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Gold, silver and Bitcoin as insurance.

Thursday, May 5, 2022

Long time readers of my blog might recall that I hold some gold and silver.

Some readers might find this surprising since value investors like Buffett and Munger do not believe in holding precious metals.

In case you are relatively new to my blog and want to find out more, please read the following blog:

Why investors for income buy gold and silver?

I don't want to rehash the old blog.

Too lazy. ;p

Anyway, it has been many years since I bought more gold and silver.

When I took a look recently, I found that, together, gold and silver formed only 2% of my portfolio.

This is lower than what I think I should have as insurance against fiat currencies.

I was watching some videos on the topic when I stumbled on a video by Robert Kiyosaki who has always said that keeping some gold and silver was sensible.

However, in that particular video, there was a twist because he was also talking about Bitcoin and why we should keep some.

That was very intriguing to me as I don't remember him talking about Bitcoin before. 

To be fair, I don't follow him and what I know about him is probably dated.

The last time I blogged about him was in 2013:

Rich Dad, Poor Dad!

Anyway, long time readers might remember what I thought of Bitcoin before.

If you don't remember or if you are new, read this blog:

My final word on Bitcoin and friends.

Like the Dollar, Bitcoin was a currency to me but unlike the Dollar, other than being a digital currency, Bitcoin was not a fiat currency.

Then, while looking for more information, I found a video by Kevin O'Leary who said that institutional investors are looking at Bitcoin not just as a currency but as a property to hold.

So, just like gold, many institutional investors are looking to hold some Bitcoin.


They believe that Bitcoin is digital gold and, just like gold, Bitcoin is supposed to be a good store of value.

Digital gold for a digital age.

The truth is Bitcoin has gained recognition and a higher level of acceptance. 

It has become increasingly mainstream.

The network effect is very strong here.

Source: Investopedia.

So, if we believe in having insurance against fiat currencies, we might want to hold some gold, silver and also Bitcoin.

I already have some gold and silver.

After watching those videos, I started thinking of getting some Bitcoin.

I admit that I am a dinosaur when it comes to tech stuff.

Don't even have Whatsapp.

I am very set in my ways and relatively comfortable with what I am doing and what I already have.

In a more recent blog on retirement drawdown strategy, I said that, in my retirement, I don't want to worry about outliving my savings.

So, my retirement funding strategy is such that I would probably never have to draw on my savings. 

In fact, my savings could even grow in my retirement.

Retirement drawdown strategy.

However, never say never.

Murphy's Law.

Fiat currencies are very flawed, after all, and having a crisis mentality and getting some insurance is probably a good idea.

So, I believe we need some insurance for this which is why I hold some gold and silver.

Just like how I stepped out of my comfort zone this year when I got some exposure to Chinese tech stocks, I decided to step out of my comfort zone once more to get some Bitcoin.

Why not simply get more gold and silver?

I could do that but, like I said earlier, digital gold is for a digital age.

I don't know what the future will bring but I really like "Sword Art Online" and "Log Horizon."

Is the Metaverse all hype or would it become mainstream?

I don't know.

I made the decision to get some Bitcoin some time after I decided to get some exposure to Chinese tech and both decisions surprised me for a short while.

Why a short while?

Well, considering that the prices of Chinese tech stocks and Bitcoin had already plunged significantly, maybe, it wasn't so surprising that I got interested when I did.

Anyway, the plan was to have Bitcoin make up 2% to 3% of my portfolio.

Then, together, gold, silver and Bitcoin would form 4% to 5% of my portfolio.

Ray Dalio's perspective on having a small percentage of our portfolio in Bitcoin for the sake of diversification resonates with me:

Still, I have only bought a tiny bit of Bitcoin so far and it isn't even 0.5% of my portfolio yet.

Why did I not buy more?

To invest in Chinese tech was to invest in undervalued productive assets and I nibbled even though price was down trending.

It was just to get a foot in the door.

In comparison, I cannot tell if Bitcoin is undervalued nor is Bitcoin a productive asset.

Bitcoin is just like gold and silver.


How like that?

All I have to depend on is technical analysis.

Very dangerous for me as I am probably somewhat rusty and could get tetanus from the exercise.

Anyway, I am in no hurry to have Bitcoin form 2% to 3% of my portfolio.

I will take my time.

Bitcoin's price is very volatile and big price swings are pretty normal.

Looking at the chart, I see what is possibly a bear flag, Bitcoin could go higher before plunging again in price.

So, after getting my smallest toe in the door earlier in the week, I will pace myself and accumulate whenever price swings lower.

I might get some Etherium too as that's the runner up to Bitcoin in terms of market cap so that I wouldn't be putting all the eggs in one basket.

However, Etherium is not exactly digital gold and, so, exposure to Etherium should be relatively small.

What about Litecoin?

Litecoin is digital silver like Bitcoin is digital gold.

However, buying Litecoin using Gemini, the crypto exchange I signed up with, requires me to use Bitcoin to do so.

So, to avoid paying more commission, I will mostly stick to Bitcoin.

OK, back to the present.

Drumroll, please.

I have done it!

I am a newly minted holder of Bitcoin.

2022 is turning out to be a year of surprises on a personal level.


Like I said, after my initial tiny purchase, the strategy is to accumulate mainly Bitcoin whenever its price weakens.

With this strategy, if Bitcoin weakens in price, I buy more and if Bitcoin appreciates in price, it means I wouldn't have to buy as much to have it hit 2% to 3% of my portfolio.

So, whichever direction Bitcoin goes, I am good with it.

OK, long time readers know I believe in keeping an emergency fund.

Emergency fund is in a chest labelled: "CODE BLUE!"


How much should we have in our emergency fund?

All my gold, silver and Bitcoin will go into another chest.

This chest will be labelled: "CODE RED!"

Please note that I am not getting Bitcoin because of some get rich quick idea. 

We want to be careful as there are people who would pitch it that way.

Source: MAS.

Remember, nobody cares more about our money than we do!

Recently published:
Recession is coming and cash is trash.

Related posts:

1. Investing with some common sense.

2. Nobody cares more about our money than we do!

3. Largest investments updated (1Q 2022.)


AK71 said...

Hi Kent,

I published your comment but quickly reversed the action after I saw the request to keep it private.

Before a comment is published, it just appears as a wall of words without the paragraphing which makes it harder to read.

All good now. :)

If I have misunderstood, please let me know.

I chose to start a Gemini account because it is the safest of all crypto exchanges.

They keep a big portion of crypto held with them in cold wallet and everything including what remains in the hot wallet is insured.

There are risks associated with lending or staking our crypto because we could lose everything and I am not sure it is worth the risk.

I am more concerned with security than returns when it comes to Bitcoin which is consistent with my thoughts on gold and silver too.

Peace of mind. :)

ed said...

hey ak. u may want to listen in to Andreas Antonopoulos and Lyn Alden regarding bitcoin. i find their speech more logical and sensible, and less about agendas.

AK71 said...

Hi ed,

I am very sure there are many out there with ulterior motives. -.-"

So, thanks for the recommendation. :D

Will do. :)

Rellangis said...

Hi AK,

There is a phrase "Not your keys, not your coins". Gemini is essentially holding on to the coins for you. Think about the Mt Gox episode ..

You can consider getting your own cold wallet to store your bitcoins. Ledger or Trezor are some of the more well-known brands out there.

AK71 said...

Hi Rellangis,

I like how your said Bitcoins in the plural.

I don't even have a whole Bitcoin right now. ;p

Yes, definitely will be looking at getting my own cold wallet if I have a bigger position.

Not really concerned right now with Bitcoin being at less than 0.1% of my portfolio.

laurence said...

Bitcoin price slumps after US billionaire says crypto is worthless
Bitcoin’s price has plummeted in the past 24 hours after one of the richest men in the world called it less than worthless.
May 5, 2022 - 8:11AM

US billionaire Warren Buffett absolutely savaged the top-ranked cryptocurrency on Tuesday at an annual shareholder meeting for his company Berkshire Hathaway.

Mr Buffett also said at the meeting: “Whether it [bitcoin] goes up or down in the next year, or five or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t produce anything.”

The famed investor explained why he believes bitcoin is intrinsically worthless.

“If you said … for a 1 per cent interest in all the farmland in the United States, pay our group $25 billion [$A35 billion], I’ll write you a cheque this afternoon,” he said.

“[For] $25 billion [$A35 billion] I now own 1 per cent of the farmland. [If] you offer me 1 per cent of all the apartment houses in the country and you want another $25 billion [$A35 billion], I’ll write you a cheque, it’s very simple.

“Now if you told me you own all of the bitcoin in the world and you offered it to me for $25 [$A35] I wouldn’t take it, because what would I do with it? I’d have to sell it back to you one way or another. It isn’t going to do anything. The apartments are going to produce rent and the farms are going to produce food.”

Mr Buffett’s right-hand man, Berkshire Hathaway’s vice chairman Charlie Munger, previously said at the shareholder meeting: “In my life, I try to avoid things that are stupid and evil and make me look bad … and bitcoin does all three.”

Back in 2018 he said: “Bitcoin is probably rat poison squared,” he said at the time, adding later on that the digital asset “has no unique value at all”.

AK71 said...

Hi Laurence,

Bitcoin isn't at all attractive if we are looking for productive assets.

It is like gold and silver in that respect.

It is the hard truth.

Busybody said...

Hi AK71

Like to watch these channels (theirs news can be very dramatic)金錢爆

Thank you

AK71 said...

Hi Busybody,

Many YouTube videos are disguised as trustworthy when they are at best third rate entertainment. ;p

AK71 said...

Hi Rae,

I agree with you.

The article made it sounds like AK encouraged CZM to speculate in crypto when regular readers of my blog would know that AK has never encouraged anyone to do such a thing.

In fact, AK has done quite the opposite.

I have always said that bloggers who tell their readers to "invest" in crypto are either confused or out to confuse. ;)

I did not publish your comment because I do not want to help generate publicity for the article which is sponsored.

Thanks for letting me know. :)

Newer readers might be interested in reading this:
Lost $300,000 staking crypto...

The Sun said...

Hi AK,

If you do not mind, where do you buy your gold and silver from?

AK71 said...

Hi The Sun,

I support UOB, of course. ;)

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