The investor places his capital in instruments to be able to grow financially. It’s about making money with money. It is different from the worker who offers his time and talent for money. In this case, the investor is a capitalist who uses his property to earn additional income.
Life, in reality, is a big waste of money. Or, put another way, our lifestyle has a monetary cost. Which implies that it is budgetable. Now, the human being has needs. AND these needs must be met in a world of limited resources. How do we fix this? The first solution is to take what we need directly from nature. Meal? Water? Living place? Coat? Go and search in nature. This is the animal solution.
The second solution is to obtain products and services from the hands of others. That can be achieved with several methodologies: violence, gift or exchange. War and crime have always been options for obtaining resources. As well as the gift. In fact, the child and the beggar have in common the fact that they obtain things from others without giving anything back.
Money is an instrument that facilitates exchange. It is an abstraction that represents exchange power. Is about an impersonal technology that allows us to conduct mutually beneficial transactions in a non-violent manner. Violence is too destructive. And the gift is too personal.
Now the concept of financial freedom. What is financial freedom? In a nutshell, Financial freedom is being able to live off the income generated by our properties. Suppose we already know the cost of our ideal lifestyle. That lifestyle includes housing, transportation, food, clothing, health, entertainment, miscellaneous expenses, etc. The beggar is not free, because he depends on others. The infant is not free, because it depends on its parents. The salaried worker is not free, because he depends on an employer. He who depends on no one is free. In this case, He is free who can live on his properties. Freedom is not synonymous with leisure. The key concept is dependency. The person with financial freedom may or may not work. Work, in this case, would be optional. Freedom lies in having that choice.
Is it possible to obtain financial freedom with Bitcoin? In the case of Bitcoin, it is very difficult to predict the income that such a volatile asset could bring. Here is the first difficulty. It is true that Bitcoin in its good times has grown a lot. We cannot deny that. However, it is a very erratic growth. Which makes planning very difficult. In addition, everything depends on our capital. Having a million dollars to invest is not the same as having a hundred dollars to invest. The person who needs a monthly income of $1,000 to be able to live contentedly requires less capital than the person who needs $20,000 to be able to live contentedly.
To some extent, this is all a matter of numbers. What are your numbers? To start, we need a capital. The most sensible thing is to create a dynamic where our expenses are less than our income. Accumulate the surplus. Invest that capital for additional income. And reinvest the earnings. In other words, what is sought is to grow financially. Over time, growing apace at some point we will cross the line to financial freedom. What line? Well, At the moment that our portfolio is large enough to generate an income that can finance our expenses and more, we could talk about financial freedom.
For example. If we have annual expenses of $15,000 and our portfolio grows by an average of 10% per year, we need a base capital of more than $150,000 to start talking about financial freedom. In this case, our numbers would be $150,000 capital, 10% income, and a $12,000 lifestyle.
The most sensible thing would be to design a diversified and balanced portfolio. Which normally includes fixed income instruments (bonds, bank deposits…) and variable income instruments (stocks, crypto…). The traditional is a 60/40 ratio. The former provide stability and predictability. And the latter bring growth and dynamism. In this context, volatility is recognized as risk. And we typically allocate riskier assets less capital than more stable assets.
Suppose we place 5% of our capital in BTC. If Bitcoin grows 2X for a year, our portfolio would grow an additional 5 points thanks to the asset. Conversely, if Bitcoin loses value that year, the most our portfolio could lose would be 4-5%. That is when fixed income instruments show their true importance. That is to say, the gains on the winning assets cover the losses on the losing assets.
Is it (really) possible to achieve financial freedom with Bitcoin? It’s possible. But we have the issue of volatility and uncertainty. Bitcoin offers great opportunities, but, at the same time, great risks. In other words, investing in Bitcoin is not a matter to be taken lightly. Before anything, you have to take the risks into account.
Of course Bitcoin in a portfolio can give growth. And, eventually, financial freedom. However, Bitcoin can also lead to large losses. In other words, it implies a risk. But, In the investment world, risk is something that is manageable.
In my opinion, every successful investor must become an expert in risk management. The investor needs a lot of clarity and strategy. Why do we do what we do? We must be aware that this is primarily a matter of money. We use money to make money. As simple as that. In this space, ideology mixes with finance. Because now everything is a political passion and a fight of groups against groups. When did it become a sin to invest money to make money?
financial growth. Financial Freedom. Profits. Losses. Opportunities and risks. Financial freedom is a life project. And it requires a lot of strategy. Why do you want to invest Bitcoin? Own interest? Ideology? Profit? To save the world? To reform the system? Financial Freedom?
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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