sell

Investors who want exposure to cryptocurrency without actually holding any will find it easier to purchase via an ETF than going out and buying Bitcoin directly. This makes crypto ETFs accessible to traditional investors that don’t want to go through the learning process of setting up their own crypto wallet and navigating the on and off ramps into the crypto ecosystem.

For example, you can buy shares in an ETF through a regular stock broker or on an easy to use stock app straight from your mobile. To get crypto is a bit more involved and there’s a learning curve.

Reduced investing risks

Crypto funds are still relatively new and we’ve posted extensively about the different risks of investing directly in crypto (and how to manage them).

If you really don’t want to take the plunge buying into a crypto ETF could help avoid some of these risks – like human error in navigating the block chain. Any ETF fund manager will also do the due diligence for you. They vet the coins in the basket, so your risk of things like project failure (when the coin goes to zero) and rug pulls are theoretically less. You also don’t need to think about coin custody and cyber hacks because you won’t actually ever own any cryptocurrency.

A crypto ETF is good for crypto (but is it good for you?)

A crypto ETF is expected to bring more money into the crypto asset ecosystem. Mainstream investors may see it as opening up the possibility of large gains to traditional stock market investors. A common view is crypto ETFs will bring new money, new investors and greater legitimacy into the crypto ecosystem.

This is good for crypto hodlers like us because demand for crypto assets that we own will increase.

The price of Bitcoin has already pumped more than 10% on the news of the Proshares Bitcoin Futures ETF and the ETF will not even hold any Bitcoin!

But in the end, a crypto ETF is a traditional financial instrument. That means middlemen taking their fat fees and others controlling your money. Ask yourself, is buying into a crypto ETF a good way to start your crypto investing?

Here’s 5 reasons we don’t think so..

5 reasons to think twice about buying a crypto ETF

1. You’ll pay more

There are additional fees associated with using a fund set up by institutional investors. Instead of paying more of you hard earned fiat, you can buy crypto directly and pay less for the opportunity.

2. Wall Street gets richer

ETFs involve middlemen who clip the ticket on your investment. If you’re cool fattening their pockets, then go you. But if you know about the idea behind crypto and believe in its human good, then making Wall Street richer should grate on you.

Crypto is about decentralised system of finance where opportunity isn’t controlled by Wall Street and everyone invests from a level playing field.

3. You miss out on DeFi opportunities

Owning cryptocurrency can open up the opportunity for gains other than to the underlying asset price movement. For example, holding a crypto asset might qualify you for an ‘Airdrop’ in which you’re gifted another asset by the same crypto project (for free). We’ve received many an Airdrop that has turned into sweet profits in the past. You won’t get this owning shares in an ETF.

DeFi is also an opportunity to compound any crypto investment gains. You can own a crypto, be exposed to its market price and also earn passive income from lending that crypto or staking it in a DeFi protocol. An ETF only exposes you to the price gains or losses of the underlying crypto asset.

4. Double the market risk?

ETFs are part of the stock market (fiat currency based). Irrespective the asset an ETF covers, it may be influenced by overall stock market movements and sentiment. On top of this, a crypto ETF may be influenced by crypto market movements and sentiment.

5. It’s not the future

You don’t need to learn anything new to buy a crypto ETF. This may seem like a benefit, but is it in the long term? We would argue that with digital assets and blockchain tech growing exponentially, the sooner you learn about how to use blockchain technology and transact cryptocurrency assets, the better off you’ll be in the long term.

Conclusion – invest in yourself not Proshares

None of this is financial advice peeps, be we think crypto is here to stay. Digital assets are a growing asset class and a part of our asset portfolio. The opportunities you open up from understanding the crypto ecosystem right now can be asymmetrical.

But that won’t always be.

It’s up to you. You can invest in a crypto ETF and you might get some nice gains. Or you can invest in yourself, learn crypto and use it like we have to get to financial freedom.

If you want to join the digital asset revolution and just by crypto instead, check out our starter guide to the right of screen. It’s free and it will help you buy your first crypto safely in 6 easy steps. It even has links to everything you need on the internet. -> -> ->

Our first steps into the world of off-grid living

Tara Our story, Sustainable living , ,
Off-grid living

It’s been 2 months now since we moved into our humble home in rural Tasmania and began our adventures in off-grid living.

Time for another update to our financial freedom journey!

What a busy period, with lots of adjustments – work, lifestyle, home life, finances, remote business running – just about everything really. 🙂

Unpacking into our new life

Before the dreaded unpacking, we camped in our little cottage for two weeks while the floors were re-done. I wouldn’t recommend it, but the floors look great.

We also had a wood heater installed, which makes for a cosy winter night with a glass of red or a tasty craft beer. The first night we ran the heater I worried we might burn the house down while we slept (we’re Queenslanders after all!). Now we’re chopping wood like maniacs and drinking more red wine than ever. Something about those flickering flames… 🙂

Before and after new floating Tassie oak flooring and our gorgeous and entirely necessary wood heater

Cheap and cheerful $100 DIY reno

We love a DIY reno and also completed a cheap and cheerful do-over of the once ghastly pink study.

To make the standing desk for two, we bought $45 worth of timber and hinges and built two trestle legs. We then repurposed a beautiful, heavy timber barn door from the kitchen into a gigantic desktop. Add some crisp white paint to the walls and ceiling and voila! The room is perfect, with a picture window so pretty it’s a dangerous distraction from blogging.

The study is where I work when it’s raining out, which it almost always is in Tasmania!

The new study with picturesque views over the back fence of wild Tasmania

We’ve had to pinch ourselves a lot in these last two months. We feel like we’ve stumbled into a huge slice of luck to be living here. But then, I’m a firm believer that luck is the meeting of preparation and opportunity. And our financial freedom was a journey we started 8 years ago…

We’ve met our curious cow neighbours and our thin Queensland blood has proudly survived the winter frost and a late spring snow.

  • Winter frost-scape from the back yard
  • My outside standing desk
  • A catch up with the neighbours over the side fence

Urban life to off-grid living – what has the transition been like?

One welcome adjustments and part of our financial freedom plan has been our move to off-grid living.

I confess, we’re not entirely off grid. We do have power lines. But we are off-grid for our water, waste water, septic, rubbish and 80% of our heating. For these life-time urban dwellers, it’s been a fun and a learning experience. So what exactly do we do differently now?

We manage our own water supply

Our water doesn’t just turn up at the tap as it does with urban living. It’s on us to make sure we have enough water and that it’s sufficiently clean to use and drink. We run two water pumps and two ‘pump and gravity fed’ rainwater tanks. The water is not clean enough for our liking so we have ordered a whole-house water filter to be installed before the main pump to clean up the water supply to the house. We double filter our drinking water through a Dolton tier one drinking water filter inside this cute and custom pot-belly pottery urn.

In return for our efforts, our variable water cost is zero. Our infrastructure costs are sunk and contained (no water utility to put up the fixed cost component of the water bill). And we don’t complain about the rain.. 🙂

We heat our home ourselves

We had 5m3 of dry timber delivered just after the wood heater was installed. Wow. That ended up being a lot of timber! We were stacking it for days inside our shed. Two months in, we’ve used about 1/4 of our timber supply. At $120/m3 delivered plus fire starters, we’re paying $90 per month for whole of house heating.

We live with less waste, more sustainably

Here’s a revelation for you. There’s no curb-side rubbish collection in the middle of rural nowhere. Who’d have thought.

This means that we have to take our rubbish for a drive to the transfer station each week. As we are putting it in the car, we find we are way more careful about what goes into our bins. We compost our kitchen waste. We recycle everything, especially paper and cardboard into our heating supplies. We live more consciously about our waste, and more sustainably because of it.

The same concept applies to our septic and grey water. We don’t use toxic chemicals down the loo, the sink or for cleaning. This keeps our septic system healthy and respects the surrounding farmland where our grey water filters.

We are rewarded for doing these things with much lower Council rates and a satisfying sense of living more lightly on the land.

We’re more self reliant

The transition to running our own systems hasn’t been hard. There’s no noticeable difference in the quality of the essential services that we now provide ourselves. But we do feel more self reliant and prepared for any future.

And that was a big part of our ‘Plan B’; a plan to rely less on centralised systems for our own well being.

Our next step off the grid will be uninterrupted power supply, and to build a growing tunnel for home-raised fruit and veg. So much to do and learn, this retiring from a wage earner job thing sure is hella busy! 🙂

That’s all great Tara, but now show me the money, right!

Net worth

Our net worth has grown by just under $55k in the September quarter, mostly due to cryptocurrency and some superannuation gains. We also added a new ‘digital assets’ category to our portfolio. This covers off the websites and domains we own. Property still makes up the largest share of our personal wealth. We also continue to hold more cash than our emergency fund rules require as we didn’t make large investments during the quarter.

Debt position

Our good debt position hasn’t changed as we have interest only loans on our investment properties. Bad debt remains at under $10,000. We funded our move in cottage renovations with cash that we had put away because the home cost less than we had budgeted. Oh, and some sweat equity!

September quarter income

Our Airbnb income this quarter was down on expectations thanks to two weeks of lock-downs in August. We’re not complaining because we know pandemic lock downs have driven many tourism businesses to the wall.

To manage this risk ongoing, we’ve been building up a business emergency fund for our Property Management business. It’s a strategy we’re using for peace of mind that we can ride through the uncertainties of living with a pandemic. We didn’t have to draw down on that fund in August, which we are grateful for.

Our expenses

If you’re wondering how expenses might change with your financial freedom, here’s what ours now look like. We live on around $3000 per month – less than half of what we lived on in Brisbane! With lower living costs, our money goes further. This geo-arbitrage strategy has helped bring forward our financial freedom date by years. It should definitely be on your radar if you’re open to it.

Not counted in our living costs is the capital we put into setting up our cottage – $36,000 from savings. This included:

  • new floors throughout
  • wood heater supply and install
  • NBN wireless connection and phone signal booster antenna
  • DIY study renovation
  • a new doorway to bring the stunning mountain views into the loungeroom,
  • some new large appliances and yard equipment
  • additional kitchen cabinetry
  • water filter systems
  • Snake mesh fencing – which we’ve half installed
  • Ikea shelving for the study
  • new blinds, which have yet to arrive.

Savvy spenders, not frugalistas

Our largest expense by far this quarter was food. We’ve spent more than usual to stock up our fridge and deep freezer. Rent comes in second but it’s all from July, before we had our new home. Happily, we’re no longer paying rent.

While we’re living on about $750 per we, we’re not practicing frugality. We still go out and eat out every weekend. We’ve been on a weekend trip to Launceston and a couple of day trips. It’s just that, where we live means we don’t ‘incidentally’ spend money on things like Uber, take out and coffees. It’s much easier not to consume blindly when the shops are a 35 minute drive away… This too has been intentional.

Our savings rate

Because our income was down this quarter, our savings rate also dipped from July’s 75%.

We still managed a healthy 52%. You can check out how much you need to be saving to win your own financial freedom right here.

Our investments

In July, we said out next investment would be a rooftop solar system, which we expected to give us a return of around 20% each year. We haven’t had solar installed because it rains a lot in Tasmania. We still intend to go solar and hope we can get it installed over summer and take another big step in our off-grid living adventure.

In September we did invest some fiat currency we had sitting on the sidelines into three Layer 1 crypto projects. These investments are already paying off.

We also made a small investment during the quarter into a US based innovation ETF with a very savvy fund manager. We’ll reveal all in a post at some stage. But first, back to the off-grid living thing – there’s wood to be chopped!

Til next update, have fun, be happy and do good!

The best stock apps to start growing your dough

Tara Money making apps , ,
Stock apps

Investing in stocks is a great way to grow your money. It can seem like a daunting task for the uninitiated. There are a lot of stock apps to from your mobile, but some are better than others. It’s not easy to figure out where to start, who to trust, and how much money you need when starting from scratch. If you’re just starting out, you want an app that’s easy to set up and sign in. You also need to figure out who has the lowest fees and commissions and the best access to markets. That’s why we have put together this list of the best stock apps available in the USA and Australia based on App Store and Google Play reviews. These apps can help make investing in stocks and building wealth a lot easier and you can do it on the go!

Content

In this post, we’re going to cover everything you need to know to use stocks apps for investing on the go:

We’re bringing wealth building straight to your mobile phone, so it’s even easier to get on that road to financial freedom!

What are stock apps?

Stock apps are apps that allow you to buy and sell stocks and invest in different financial products, directly from your phone. You can use these apps on Android or iPhone. There are two categories of stock apps each with their own benefits and trade offs:

  1. Bank and broker stock apps
  2. Fintech stock apps

We’ll go into the pros and cons of each of these below.

What should you look for in a good stock app?

The good news is there is a lot of competition to win your custom and that’s great for you as an investor. It means you should expect more from your stock app than just trading stocks. It can also mean decision fatigue when you’re getting started because there are so many apps to choose from! Don’t worry, we know your time is precious and we’ve go you covered!

A great stock app will have these features:

  1. high levels of trust and authority
  2. easy to set up and use
  3. low commission and fees
  4. Good research and market access
  5. Responsive customer support
  6. investment portfolio ‘bells and whistles’ to help manage your money

Some apps even offer rewards and incentives to invest and use the app!

Let’s look at each of these features in turn.

Trust and authority

Trust and authority comes from the legitimacy of an app, its history and user base. It’s easier to trust apps from companies that are regulated and licensed where required.

Trust and authority also comes from the company longevity and whether it has built a strong, satisfied and growing user base. If an app has all of these things, we would put our trust into the company and our money into the app.

Easy set up and use

Gone are the days where it takes two weeks and a mountain of paperwork to set up a brokerage account! Fintech has upped the game here. It should be easy to set up your account. In some cases – like with Stake app – you’ll be able to do it in minutes. The app should also be intuitive to use and simple to navigate. The apps on this list are clean, simple and even fun to interact with.

Stock apps

Low commissions and fees

There’s loads of competition in this space, which lets us really nail down the best of the best. It’s not a matter of find the lowest commission and fees per se. It’s more about whether you’re getting value for your commission and fees. There are zero brokerage apps in our list. But it’s ok to pay brokerage if you need good research and analysis to inform your investing decisions and the app provides that. We just don’t want you to pay high fees and get little value in return.

Just remember, companies have to make money so do expect some fees always. If you can’t find them, be suspicious! In the US there are also regulator fees for securities transactions to consider.

Research and market access

You should expect your stock app to provide access to investment news at a minimum. If you’re paying more in brokerage, the app should provide access to research reports and company performance metrics.

Market access is about the diversity of investment opportunities in the app. It should cover plenty of different stocks and provide choice of investment. This might be through the markets you can access or the range of portfolio options and companies covered within them.

Responsive customer support

This is a biggie if something goes wrong. You need to be able to trust the company and get in touch with a human sometimes. This one factor has made us really pair back our list. The fact is, some of the really big Fintech stock apps out there have terrible customer service. You can see it reflected in frustrated App Store reviews and when you do a Google search on the app. We’ve stayed away from those apps and so should you.

Investing bells and whistles

These apps will often market on added extras for investors. Feature’s like automated investing, fractional investing, retirement fund investing, tax optimization and so on.

Off all of these services, we like fractional investing the most. This means you can buy a slice of some of the best companies (and most expensive stocks) around without having to have enough money to buy 1 whole share. It opens wealth building up to everyone, even if you’re starting with just a little, and we love it!

Incentives and rewards

You might find incentives to sign up with a stock app, like a free stock or a small dollar value amount towards your first stock buy. Cashback rewards for credit card purchases is another popular in-app reward. Some stock apps also have referral programs that pay you in stock or money when a friend you refer signs up an account and buys their first stock.

Choosing the right stock app – bank or fintech?

As we said at the beginning, there are two types of stock apps – bank stock apps and Fintech stock apps. Each type offers trade offs against the other, so you need to make sure you start with picking which type you prefer based on what you value This will make selecting the app easier.

Bank and broker stock apps

These are stock apps developed by existing banking and brokerage services that allow you to invest in stocks from your mobile. The names of these apps may be familiar to you. For example if you are in the US there is xxx. If you are in Australia, there is the Commsec Mobile app, which is an offshoot of the Commonwealth Bank.

The pros

High trust and authority.

Bank stock apps generally rate very highly for trust and authority. Especially if the app is from the investment arm of a big bank or broker (Like Wells Fargo or JP Morgan). They’re from institutions that have been around forever, are regulated and licensed, and have government consumer protections in place. They’re a known quantity, and you’re used to dealing with them!

Research and analysis.

Because they’re spin offs of existing financial institutions with big pockets, these apps can feature great research, analysis and company performance metrics to inform your investing.

Links to bank accounts. The benefit of bank stock apps is that they link pretty seamlessly with existing bank accounts if you’re a customer of the bank already.

The cons

Paperwork and process

On the cons, big banks mean big bureaucracy and this extends to their stock apps in a few ways.

Firstly, bank stock apps are from big bricks and mortar banks that have existing overheads to cover, so they’re not cheap to use. Fees and commissions are higher per trade as these institutions have focussed on large net worth customers. If you’re starting out with small amounts, you’ll be paying high fees.

It also takes time (days!) to apply for an account to trade from with apps. In addition, the paperwork is often done by snail mail and needs to be ‘processed’. More time. I recently applied for a Commsec international trading account. It takes Commsec 7 days to process your application and send you tax forms, which you then return by post. It’s another 5 business days from there to activate your account.

Transactions are also pretty slow with these apps – it takes 2 or 3 days for your money to settle for example.

No in app rewards or incentives

Bank’s just aren’t used to doing this!

Fintech stock apps

Fintechs are companies that operate in the finance and technology space. Usually, using better technology to bring users new and innovating financial products and services. Some of the big name Fintech’s have built their brand on financial services apps.

The pros

Low or no commission.

A lot of these apps have targeted their app products to lower net worth and younger investors. As a result, they often provide a platform for people looking to invest money into the market with minimum start up capital. To do so they have to offer low per trade brokerage commissions. They do have fees though – they have to make their money some how!

Digital wallet capabilities.

Many Fintech stock apps are actually all in one personal finance apps that offer both banking and investing. You can get bank cards with some apps, linking your investing and banking all in one place.

Access to cryptocurrency.

These apps are more likely to let you trade both stocks and cryptocurrency, if that’s what you’re after. A word of warning however, the crypto supported will be limited and the fees on transactions are not the best you can find. If you want to invest in crypto, we suggest you do it with a crypto mobile wallet.

Banks are not into crypto so you won’t find this service with them.

Rewards and incentives.

Fintech companies often offer in-app incentives, rewards and referral programs to grow their business. They’ve perfected the gamification of investing because their targeted audience is younger. We think this is a fun feature, and if it gets your to invest more in great assets then we’re big supporters!

The cons

Trust and authority score is lower than the big banks.

Some apps come with a warning in the App store that investments are “not FDIC insured, are not bank guaranteed and may lose value.”

The FDIC is the Federal Deposit Insurance Corporation. Being FDIC-insured means that up to $250,000 of your money is protected in the event of a company failure. The FDIC covers the traditional types of bank deposit accounts – including checking and savings accounts, money market deposit accounts (MMDAs), and certificates of deposit (CDs). Investment products that are not deposits, such as mutual funds, annuities, life insurance policies and stocks and bonds are not covered by FDIC deposit insurance.

You can find out more about FDIC insurance here. Or use their look up tool to find out whether a company is covered or not.

If the company does not have FIDC insurance it should at least offer SIPC insurance. SIPC is the Securities Investor Protection Corporation (SIPC), a non-profit organization dedicated to protecting customer assets. SIPC insurance protects you up to $500,000 or $250,000 in cash if the company goes bankrupt.

Of course, if you lose money on a bad investment, you’re not covered by any insurance!

Customer support can be dismal.

Customer support with Fintech stock apps can be hard to nail down. Dealing with customer support in a big bank can be a pain in the proverbial but at least they have this service. If anything goes wrong with a Fintech app, you may have a bit of battle on your hands to fix it.

How to vet a stock app before investing your dough

We are writing this post because we don’t just want you to put your dough anywhere. It’s important that your money is safe! Here’s how to go about vettingn a stock app before you hit download:

  1. Check for FDIC insurance or SIPC insurance. Look for a statement in their app description in the App Store or on Google Play. Then double check this with SIPC or FDIC look up.
  2. Do a similar check to see if they are regulated by FINRA. Or in Australia, by ASIC (the Australian Securities and Investments Commission).
  3. Google the name of the app and see what people are searching on. If it’s all about how to contact their customer support or solve some other problem – red flag!
  4. Read their website to know exactly what fees you’re up for. They have to make their money somehow! Fintech apps often have a different business model than banks which means they don’t make their money from you in brokerage fees. It can be more difficult to track down what fees they do charge. Look for their FAQs and financial services guide on their website!
  5. Check out the reviews on Google Play or the App store. Read them, especially the most recent ones.

Top stock apps on reviews

Top 3 stock apps – USA

Public

Public is a social investing app with more than 1 million downloads that’s also brokerage firm. It’s a straight forward stock investing app without lots of bells and whistles but with a social twist.

Because they are a brokerage, Public is regulated by FINRA and also carry SIPC insurance.

Features

Welcome to social investing!

Social investing means you can see what others are investing in and learn about stocks that way. You can also set up investing chat groups or join them in the app. You can follow investors and companies, so that information about them will come up in your feed to inform your investing decisions.

Public is straight forward and transparent investing, which means it doesn’t have the retirement accounts and other bells and whistles of some apps on this list. Public does give referral rewards however! As an incentive to refer friends, you can get a free stock worth up to $70. T&Cs apply – your friend has to make a deposit into their account first. You get to pick from 1 of 9 different stocks and a portion of that stock is then randomly picked deposited to your account.

Fees

So what about their fees? Firstly, unlike Acorns or Stash there are no subscription fees. This means you can start with really small amounts and invest and hold for the long term and you won’t pay proportionately high fees.

Public doesn’t make money through Payment for Order Flow (PFOF), which is where a brokerage firm receives rebates on trades routed through its clearing house. Its view is that this type of fee structure does not align its interests as broker with the interests of its customers. We commend this, and it’s one of the reasons they make our top five list. Instead Public makes money from:

  • tips (yes you can tip them optionally if you love the app!)
  • 0.2% on uninvested cash balances in the app.
  • when their clearing house lends shares to other investors and institutions. This doesn’t impact your trades however.

Betterment

Betterment has built their app around cash management, guided investment and retirement planning. They excel in automated and ‘hands off’ investment products. If you want a ‘set and forget’ service without the hassle of stock picking yourself, then check them out. To achieve this, they create a portfoilo of investments for you that are primarily based on ETFs. You set a money goal when you sign up, and Betterment customises a portfolio for you based on your time horizon and risk tolerance. You answer a few questions about yourself up front for them to do this.

Betterment is a member of the SIPC providing you with SIPC insurance protection. Their Cash Reserve Account and Checking Accounts are also FIDC insured and protected.

Features

If you hate paying tax, you’ll love Betterment. The app stands out for its automated tax tools, which help you avoid paying unnecessary taxes. They manage tax outcomes in your portfolio across all included legal accounts, using your dividends and withdrawals to improve asset location (the type of account your money is held in). They invest assets that they believe will be taxed at a higher rate in your tax-advantaged accounts (IRAs and 401(k)). They maintain assets in your taxable account that they expect to be taxed at lower rates. They also rebalance when they see chances to do so without incurring taxes.

Alongside your investment options, Betterment offers banking with rewards. With Betterment, when you spend from your Checking account or using their Debit Card, you get cashback rewards on some big name brands – like 5% cash back from Adidas and 2% from Walmart. They also reimburse ATM fees and foreign transaction fees worldwide and have completely cut out overdraft fees and minimum balances for their Checking accounts.

Fees

Betterment fees are straight forward – 0.25% of assets under management. They also make money through their Premium Plan which charges 0.4% in fees. Their advice packages another source of revenue. They also make money from merchants when you use their Visa Debit Card.

We love their transparent and simplicity – and the app is super easy to use as well.

Webull

Webull is a free mobile app that helps you invest on the go. It’s the most diverse stock app we have on our list. Webull is a US based company and the app offers commission-free stock and ETF investments from USA markets and 40 other countries worldwide.

Your money is insured as with Webull – like other apps on this list, you get up to $500,000 in protection against any bankruptcy of their brokerage firm partner (in this case Merrill Edge). They also offer an FDIC insurance guarantee for your checking and savings accounts with Webull Federal Bank.

Features

There are no minimum deposits to open a Webull account and Webull offers fractional investing. You can buy $5 worth of Apple stock if that’s all you have. You can also invest with margin loans if that’s your risk tolerance (we don’t do it!). 🙂

With Webull you can open cash and margin accounts as well as Traditional, Roth and Rollover IRAs.

Webull’s product offering is targeted at the active instead of the armchair investor. As a result you get access to better investment resources. In the app you can view various explanation videos and articles about how markets work and how to invest. In a nutshell, you’ll find better trading and market analysis tools on Webull than the other apps on this USA list.

Webull has a refer-a-friend program that offers free stock for qualifying referrals.

Fees

Webull makes it’s money from stock loans, interest on free credit balances, margin interest and payment for order flow. They don’t charge commission on trades. Certain types of deposits and withdrawals like by Wire Transfer will also attract a fee (a hefty one!) so make sure you stay away from those. It costs $75 to transfer a stock out of Webull, so once you buy with them you’ll need to stay there until you sell up or be prepared to pay up!

Top 3 stock apps – Australia

Spaceship

According to their webiste, more than 200,000 Australian’s are already investing with Spaceship. The app allows you to invest passively and to manage your investments. It also features som investment related news and editorial content.

You can open a Superannuation (retirement fund) account with Spaceship which comes with it’s own fee structure so make sure you look at the Super financial services guide if you’re into this product.

Spaceship has an Australian financial license and is regulated by ASIC.

Features

Spaceship makes investing easy and pretty fun. They have three investment portfolio options based on investing themes – Spaceship Universe, Spaceship Origin and Spaceship Earth. It takes 3 to 5 days to fund your account. Once your account is funded, Spaceship will issue you units in the fund of your choice. And that’s it! A super simple experience if you’re first getting into investing.

Fees

Their fee structure is also simple to understand, which we like. They charge zero fees on investments up to $5000. This a much better structure for investors with small amounts than the monthly subscription options from the likes of Acorn (in the US) or Raiz (in Oz). They charge 0.05% to 0.1% above $5000. So if you had $10,000 invested you’d be paying $5 a year.

Commsec mobile and Commsec pocket

We’re bundling these two together even though, annoyingly, they’re separate apps. It seems like the Commonwealth Bank has made an app for it’s existing brokerage customers (Commsec mobile) and has created Commsec Pocket to compete with the low commission Fintech apps like Acorn or Robinhood.

Commsec Mobile app is an all-in-one app for investing developed by the investment arm of the Commonwealth Bank. It’s free to download and easy to use.

There are no automated investing options or robo investing portfolio options here. It’s all about investing direct in listed market products.

Set up is easy using just your Netbank (Commonwealth Bank banking app) if you are an existing customer. A word of warning though, if you link it to a standard CBA account you’ll be hit with their $4 per month account keeping fee, which means using the app is more expensive than other options. Commsec say the fee can be waived but good luck making that happen. If you set up a Commsec CDIA (Commonwealth Direct Investment Account), there’s no account charges.

Features

Like Webull, Commsec mobile is designed for the active Australian investor. If you’re someone who knows about stock investing, has a good amount of capital to invest, and can make use of the full service research and analytics products, then this is a great stock app for you. These things are important to weigh up because you are going to be paying for their full featured investment research in brokerage fees which are not cheap if you’re investing small amounts.

Commsec Mobile features stock trading on both Australian and international markets. You can trade in the US, UK or Australia with Commsec – so if you’re looking to invest globally, it’s a good option. If you have an existing brokerage account you’ll be able to link it up too.

Commsec has a separate app called the Commsec Pocket. It’s designed for stock investors with smaller investing amounts – minimum $50 investment amounts apply. It’s basically straight forward ETF investing on autopilot with Commsec Pocket. You can invest in 7 themes like tech, sustainability and others. You also have access to investing tips and articles.

With both these apps you get the best customer support if anything goes wrong and just about the highest trust and authority score on the planet. There’s no bigger bank for Aussies than CBA…

Fees

Commsec mobile makes money from brokerage and from margin interest and other fees. Fees are specific to the type of product you’re trading, so check out their fee schedule here.

With Commsec Pocket, trades below $1000 cost $2 and you pay a fee of 0.2% for trades above this amount.

Stake app

Third on the list of Aussie investing apps is Stake app. Stake started originally as a cheap way for Australians to invest directly in international markets. They charge zero brokerage fees (but they make their money in other ways).

You can set up stake in just 3 minutes and it takes a 2 days to fund your account. They have a long list of US stocks, ETFs and other investment vehicles you buy into directly. The app is easy to use and they have a refer a friend bonus program.

Stake has focussed singularly on the US markets up until now but they have Stake ASX (Australian market) coming soon. It’s currently in Beta mode and trades will cost $3. If you join their waitlist you get free brokerage until 2022.

Features

We’ve done a full review of Stake app right here that explains their fees, how they are set up and regulated, cool features and our experience using the app.

Where to next for your investing?

So you want to invest from your mobile and you’re looking for the best stock apps to do it. But what kind of investor do you want to be? If it’s the passive type, something like Spaceship (for Oz) or Betterment (USA) might suit you. If you’re an ethical investor and want your app to be aligned with that, then Public has a customer centric philosophy. If you’re an experienced stock investor and just want more mobility, then Webull and Commsec (Oz) could be for you. Whatever you chose, your money just got mobile. May you invest it wisely!

10 powerful money affirmations that will have you drowning in dough

Tara Achieving financial freedom , ,
money affirmations

Does the law of attraction work for money? Probably not on its own. But paired with a clever financial freedom plan, money affirmations might just bring a laser like focus to your money ‘A game’ and put a rocket under your finances. So let’s test them out.

money affirmations

Some vouch for the power of money affirmations. They say they are a necessary tool if you want help to bring money into your life. Affirmations are a means to reinforce the laws of attraction, if you believe the universe will manifest for you that which your mind is focussed on.

In practice, money affirmations are positive statements that you repeat to yourself, about money, usually in the morning when you wake up and before bedtime.

The aim of affirming positive statements about money is to make you feel like more of it is already flowing through your life!

Whatever you believe, a little positive thinking about money never hurt anyone. So let’s start where money affirmations are designed to work – your money mindset.

Be a money mindset ninja

money affirmations

Your money mindset is important if you’re serious about becoming financially free. Why? Your money mindset dictates how you feel about money, what money means to you and your relationship with it. To have a positive money mindset means there’s no anxiety about not having money or road blocks to you making more of it.

If on the other hand, if your money mindset is one of scarcity one then money could bring up negative emotions in you because money represents fear and anxiety.

The concept goes, having a healthy money mindset will help you attract more money into your life and keep it because it has positive rather than negative associations for you. You get to become financially free much faster than if your money mindset was unhealthy!

Now let’s look at money affirmations.

What is a money affirmation?

A money affirmation is repeating a positive statement about money to yourself that’s based in truth.

For example; “I am becoming more and more financially free every day”.

This type of money affirmation aims to help you develop the right money mindset by helping to build your self-confidence around money, which in turn helps you attract money into your life.

Money affirmations are said to get their power from repetition, which is thought to be key when it comes to manifesting things in our lives. This includes money! The more you repeat the money affirmation, the faster that money affirmation will be written on your subconscious mind which will result in attracting money or anything else for that matter, into your life.

Do affirmations help?

Firstly, there are opposing schools of thought about how much help money affirmations are. Researchers seem split down the middle. Some research about using affirmations has found that they help because they release your mental resistance – in this case, to money.

Other’s are more skeptical.

Whatever your personal belief, we at the LLP are 100 per cent convinced of this:

As you think, so you are.

When can money affirmations help you?

Here are some situtations when money affirmations may be helpful for you:

  • If you feel like money is something that’s hard for you to attract or come by.
  • If money seems scarce or you feel a resentment towards people with more money than you money affirmations may help you change your negative money mindset.
  • If you have a hard time charging for your services or chasing money that’s owed you
  • If money is something that you worry about all the time.

How long do affirmations take to work?

Don’t expect money affirmations to manifest you fat stacks of cash overnight! Some people say it takes 21 days for money affirmations to take effect – so repeat your money affirmation every day until you notice a difference in the way you think about money and feel around money. Pay attention to what you say about money in everyday conversations and what goes through you mind when the topic turns to money.

Money affirmations can be very powerful, but they won’t do anything if you don’t do anything with them! We’re of the view that you get the best out of them if they’re supported with some real money action! Affirm and execute peeps!

Here’s where to start with your financial freedom action plan.

How to attract wealth with money affirmations

Here’s how to use the power of words and positive thinking to increase your own money vibe.

Express for success

When repeating money affirmations, you’re aiming you keep your statements positive and emotional. This is so that you can connect emotionally with what you’re verbalising.

For example, instead of saying “I hate money” say “I am a money magnet.”

It’s also effective if you speak to yourself in the present and not in the future tense. For example, say “I attract money” instead of “I will attract money.” The thinking is, you’re already in the shoes of someone that money comes easily to. You can more easily identify with and be that person.

Repeat your money affirmations in a quiet area with few distractions, where you feel comfortable and safe. Repeat your money affirmation to yourself rather than out loud.

How to release money roadblocks

If money affirmations don’t seem like they are working, try repeating money affirmations in a new way! If you feel stuck, ask yourself “What am I resisting right now?” and repeat an affirmation about releasing resistance towards money instead of focusing on attracting money into your life.

You may just be suffering from what is referred to as a money roadblock.

…money road blocks are the beliefs, habits and stories that stop you from receiving money in the most natural way possible.

Denis Duffield-Thomas, Author of Chillpreneur

In business, money blocks determine things like:

  • the prices you set,
  • your ability to charge people appropriately for your services.
  • How comfortable you feel chasing money that’s owed to you or
  • dealing with unreasonable refund requests.

What are your limiting money beliefs?

You can use money affirmations to release blocks around money. Try saying “I release all my money resistance”, and when you feel ready try adding a money affirmation on top of it such as “I am open to receiving abundance in every area of my life!”

Stay consistent with your daily ritual. Repeat your money affirmations for 21 days straight – this is the amount of time that psychologists agree upon.

Keep repeating money affirmations until you notice a difference in how you feel about money. If money is something with significant negative connotations for you, this could take more like three months.

Now its the list you’ve all been waiting for. It’s time to find those skin-tingling money affirmation to assuage any feelings of anxiety, release those money roadblocks and turn your negative money thoughts into a millionaire money mindset!

It’s time to be a money magnet

Here are 10 powerful money affirmations to bring more money into your life.

1. Money is abundant – I can always make more of it.
2. I am financially free.
3. I deserve to be wealthy.
4. Money is a wonderful thing that comes into my life easily and effortlessly.
5. I welcome money abundance in my life.
6. I am worthy of a wealthy life.
7. I am receiving money easily and effortlessly now.
8. Everything I need to make money is within me.
9. Money is the source of joy, comfort and security.
10. I release all money roadblocks and negative energy about money.

Money affirmations can be a great tool to help you achieve financial freedom, but they aren’t the only tool you need. If money affirmations don’t seem like something that’s working for you, try another money technique such as creating an inventory of your limiting money beliefs or reading up on how to have healthy financial boundaries.

And don’t forget, affirm and execute.

May you attract money in your sleep for the rest of your rich life!

Til next time – have fun, be happy, do good!

14 financial freedom quotes we love to get your money mojo flowing

Tara Achieving financial freedom , ,
Financial freedom quotes

I once stood awestruck and alone at the the top of the incredible Gama valley in the Tibetan Himalayas. I was also slightly panicked that I may just be lost and about die in the Tibetan wilderness. “But what has this got to do with financial freedom quotes?” you ask.

Our values and beliefs, the decisions we make, and where they take us.

You see, what popped into my head in that moment with the trek into Mt Everest in front of me was “How did a 22 year old girl from Oz, come to be here in the Himalayas, doing this?”. (Figuratively speaking of course. I had been bouncing around in the back of early model Toyota troop carrier for days, across vast and dusty valleys with no roads to be seen…)

The answer? A combination of my values, beliefs and decisions I’d made, taken from everything I’d learned and experienced to that point.

The same question drifted into my head yesterday as I stood at the Cow Bar which rests on the back fence of my recent cash-purchased home. I contemplated the stunning Valley of Views that I now live in, and my new life. The answer this time was the same; 8 years worth of building new values and beliefs about wealth, and decisions taken from everything new I’d taught myself about money.

This is where the financial freedom quotes come in.

What are your beliefs about money?

If you think the wealthy are a bunch of greedy bottom feeders you’ll probably never be wealthy. Because what you think about money determines the role it plays in your life.

What if I told you that our beliefs about money are based on myths from another era and hold us back in life? Here are some examples:

Myth money mindsetsMillionaire money mindset
There is never enough moneyThere is always more money and more opportunities
You have to work really hard to make moneyThere are easier ways to make money
You can help people OR make money, but not bothMoney gives people the opportunity to contribute to others and make a powerful impact.
Retirement is for when you’re oldRetirement is for when you want
The world is a zero sum game – if I get money I’m taking it from someone elseRemember, there is always more money (they’re printing it after all)

My advice on all of this is to explore your money mindset. And no, this is not not all rah, rah fairies and unicorns. Pay attention to the words that come out of your mouth when it comes to money. The things you say, like “Money doesn’t grow on trees you know”, reflect your values and beliefs about building wealth. Values and beliefs that can manifest and limit you to the status quo.

Write these things down. Then consciously challenge them.

One way to do this is to surround yourself with new values, new beliefs and different attitudes about money. Read books and quotes and re-educate yourself. The pay offs can be huge.

If you want to know more about how this works, ‘Chillpreneur” is a great, fun book to get your money mindset flowing.

Chillpreneur: The New Rules for Creating Success, Freedom, and Abundance on Your Terms

14 financial freedom quotes to live a wealthy life

The list you’ve all been waiting for! Here are the money beliefs and values that have guided us over the last 8 years, expressed in our favourite financial freedom quotes of all time.

I hung them on the fridge door, put them into my screen saver, read them on my daily commute and remembered them whenever I found a financial opportunity or saw a fork in the road. And things began to change for us.

These 14 evocative quotes reveal what we believe it takes to build wealth and get to financial freedom. They have provided us direction and driven our financial decision making every day for 8 years. We hope they do the same for you.

1. Time is our most valuable asset

“Everyday is a bank account, and time is our currency. No one is rich, no one is poor, we’ve got 24 hours each.” –-Christopher Rice

“Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do.” —Mark Twain

Time is THE great leveller. We worked out 8 years ago that time is our most valuable asset. We were selling it so cheaply! So we went about putting our time to greatest use; spending it on building wealth to buy back our time in the future.

We also realised that each day what we did in the next 24 hours would determine the path of our future. The same for the day after that. Everyday we did SOMETHING that would help our financial future.

Financial freedom quotes

2. Life IS the goal

“The goal isn’t more money. The goal is living life on your terms.” –Chris Brogan

“Wealth is the ability to fully experience life.” –Henry David Thoreau

Our goal was born from a burning desire to take back control of our financial future after struggling to stay employed through an epic workforce slash and burn in 2012. We realised that life is the goal. And ours was passing us by in ways we were not happy with.

Financial freedom quotes

3. To build wealth, you have to invest in yourself first

“An investment in knowledge pays the best interest.” —Benjamin Franklin

“If you fail to plan you are planning to fail.” — Benjamin Franklin

So we began to learn about how to build and keep wealth. We read books, we attended training courses, we invested in our own financial literacy. We still do this today. We also came across the Financial Independence Retire Early (FIRE) movement and the crazy idea that working until you are 65 is, well… crazy!

Mind. Blown.

We started to reprogram our brains. We learned all we could about FIRE, building passive income, tax effective investment structures, and how to build wealth. We learned do-it-yourself renovating, real estate investment, property styling, the share economy, blockchain technology, digital assets… We’re still learning.

Financial freedom quotes

4. Money comes in abundance if you just plant the seeds

“Someone’s sitting in the shade today because someone planted a tree a long time ago” — Warren Buffet

“If you approach the ocean with a with a cup you take away a cup full. If you approach the ocean with a bucket you take away a bucket full.” — Ramana Maharshi

In 2012 we started planting investment seeds that we could harvest the rest of our lives, and tending them with patience. We’re still planting…

Financial freedom quotes

5. Thinking like everyone else will get you where everyone else is

“Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.” —Steve Jobs

I’ve always been a contrarian and challenger of mainstream thinking so FIRE appealed to me. We started following the FIRE movement in earnest. I’ve also been in tech and innovation for much of my working career, and leveraged these skills to help build wealth.

We consciously kept thinking differently. We challenged mainstream investment advice and made up our own minds in our own heads.

Financial freedom quotes

6. Passive income comes from hard work and persistence, with little pay off at the start

“The only place where success comes before work is in the dictionary.” —Vidal Sassoon

We worked our butts off going to our full time wage earner jobs and then creating wealth building side hustles on weekends. We did this 7 days a week for a few years, with little reward. We stayed focussed on our goals and our new values and beliefs. We knew the wealth would come if we persisted.

7. No risk no reward

“the biggest risk of all is not taking one.“ — Mellody Hobson

We took financial risks. Sometimes we lost money. That didn’t stop us. Instead, we learned from it. We thought about how to do it better next time. We kept taking risks and slowly they began paying off. As did our hard work to build passive income streams.

Financial freedom quotes

8. Bring value that no-one else brings

“Help a million people and you’ll make a million dollars” – Matt and Liz Read

“What we really want to do is what we are really meant to do. When we do what we are meant to do, money comes to us, doors open for us, we feel useful, and the work we do feels like play to us.” —Julia Cameron

“If you always do what you’ve always done, you’ll always get what you’ve always got.” — Henry Ford

With passive income streams in place, it’s now time to reinvent ourselves again. Get some fresh blood flowing through our veins, new thoughts ticking in our brains.

Our new goal is to help a million people online. We’re going to do it by being round pegs in square holes and focussing on what we love.

We’ll know when we’ve got there using the analytics for our websites. We also know if we can do this, we’ll be wealth and financially free.

Financial freedom quote

The Final Word – financial freedom is the feeling that you’ve made it

These financial freedom quotes may not resonate with you. But here’s the good news – you can go find your own!

Indeed, we hope this post inspires you to read some financial freedom books, plant some seeds, take some risks, help a million people. be trouble maker. Or even better – do your own version of all of these!

We promise, you won’t regret it. And it may just change your money mindset and your life.

Til next time have fun, be happy, do good!

How to manage crypto investing risks for new investors

Tara Investing in Cryptocurrency , , ,
crypto investing risks

It seems like everyone in crypto has a war story they like to tell about the time they lost a bunch of coins because of some rookie investment move. But I think the one about UK IT Engineer James Howells who dumped 7500 Bitcoin on a hard drive back in 2013 takes the cake. He lost a measly $361 million at today’s Bitcoin price. The moral of the story for the crypto uninitiated? Losing your coins is just one of the many crypto investing risks for new investors. So before you invest your hard earned into the space, we’re here to help you get informed on what it takes to invest successfully in crypto and get to financial freedom.

Hopefully you come out the other side of this article with the know how to bag a fat stack of coins and to keep them.

What do we mean by cryptocurrency investing?

As a new crypto investor, it’s likely you’ll start off with more straight forward types of crypto assets so we’ll focus on those. By crypto investing, we mean investing in cryptocurrency projects that have associated coins and tokens.

We also mean investing in Decentralised Finance products and services to earn interest on your cryptocurrency assets.

We are not talking about complex crypto day trading, margin trading, futures trading or options trading.

Is crypto risky?

Yes it is. It’s new technology and the market is largely unregulated. Crypto assets are also non-custodial. These features can heighten crypto investing risks for new investors if you don’t understand the investing landscape.

However, we would argue it’s also risky NOT to invest in crypto!

Cryptocurrency, in its decentralised and non custodial design, aims to be an alternative to the awful global monetary and financial policy we’ve suffered since the GFC. Crypto is also about more than the coins themselves. It’s about disruptive technology that is here to stay and that we think will shake out some large industries, with finance being just one.

The point we’re making in this post is that you can still invest and manage risk. That’s why we’re sharing everything we’ve learned and do to identify and manage our crypto investment risk exposure.

Know before you invest in crypto that you are in control and that’s the way the ecosystem is designed! No-one is responsible for actively managing your assets and your investing risks but you.

Is the risk worth it? It has been for us because it’s still early stages and we argue the technology development curve is yet to hit exponential growth. But you make up your own mind, hopefully after considering the risks and how to manage them.

Why do you need to know how to manage crypto investing risks?

Because cryptocurrency is non-custodial and decentralised. There are no middle men to transact for your or look after your assets. You need to do this yourself and if you don’t understand how to manage the risk of being custodian of your own money, then it’s likely you’ll fail at that important task.

Besides, there is little to no regulation to fall back on if something happens to your coins. There are no government bank guarantees and very few consumer protections in crypto. And that’s the way the industry likes it. It’s an asset class designed around non-intervention of governments and middle men. All of this means you have to know how to take care of your assets yourself. The way it should be!

If you are a first time cryptocurrency investor, you’re probably new to crypto market idiosyncrasies. Have a read of this post about what makes cryptocurrency prices rise and fall. If the concepts are new to you then it’s super important that you learn how to manage risks because your risk profile is high as a newbie investor.


Risk comes from not knowing what you’re doing.

Warren Buffet

You also need to know how to manage crypto investing risks because as an asset class crypto is potentially one of the greatest asymmetric investment opportunities out there right now. Asymmetric investments are when you risk a small amount of capital for the opportunity to earn much larger returns. This is entirely possible in crypto – we’ve seen it ourselves.

13 crypto investing risks for new investors and how to manage them

Here are our top 13 crypto investing risks for new investors and how to manage them:

  1. Price volatility – price swings in the double digits daily
  2. Illiquidity – you buy in to an asset but can’t sell it when you need to because trading is too thin
  3. User complexity – technical complexity of blockchain transactions for new users
  4. Crypto exchange crashes – platforms go down with your crypto on them
  5. Project collapse – and the associated coin and token goes with it
  6. Hard Forks – a project splits and so does the value of the coin or token
  7. Smart contract failure or hack – hacks are rife and often unrecoverable (or at least uninsured)
  8. Regulatory risk – risk of non-regulation and new regulation
  9. Human error – goes with the technical complexity of crypto
  10. Market manipulation – whales throwing their weight around causing prices to pump or dump
  11. Theft or hack – physical or cyber, how do you protect yourself?
  12. Scams – mostly online and completely insidious, millions have been lost this year alone
  13. Rug pulls – DeFi fly by night operators absconding with your treasured coins

Now read on to learn about each risk and how you can protect your crypto assets….

1. Price volatility

The price volatility of crypto is enough to put hairs on your chest. But what is price volatility anyway? Investopedia sums it up as the range of price change a security experiences over a given period of time. Now check out this epic chart from the guys at Trading View showing Bitcoin volatility over two historic market periods – 2017 and 2021. Price corrections of between 20% and 50% are run of the mill for BTC.

It’s worth understanding in context that Bitcoin is less volatile than other small cap coins. So you get the picture – volatility is real in crypto with coins capable of moving hundreds of percent in a day. If you can’t take the heat stay outta the kitchen.

But what are the actual risks of price volatility for an investor? Good question right! The price may move up or down dramatically, but this can be as beneficial to investors as it is risky. It all depends on your entry and exit as well as your investment horizon. If you buy the dip, then price volatility can be totally fly. But if you buy the top it can crush you.

Here’s how to manage your risk

Learn how to read a price chart and charting indicators. Understand from the chart what part of the market cycle you are investing in. If you have a clear view of this, short term volatility is less draining emotionally. For example, if you’re riding a mark down phase (which would be dumb, but it happens) you’re going to be more worried about price volatility (compounding losses) than you would if you’re in a mark-up phase.

Traditional market cycle – knowing what phase you’re in can help you manage short term price volatility.

Set an investment plan before you invest. What is your aim and your timeframe? What is your break point?

Use trading tools like stop losses to avoid price crashes if you’re not investing for the long term.

If you’re an anxious investor, set your stop losses and don’t check your coins every other day! In crypto there’s ‘weak hands’ – investors that don’t have the conviction of their investment plan and sell out with price weakness, which is inevitably selling at the wrong time. There’s also ‘diamond hands’ – investors who are undeterred by large swings in price.

Which one are you?

2. Illiquidity

Crypto has a low barrier to entry which means that new projects, with their own coins and tokens, are popping up all the time. Some crypto assets, particularly the new projects with micro or small market capitalisation, are traded very thinly. If you’re looking to invest in these projects there’s not a lot of volume. This all means it can be hard to find a buyer or someone to trade with if you want to sell or swap your investment. Particularly if you’re selling at a volatile time.

Here’s how to manage your risk

When you buy a crypto asset, ask yourself “Will i be able to sell when the time comes”? “What is my exit strategy?”

Buy assets that are well traded on exchanges with large volume. This may prevent you from buying some micro caps that are only available on smaller centralised or decentralised exchanges. But that’s the risk mitigation bit in force. If you do buy thinly traded crypto you should understand how to time your exit and sell in small amounts, such as by using bots, to offload your investment. This is also good practice if you have a bag full of the asset and you don’t want to tank the price as you sell down your holdings.

3. User complexity

Crypto is still an early adopter asset. The technology is nascent. This means it’s not necessarily user-friendly to transact with. I remember the first time I sent some crypto through cyberspace I was freaked out. I only sent $100 worth because I wasn’t sure I’d done it right and didn’t trust the technology. But the crypto arrived and the rest was history.

Seriously though, if you ask any crypto investor the first time they put money into a new product, service or protocol there is always that nervousness about how to make it work. Seeing your money disappear into cyberspace when you’re not completely sure it’s going to reappear where you want it to can be heart stopping.

The thing to understand is that crypto transacting is different to bank transacting. It uses different processes and technology and you have to get used to that. Banks have had years to perfect the simplicity of their services (and many still haven’t got it right). Crypto on the other hand has been around for a couple of decades and until 2020 has been the bastion of super brainy IT nerds and tech savvy gamers. There’s been no driver until now to make it user friendly and that means in most cases it’s still involves a learning curve.

Here’s how to manage your risk

The best way to overcome user complexity is by learning the technical and market basics.

Read up on the information we have posted about how to make money with cryptocurrency here and here. Follow these tips on managing risk as you learn the ecosystem:

  • Crypto investing – Use the financial service providers you do know – like Paypal – to start investing in larger cap crypto assets like Bitcoin. Paypal provides an ‘on-ramp’ to crypto that many people will recognise and be able to use easily on first attempt. If you do use these conventional on ramps to start your investing just know that you will be paying a premium on the exchange rate from fiat currency into crypto. Think of it as the price of convenience but once you learn how to navigate the ecosystem there cheaper ways to transact.
  • Making money with DeFi – start with Stablecoin interest earning products. These are simple to understand as they’re just like bank interest. The least complex way to do this to sign up for a Celsius account and download the app on your mobile phone. If you’re worried about where to buy Stablecoins like USDC and USDT, Celsius will let you buy them directly via credit card. They will charge 3.5% fee on the transaction, which is high in crypto terms. But they do offer 8.8% interest on your USDC and USDT once you have it.

Earning interest on Stablecoins means you’re not subject to the same price volatility as other crypto because these coins are pegged to the dollar. It’s just an easy to manage way to dip your toe in the water of crypto investing, but it’s not where the real money is made.

4. Crypto exchange crashes

Exchange crashes are rare but we’ve seen them happen at the most inopportune times. One very large crypto exchange went down right in the middle of a gigantic market dump in 2020 and all anyone could do was sit back and watch. Technical issues took them a couple of hours to fix but by the time the platform was up again the market meltdown had eased. It meant at the time that we were able to buy the dip on that exchange. Luckily we had other exchange accounts with some crypto in them that we could use to transact.

Here’s how to manage your risk

Keep your crypto hodl bag (the crypto you plan on holding for the long term) in a hardware wallet. If your assets are secure in your hardware wallet it means you have full control of them at all times. You can load them onto different exchanges at any time as you need to sell or swap.

Also, set up accounts on at least three different exchanges. Pick ones that are not all based in the same country (helps to manage regulatory risk). That way you have back up accounts to transact from when one exchange goes down.

We recommend that you set up separate accounts with Binance (largest volume, loads of coins), CoinsSpot (starter exchange for Australians), and Kucoin (micro and small cap coins).

5. Project collapse

When you invest on cryptocurrency you are investing in technology projects, run by teams of talented developers, cryptographers, programmers, and so on. Just like any project, crypto projects can collapse if teams implode or important personnel leave the project. Or maybe the project was based on a dumb idea, poor tokenomics or flawed code. This article from the Fool indicates more than 2000 cryptocurrencies have failed. If a project collapses, that’s usually the end of the associated coin or token.

Here’s how you manage your risk

This is a tough one to manage. You can of course keep your investments to well known projects with substantial funding and strong tokenomics. If you do want to invest in some true speculators then your risk management options are all about early exit. Keep your ear to the ground on Twitter. Follow the project and the crypto news. You’re aiming to get any adverse news about the project before it hits mainstream and tanks the price.

6. Hard forks

Many decentralised crypto projects use consensus models to govern project development. Coin or token holders can vote on key project decisions and consensus is sought. Hard forks can occur when there is no consensus on an important project decision.and the project literally forks in two different directions. Depending on their nature, hard forks can erode the value and adoption of a project’s coin or token, causing the coin’s price to decline.

Here’s how to manage your risk

Stay up to date with project developments on the project website. Understand any upcoming forks and their timing (they can take some time to play out) and make a conscious decision about whether you will divest, and when.

7. Smart contract failure or hack

Smart contracts are automated ways to handle value exchange between two parties, without involving a middleman, such as a bank. Because they are bits of code that execute in a decentralised way, they can be buggy and suffer from vulnerabilities like any other code.

According to this article from popular crypto exchange Coinbase, smart contract are susceptible to operational risk, implementation risk and even design risk. Poorly constructed smart contracts are also susceptible to theft by hacking.

One feature of the crypto ecosystem is that project teams offer bug bounties or rewards for tech savvy internet nomads to identify bugs within smart contracts so they can be fixed. Smart contracts can also be audited independently to try to identify vulnerabilities.

The real problem occurs when vulnerabilities are not identified and smart contracts with millions of dollars invested fail or are hacked.

Here’s how to manage your risk

Smart contract risk is an all or nothing deal, so the first rule is don’t put in what you can’t afford to lose. Be as safe as possible with your investment and due your own due diligence. Only put your money into smart contracts that have been audited and where the audit results have been made public. You can also get on reddit.com and see what other developers and programmers are saying about a particular protocol or smart contract. Some projects offer insurance on their smart contracts as a way to attract new investors, although insurance products like these are new to crypto and have not been put to the test.

8. Regulatory risk

Let’s face it, regulatory risk exists with every money making venture. You never quite know which direction government policy makers will pivot to next. But in crypto regulators are a quantum leap behind the 8 ball. In the US for example, government still hasn’t ruled on some of the most fundamental matters, such as whether crypto is a security or some other type of asset. This means the regulatory risk exposure is akin to highly speculative financial products. And it’s not just in the US. Around the globe there are crypto friendly governments, and some not so friendly. So how does all this present risk for your investments?

Firstly, rumours of regulatory action can cause FUD in crypto markets – Fear, Uncertainty and Doubt. FUD is market sentiment that can move the price action of a particular asset, mostly in a downward direction.

Real regulatory action can also move the market. Sometimes regulation moves the market up (if it’s crypto friendly) because having regulation in place provides certainty for investors. Sometimes regulation can cause a sell-off and move prices down if it’s perceived as punitive or as hampering development of the space

Here’s how to manage your risk

Keep up to date on crypto regulatory news from the US (as primary market) and from your home country in particular. If there is major regulatory change afoot you will hear about it on Twitter. Follow some crypto projects and personalities like Cameron Winklevoss, Michael Saylor or Mike Novogratz. Once you know about a potential regulatory change you can make your own mind up. Will it support crypto or will it hamper growth? This knowledge will help determine what you do with your investment.

9. Human error

This one goes hand in hand with the non-custodial nature of cryptocurrency. If you lose the private key you need to transact your crypto assets, you will need to have your recovery seed phrase at hand. If you have a particularly human moment and lose your seed recovery phrase, you’re done. That’s it. Drop the mic – your crypto is gone.

Here’s how to manage your risk

This one’s simple – do not lose your seed phrase!. Here’s how to go about it…

Keep your crypto secured with a hardware wallet.

Get a metal crypto wallet for the recovery phrase that backs up your hardware wallet.

If you don’t have a hardware wallet or metal seed storage wallet then you’re exposing yourself to cyber hack. We recommend this site – cryptowalletreviewer.com to find the best hardware and metal crypto wallet. We personally have the Ledger Nano X and the Billfodl metal wallet to keep our crypto safe.

Treat both your hardware wallet and your metal seed phrase wallet as though they are little bars of pure gold. Store them securely in different locations (never together).

10. Market manipulation

Ever heard of crypto whales? Whales are large holders of particular assets, for example Bitcoin whales or Chainlink whales. Whales can and routinely do use their large holdings to manipulate price action in crypto markets. So how do they go about it?

Whales can place very large sell orders at a price below other sell positions in the market creating volatility following which prices can fall. The falling price can then cause a chain reaction as stop losses set by other traders are triggered. 

That’s just one example of how whales might use their coin bags to manipulate price in the crypto market.

Here’s how to manage your risk

Cryptocurrency blockchains are publicly viewable which means if you know how to read the data you can work out whether ownership of the coin is concentrated in the hands of the few. Coins with concentrated ownership are ripe for the picking by manipulative whales.If you don’t want to go through the laborious task of doing this analysis yourself or are not technically inclined, you can use Glassnode or CryptoQuant – blockchain analytics services.

Or you can do absolutely nothing – accept this risk as a part of crypto price volatility and move on. That’s what we do, along with not putting too much of our money into a single crypto asset.

Diversification in crypto is a foundational risk management approach – use it! Diversify across assets, across DeFi protocols, across exchanges, and platforms. Divvy up your investments into smaller bags that you could afford to lose if something goes wrong.

11. Theft or hack

There are two types of theft you need to manage risk for in crypto

  1. Cyber theft or hack – just as it sounds, this is the theft of your crypto on the internet. It can happen to your directly – where coins are stolen from your online wallet – or through a third party like a crypto exchange or DeFi protocol. Exchanges and protocols are hacked regularly, with the latest being a $600 million white hat hack of PolyNetwork.
  2. Physical theft – you might be wondering how physical theft can occur in crypto if your coins are non-physical objects. Ever heard of the “$5 wrench attack”? It’s basically where someone steals your hardware wallet and with it the private keys to your cryptocurrency.
Here’s how to manage your risk
  • Good cyber hygiene –
    • keep your apps and operating systems up to date always.
    • Use a password service like LastPass to manage your passwords.
    • Make sure you have unique passwords on your home WiFi and modum.
    • Use 2 factor authentication on websites and apps associated with crypto.
  • Use hardware wallets and metal crypto wallets – you don’t have full control over your coins if they are on an exchange. The best way to avoid theft via an exchange or protocol is to transfer your coins to a hardware wallet. If anything happens to your hardware wallet you can recover your coins with the wallet’s recovery seed phrase. This is why you also need a metal crypto wallet as well as a hardware wallet. A metal crypto wallet is an indestructible and secure place to store the recovery phrase for your hardware wallet in case you need to restore your crypto nest egg.
  • Proper physical custodianship of your hardware wallet and metal crypto wallet – keep them secure and apart. If one is stolen with the other your coins are gone and unrecoverable.

12. Scams

Scams in crypto are rife and understandably this is very off-putting to new investors. According to the US Federal Trade Commission, the most common crypto scams are:

  • Giveaway scams – members of particular online crypto communities get free coins if by send their coins to a posted wallet address
  • Bogus websites – with scam investment opportunities offering block buster returns using fake testimonials
  • Impersonators – Elon Musk impersonators have duped unsuspecting coin holders out of $2 million collectively
  • Online dating apps – used to lure people into cryptocurrency investments (yeah I know I can’t believe it either…)
Here’s how to manage your risk

Scams are a problem that you can overcome by knowing what you’re investing in and by doing your own due diligence. If you come into crypto understanding that it’s designed to be decentralised and non-custodial, you’ll appreciate that you alone are responsible for the security of your assets. If you get this, you’ll do your own due diligence and only invest in crypto with demonstrated real world use cases. You’ll accept that investing in anything else is either highly speculative or you’re at risk of being scammed.

Here are some tips to avoid getting scammed if you’re new to crypto investing:

  • NEVER send your crypto to wallet addresses sent to you in unsolicited emails, social media, group chat apps like Telegram and WhatsApp.
  • If you come across an ‘investment opportunity’ that seems too good to be true then it just is.
  • Don’t respond to unsolicited offers. If someone reaches out to you to join a crypto community or promote a killer crypto investment opportunity over social media, via email, in Youtube comments or in any message group forums it is likely a scam.
  • Make sure you have the genuine website or app. Fake websites, apps, groups or project profiles are a big issue in crypto. Type the web address in every time and don’t use autofill. Link to the project app directly from the developers website and don’t search it on Google Play or The App Store.

13. Rug pulls

A ‘rug pull’ is a phenomenon specific to decentralised finance (DeFi). A DeFi rug pull is when a team of developers disappear with all of the liquidity added by users to a particular DeFi Protocol liquidity pool. If you want to know more about DeFi lending and liquidity pools (and how to make money from them) check out our How to Invest in DeFi post.

Rug pulls and other types of DeFi exit scams are on the rise as more capital flows into the DeFi space with a reported $240M lost in just the first 5 months of 2021.

How to manage your risk
  1. Avoid new DeFi projects – early projects is where the serious money is made, but it’s also where authenticity and legitimacy are questionable. At a minimum avoid low initial liquidity projects. Just like in the fiat world, scammers find it tough to raise large bags of initial capital for new projects.
  2. Make sure there is a project whitepaper and read it. Compare it to other legitimate white papers.
  3. Watch out for social media campaigns on tokens with claims of benefits that are too good to be true. Fake hype on Telegram and Twitter is a telltale sign.
  4. Research the project – is the developer team transparent and known in the crypto community? If not, do you really want to trust them with your assets?
  5. Get on to Reddit and research the token and the project and any red flags raised by other developers.
  6. Check that there is an audit of the protocol by an independent know auditor. Audits are expensive and having one helps legitimise the project.
  7. If you are more technically savvy, check the smart contract history on Etherscan or Polygonscan.
  8. Watch the token price. If the price starts to tank, get your coins out immediately. Offload the scam token and get your valuable tokens back in to your hardware wallet!
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