Portfolio Review - Mar-2022 (Crypto and Equities)

Full article on Substack can be found here. My substack profile here.

February's Seedly opinion article (on Crypto and Equties) can be found here.

Equities portfolio breakdown

Green: Value as % of my portfolio Orange: Cost as a % of my total cost invested into equities

This chart simply visualises the divergence between my investment thesis and the current market expectations of the company. No hard rule on % cost allocation for stocks yet, nor a threshold where I will trim them.

Equity Portfolio Performance

Time-weighted returns (IRR) - Past 12 months

Cumulative IRR returns

CAGR* Performance

Note: Brokerages and most investors use IRR (time-weighted returns) as a metric. A crude but also widely used measurement is CAGR, which is basically value as a % of cost, annualized (i.e. $1 invested at the start will be $x now). Given our monthly DCA strategy that isn’t as accurate.

In any case, it’s a good measure for non-investment savvy folks who just want to know how much money they take out vs they put in. Value over cost. My chart is an attempt to simulate this by using MoM returns of classic benchmarks to compound my cumulative additions into stock markets. I’m doing this bc investment calculators for NASDAQ & SP500 isn’t as accurate I would like them to be.

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Thank you for reading my monthly journal. I try to keep it real and authentic because nobody can buy the bottom and sell the top. Life is full of mistakes and writing this helps me identify what went wrong and how I can improve. Besides investment I also talk about my life (as its also a journey) as I live through it.

Catch the monthly update of my personal and investing life by subscribing here.😊

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Equity Portfolio Changes

Added: $SNOW (x2) $TDOC $NVDA $U $TWLO

Started: nil

Trimmed: $TSLA

Sold: $OKTA

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Crypto Portfolio Performance*

• Charts start from end of November 2020 when I started recording my crypto portfolio. Summarizing:

2020 performance: 2.7x-ed my portfolio 2021 performance: 5.5x-ed my 2020 portfolio Lifetime performance: 14.7x my cost

Lifetime result:

• Outperformed BTC by 2.24x (14.73/6.56)
• ETH outperformed me by 1.70x (25.48/14.73)

Goal is to try and outperform BTC and ETH from here on out. 👍🏻

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% of Net Worth (direction change from previous month) in:

Stocks: 17.1% (🔽)

Crypto: 76.1% (🔼)

Net worth excludes fixed assets (e.g. house)

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Overall Portfolio Commentary

Where are we now?

It’s always a good time to think about yourself in a 3rd person view, much like how single-player games pause for the main character to narrate a monologue. Looking in from the sidelines manifests the situation (in the markets) for what it truly is. The Chinese idiom represents it best:

旁观者清

Where are we now in the market psychology cycle? By the looks of my portfolio, looks like we’ve done fear and capitulation since Nov 2021. Is it despair yet? Have we gone past it already? I genuinely don’t know. I wonder if I’ve waited too long for despair, which graphically speaking, is the best time to buy. I, like most retail frens, didn’t capitalize (enough) near the local bottom as we were expecting lower prices cum March/April/May. What did we have?

Sidelined money getting FOMO as market rallied alongside Ukraine v Russia; Commodity prices went through the roof; Fed is hawkish AF. After getting through all of that, there’s still the problem of elevated software multiples (ex: $SNOW).

I sound like a bear market doomsayer, like I’m predicting that markets will fall over and I’ll get the final laugh. I, too, am also near fully invested in both stocks and crypto, and will faithfully morph into a bona fide bagholder when the markets get their reckoning.

Being serious here though, rate hikes have a direct negative correlation to software multiples (due to the terminal rate used to discount cash flows in discounted cash flow DCF models). The higher the rates, the lower the multiples. Hedge funds & institutional players will simply sell indiscriminately when multiples demand them to. See this tweet thread by Jamin Ball.

What do?

Let’s revisit our investing goals, shall we? First principles style. By deconstructing large concepts into smaller functional pieces, we can optimize and refine each of them, then assembling it into the optimal framework that best suits us. Note that this applies to both stocks and crypto (with good projects or protocols to own).

What do we want? Own good businesses for the long-term.

When do we want it? Ideally after 30-50 years to harness compounding.

We all want the same thing (make money). However, framing it like this makes this ongoing crash feel like a blip, especially if you think that $SE can go to $1000 (I can already imagine the hate being spewed at me; not sorry) over the next 10 years. It’s never that simple though, and we need to reach for my favorite phrase:

And then what?

The next step of our framework would be the how. How do we get what we want?

How much money do you have to invest?

How long can you invest for?

The answers to this question depend on how well you manage your finances. What’s your inflows and outflows? For the sake of transparency, I’ll show you how I manage my finances (cells blacked out for secrets 😳).

There’s more categories that I’ve hidden but these categories should be specific to your life and how you conduct your spending. For me, I have been using this since I’ve started work in July 2019 and every month I’m able to see the distribution of my spending, and the magnitude of my savings. If you’re interested in a template like this, can reply here, via email or Twitter DMs. The sheet above requires 2 other excel sheets, but you’ll only be required to record your expenses in 1 sheet; the values will flow to the sheet above via Excel formula.

Of course, this won’t exactly tie up to your bank balance because for example, some bills (like insurance) are deducted yearly. These yearly bills should be split monthly so you can account for the portion of the payment for usage of that service in that particular month. Sometimes we just don’t have that information too (e.g. forgot to record, lost receipt).

There’s a second file I use to keep track of my balances. Think of the above picture as my P&L statement, and the below picture as my cash flow / balance sheet.

From here, I track my account balances for my brokerage, my bank, as well as my pension fund (CPF). I also keep track the amounts I’ve invested into crypto and stocks, and this paints an accurate picture of your finances (as they are tallied with your account balances).

The P&L statement outlines how much you’ve been spending on what, and the magnitude of your savings, which are for reference only. What’s important are the numbers in your account right now. The balance sheet, above all, summarizes my net worth at a glance, and over time. This can be further expanded to include long-term debt (e.g. housing/car loans).

It’s a slightly long winded explanation on how you can reach your investing goals. But, as you can see above, we need to know a lot of things about our financial situation before we can even talk about the how. From the above 2 pictures, I’ve actually answered the 2 questions:

How much money do you have to invest?

How long can you invest for?

How much? This depends on your desired bank account balance, considering future expected purchases. It’s my margin of safety. If I’ve more money in the account than I need, then I could put the spare cash to good use if our worst market fears come true.

How long? Likely no need to take out any investments as I’ll only put in money I don’t need into the markets. This comes from having a clear picture of how much debt and expenses you have. On the flip side, if your income growth can outpace your expenses, then I’d say you’re in a comfortable position (aka no need to scrutinize over expenses). I get a peace of mind knowing where my money is flowing, but hey, that’s just me! 😎

The final part of this framework is of course the choice of asset to purchase.

What to buy?

That’s the holy grail of any investing activity. I gather that most folks reading my monthly journal fall into 2 categories:

• People who don’t want to spend anymore time on markets than they should
• People who are like me (active investors & enjoys the process)

For the former group, what to buy becomes an easier question because anything other than blue-chips (FAANG or indices) will likely exceed your risk (volatility) tolerance. For crypto, a simple DCA-style allocation to BTC and ETH can set you up pretty comfortably for the next few years.

For the latter group, you have to recognize that my gains (however little they seem now) came from extensive research and effort expended to study the stocks/ projects that I’m now invested in. I mean, it’s not like I don’t understand the things I invest in. I do, and when it jumps 50% to maybe a 2x, others may have the impression that I was just lucky. But that’s not true. Luck is just how outsiders see your skills. They don’t know how many nights you spend on “crypto stuffs” and the amount of whitepapers (or 10-Ks) you’ve read.

It’s very clear to me that if you want life-changing returns, you’ve got to work for it. No pain, no gain. If you’re not willing to put in the effort, then best DCA into blue-chips because over time you’d likely outperform 80% of active investors (like me)! Plus you can spend that free time on some other pursuit that you actually enjoy.

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Equities

February and March was the month of allocation. Looking at my buys from Q1 of this year I’ve actually invested closed to a 5-figure sum (hope my missus don’t see this as we’re saving money for our house 😳) into the stock market. I’ll admit, the $TSLA buy at $1144.44 in Jan 2021 was really a stupid buy. Thankfully, I’ve managed to get some other wonderful businesses at fantastic prices (my opinion).

Part of me wonders if I should offload my Tesla shares at current prices ($1000) or wait for higher prices? Personally, I don’t see it going to $1500 in this _environment (rate hikes and all) but have high confidence that it will be above that in the next 3 years. Half of me thinks like an owner-operator, whereby we own things for the long run (also similar to VCs), and the other half thinks of capital preservation. Retail has been decimated and there’s no more _stimmy _checks flying around to prop up the overall market. Profits are profits and we should take what we can before we give it all back. Need to channel some Elon [genius] to help me in this. _Post edit: I sold half the position (was actually only 2 shares in total; see below pic) to raise cash and rotated it elsewhere.

However, as we all know, we can’t time the bottom. With limited capital, no fractional share program (for my brokerage), and $4+ USD per order (I know, too expensive, but can’t switch brokerages right now), I can’t run away from timing my buys. Not when I’ve got to pay $4+ USD in fees for 2 shares of $SNOW (currently $212/share as of time of writing).

I’ve also been exceeding my predefined max allocation on some of my other stocks (e.g. $SE, $ROKU and $TDOC). Not very disciplined of an investing style, but the argument can be made that they’ve now given their covid gains back, whilst being a much larger company than they were pre-COVID. One can hope that I’ve bought the bottom but I doubt it. I would be happy just to buy near the bottom when all is said and done (e.g. after 5 years). Here are my Feb/Mar buys for transparency.

On the point of max allocation, I still find it rather difficult to size my portfolio in percentages. This is because assuming a steady state (of contributing cash into markets), the amount of your capital invested in the portfolio will naturally increase. The lack of fractional shares means an additional buy of $TSLA stock may spike $TSLA’s proportion of the portfolio a few percentage points. Granted, my portfolio size is < 6 figures so I may switch to sizing by % when I’m rich? lol.

I’m just thinking out loud here how one should conduct portfolio allocations. My current framework is just to size it near a ballpark figure (e.g. $x thousands) for each stock. For lower tier stocks, perhaps two-thirds the size, and for blue-chip (or large-cap), perhaps 1.5x the size + regular DCA over the next few years?

The ballpark figure also grows alongside my income growth so in effect it’s just a longer-term DCA into my favorite stocks.

Many questions, but the answers are always: “It depends” (to quote my friend’s favorite line).

In any case, I’m already sufficiently invested to thoroughly enjoy the benefits of capital gains should the market just rally over the next quarter because you know, war is happening and commodity prices are through the roof but the Market can do what it wants. If the market tanks (like all of us sidelined investors would hope with some cash to invest), then I’ll hopefully make some opportunistic buys.

Speaking through an amateurish lens here but volatility in both directions and massive rallies aren’t something that happens in a bull market right? Liquidity is thin and markets can open green with 2-3% gains on the day before crashing to -5% to even -10% by the close. That’s a delta of 13% at the worst, which isn’t exactly the behavior of healthy market participants. My own theory is that volume is low and liquidity is mainly dictated by algorithms who trade on sentiment. It’s certainly not a fertile market for retail traders imo unless they know what they’re doing.

But lucky for us, we’re “long-term” investors, and when we spot the “dip”, we buy ’em. No need to care if the dip keeps dipping!

Addendum: Shopee (part of $SE) has exited India. It’s a considerable loss as the market has huge potential, but will definitely alleviate the cash burn which can elevate the bottom line. I’ve riffed off of the comments where I first saw the news and wrote up a thread on it here, if you’re interested.

Addendum 2: I also sold off my $OKTA position on 28th March. Between the breach, how they handled it, and hhhypergrowth’s writeup (paywalled; check our his free articles on prior writeups) on Okta’s product cadence & development, I didn’t feel completely bullish on Okta like I did on the other SaaS companies like Snowflake, Datadog, Cloudflare (albeit slow growth), Crowdstrike, and Twilio. Granted, it is a different play (Identity Access Management), but I felt my money was better invested elsewhere. The proceeds will be used to DCA each quarter-end from Q1 2022 in Nvidia ($NVDA). Prefer the secular trend that is “AI is eating the world”, and I see Nvidia extremely well placed to capitalize on it (even without the ARM deal).

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Crypto

I think March has been pretty merciful to our crypto bags. With the cash that I’ve raised over the past 2 months, I felt in a good position to allocate and rotate my portfolio, with a stronger focus on taking profits and cutting bags that I’ve held with lower conviction. Peak bearishness?

We often overestimate the amount of projects that we think will moon in a bull market. That amount seems very underestimated in a bear market because everybody’s so attached to the meta-narrative that everything is a ponzi and that everything will go to 0. I think there’s certainly some truth in that, because a 99% drawdown is pretty much 0, right?

The idea that the markets are a ponzi i_s largely a byproduct of the greater fools theory. TradFi (or stock market investors) will slam their fists and violently disagree because _muh _cash flows must equate to higher prices. How true is that? It’s only true because everybody believes it’s true. There’s no _right answer here like 1+1 = 2. Investments aren’t a hard science (like physics). See tweet thread by Tascha.

The cash flow argument only works if a lot of other assumptions are valid, such as if the cash flow is eventually returned back to shareholders (via actual dividends). Otherwise, asset price valuation is just a premium with which investors are willing to pay, to potentially sell at a higher price in the future!

Perhaps the right interpretation here would be that cash flows generally correlate to higher share prices, over the long-term. Anyway, let’s end this rant and dive into my portfolio. My portfolio breakdown below:

Token holdings

Holdings not in order of size, degen plays (if any) excluded:

L1s: LUNA SOL AVAX (incl. XAVA JOE) Cosmos (ATOM JUNO OSMO)

ETH L2s: METIS

Gaming: MC RAIN JEWEL PYR MMA

Infrastructure: SHDW POKT RNDR HNT

Large caps: BTC ETH

Others: BASIS ANC

Not financial advice. I may rebalance my portfolio at any point of time.

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The main change I’ve made are related to a few areas of crypto:

• Sales of some BTC in cold storage (to cash) and LUNA (profit-taking)
• ETH 2 merge
• Cosmos/Metis
• Octopus Network and NEAR

I think I’ve started to become more discretionary in terms of rotating in and out of bags. Even though I’ve bought some BTC at the 55k to 60k zone, I’ve recently become more immune to bagholder syndrome and am willing to rotate bags to cash/alts.

The sunk cost fallacy looms large especially after a large correction. Your bags are down 50% but give it a few days of mean rallies and suddenly it looks like your bags can breakeven, or so you hope. After one week your bags are back -65%, but that’s just bear market doom porn talking. The key mental model across investing in crypto and stocks is always conviction.

What is your conviction in right now?

My 2018 bear market trauma + the period of May 2021 to August 2021 taught me many lessons. Plan for the portfolio you want, and not for the portfolio you have. Having sold off OCT and NEAR at about a 50% loss, whilst painful, is not something I lose sleep over (even if these token stage a mean rally). The main reason was that I couldn’t convince myself that OCT/NEAR could outperform the SoLunAvax narrative for the rest of 2021.

Hence, am currently much more comfortable in cash or in projects with which I’ve high conviction (and can hold for 1 year).

Anyway, these sells and profit-taking are me raising cash for the back half of the year. My sixth sense tell me that markets aren’t going to fare so well, so I’m trying to optimize my portfolio to capture any upside gains before they vanish into thin air. It’s not going as well (because I’m not inclined to sell 100% of my bags I’ve got high conviction in, perhaps due to bias). A case in point was that I’ve sold some $LUNA at $100 and then $90. LUNA and the Terra ecosystem is fronted by an absolute chad that is Do Kwon, and whilst there’s no way I’m fading the guy, I’m certainly counting my blessings and taking some profits (having bought most of my bag just below $50). For a detailed writeup about @stablekwon himself and Terra, look no further than the generalist. My USD position is also sitting very comfy at a 19.5% APY, which is way more than I can say than my IRL bank accounts.

The reason why I (and many others) bestowed him the status of _chad _can be summarized in the following tweets:

He bet $10m + $1m in 2 bets that $LUNA prices will not be above $88/$89 1 year from now. That is immense skin in the game. Tweet here.

Building of BTC reserves (3B!) to prevent death spirals of the LUNA-UST as UST can be burned for BTC rather than LUNA. Tweet here.

_Signal _is often enough in this market. It could be unrelated to the BTC bullishness (as we often justify price with narrative), but who knows? The hidden hand of Do can be very powerful.

Hope the numbers aren’t too small, but from the time Do Kwon was willing to match the 10m bet up till now (30th March 2153 GMT + 8), Bitcoin ran up about 21% whereas LUNA did a 16%.

Can he save the crypto market from the clutches of the bera? We shall see. I’m still heavy in my LUNA bags and will surely take profits be it at $100, $120 or $150. (though now prices have tagged $110). A 1-2x gain is too hard to pass in the markets of 2022.

As a token (ha) of gratitude, I’ve also put a small amount into $ANC, which is the governance token of the Anchor Protocol. I think the meteoric rise of the protocol’s TVL (because people like me largely abuse the 19.5% APY without borrowing funds on the dapp which makes the yield reserve sustainable) will force the core team to re-evaluate the tokenomics such that the rise of TVL on the dapp will be proportional to the rise in the value of the underlying token. This is what is known as the value accrual mechanism. If my thesis holds true, then the token would appreciate. We’ll see.

Also check out this article by @blknoiz06 for Q2 plays.

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ETH2 play

With the global event that is the ETH merge (where the PoS Beacon Chain and the current PoW chain gets merged) slated to be introduced sometime in end-Q2 2022, I felt slightly underweight in ETH. Other than the ETH side of LP pairs I own for gaming plays (otherwise as a holder you’re stuck with massive dilution), I don’t own any.

I did have a large bag of ETH back during July 2020 which I’ve since diversified into the portfolio you see now. It’s therefore a shame that I still underperformed the beast that is ETH. In any case, I thought that the pumps from the prior week was certainly something of note; even for a bear market rally. Notwithstanding further tail-risk events like Russia v Ukraine evolving into an European war, I think that ETH has a positive narrative going into Q2.

Many of us wannabe smart people will think of ways to play the ETH merge without owning ETH, and might advocate for other tokens like LDO (Lido Finance). In times like these I prefer Occam’s razor which optimizes your decision around that which has the least amount of assumptions: Efirium.

My buys: $2944 USD (19th March), 0.0710 ETH/BTC.

Anyway, given the resilient institutional inflows into large-caps whilst being cognizant of the broader economic environment which isn’t exactly conducive for risk asset prices, the ETH2 merge is a good (albeit overcrowded) play to capture some upside profits.

In my benchmark portfolio, I compare my performances against BTC and ETH. It’s also a given fact that outperformance happens in right-tails which by definition are often 1-3 standard deviations of the mean. What this means (ha) is that outperformance can only happen to a few. How certain am I of being in that subgroup? I’m confident sure but for all my active portfolio management since 2020, I’ve underperformed ETH. That says something.

It’s near impossible to continuously find that 2x, 5x or even 10x. Sooner or later, this market is going to mature and law of large numbers (gains) will prevail. I hope accumulate enough hard assets and sound money by then to secure generational wealth.

Let’s get that bread! 🍞

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Cosmos & Metis

Earlier in February I started a decent sized position in the Cosmos ecosystem as well as the Metis ecosystem. To save on fees, I sent funds to Binance Smart Chain (BSC), then swapped to METIS, before bridging it over to the METIS chain. At least, that’s what I did before KuCoin listed METIS on its exchange. KuCoin is actually a very decent exchange, and it’s pretty on par with FTX but I’m just biased and bag-holding FTT as well which gives me 3 free ERC20 transactions a day.

Cosmos was easier as you can buy ATOM (native token for Cosmos hub) and send it directly to the Cosmos chain. From there, you can interact with other chains such as Osmosis, Juno and Secret Network. The transfers once being inside of Cosmos is near frictionless and is ridiculously cheap. My cosmos exposure now consists of JUNO, OSMO and ATOM (sized in descending order), and all are staked (also ridiculous that staking yields for OSMO and JUNO are 65% and 80% as I’m writing this (18th March).

As always, the real 10x gains comes from buying things people haven’t really talked about yet, and selling once enough people (especially retail) talk about it. As Arthur Hayes put it:

I’ll briefly share what I like about Cosmos below as I had trimmed much of my Metis position in ~$150s because I felt there was a lot of hype and liquidity conditions ain’t good; I also watched the token price jump from $120 when I first bought to $160 in a matter of days, then drop back down to $100 and then jump to $150 again. I don’t believe the conditions are ripe for a rally to $200 and wanted to raise cash too for whatever volatility that may surprise us later.

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What is Cosmos?

Cosmos tries to leverage on a common network and consensus layers to string up an ecosystem of blockchains running in parallel, allowing for Inter-Blockchain Communication (IBC) between such chains. The common layer (known as Tendermint SDK) allows applications to build on the blockchains without spending too much time on the nitty-gritty details of network/consensus layer and only focusing on the application layer (smart contracts, UI/UX). Application specific blockchains can be created as the SDK greatly speeds up development time by providing tried and tested code templates.

Essentially, it’s an alternative model (modular) to what is currently in place for the L1 ecosystems (e.g. ETH SOL) where these blockchains are monolithic. For example, Ethereum requires the development and maintenance of the Ethereum Virtual Machine that will enable developers to develop and deploy their contracts into the Ethereum ecosystem.

I’ve tried my best to summarize my thoughts about Cosmos here without sounding too technical; Have not delved in too much into the technical architecture of blockchains so my knowledge here is limited. My main investment thesis with the cosmos chain is that blockchains with a modular stack is a novel enough concept in the crypto scene that (institutional) money may flow into this ecosystem in the future and innovative applications will be built on it. This of course drives up the valuation of the entire ecosystem. Even without such large inflows, the staking APRs as mentioned above are well worth my exposure in them. Not to mention the time required to unstake (JUNO = 28 days, OSMO = 14 days) basically requires you to sit on your hands sometime, which forces a longer-term view. We can revisit this investment in another year.

For now, I am long.

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Compass Mining

Nothing to see here; my miners are chugging along. The current 7-day average is 88k sats (or 0.00098718 BTC) per day for 2 miners. At a benchmark price of 47k, that equates to about $46.397 per day. Using that as a return profile, my miners (which on average cost $7.7k) will breakeven at around 331 days, which is about 14 months. This is excluding facility costs of $160 per month per miner (currently waived). As seen below, the daily earnings can be super volatile.

With the hash rate growing at such a steady rate (correlated with price), if you aren’t adding more miners in tandem, your expected satoshis mined per day will drop as your hash power contribution to the network is also dropping. This may or may not impact your dollar revenue per day (as it’s based on the BTC price). In any case, I think a conservative estimate is that it’ll take about 1.5 years (including facility costs) to even see any pure profits from this operation.

On the bright side, a constant inflow of BTC into my accounts gives me flexibility to rebalance my portfolio to take advantage of volatility. Here are the stats for my mining setup.

So far, so good. Long road ahead towards breakeven…

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Read a very sobering article that made me wonder: Am I married to the game?

I am thankful that I’ve managed to maintain a partition between my normal life (aka work, time with family/loved ones) that don’t involve crypto, and my crypto life. This article constantly reminds me that however much gains you make on the magic internet money, it’s _needs _to be bridged over to your life. My foray into crypto is to help make my life better. I hope that will be the case in the next 5 to 10 years.

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Life

I’m beginning to like writing this section more so than my other sections, mainly because it allows me to document my life journey, as well as share it in an semi-anonymous kind of way. With Covid we don’t see our friends much if at all, and most of our social engagements usually happen on well, social media. I think writing it here is a better way than posting on Facebook or Instagram, which is antiquated and only reserved for connecting with your relatives (oh, as well as looking at dog + food videos).

Join me on Substack (& scroll to the last section to read the whole thing. It is truncated here for brevity (article is too damn fcking long).

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Conclusion

Thank you again for reading thus far. Sorry for the long writeup again… old habits die hard. I generally don’t talk as much in real life so I guess this is my outlet ;)

As always, feel free to reach out if you’ve any specific feedback about the article or any questions (equities and crypto) you might like my help in. My DMs are always open. Not financial advice.

Let’s see what April brings!

Cheers,
Joey