Disclaimer: It has recently come to my attention that I need to include a legal disclaimer when talking about investing. I am not a professional financial advisor or stock broker or even someone with any special expertise or credentials when it comes to investing, just a regular guy who likes to speculate on stocks for a hobby. Nothing I say here should be taken as professional investing advice or as any sort of legally binding promise or guarantee of any particular outcome. There are no guarantees in the stock market. This article provides no guarantee or promise, explicit or implicit, that you will make money if you follow my advice, or even that you won’t lose money by following my advice. It also provides no guarantee or promise, explicit or implicit, that you will not incur any other losses as a result of taking my advice. Never invest money that you can’t afford to lose. Since you’ve been warned, I am not responsible for any financial losses, legal penalties, extra taxes, or other consequences that may result from taking my advice. Invest at your own risk.
I made a lot of money this pandemic. Not only did I save a lot of my disability money due to an increase in my food stamps, but I also made a significant amount of money on the stock market. I’ve spent several years of my life living in abject poverty, but now there’s a way out, and I’ve seen my net worth go from about $1000 to about $3000 over the past year.
For illustration, here’s a graph showing the growth of my stock portfolio since I made my initial investment of $400:
As you can see my portfolio’s value started off at $400 and is now at about $1450. Of course I did transfer another $100 from my checking account over the course of that time, but the other $800 is all capital gains. So that’s $800 in capital gains for a $500 initial investment (the $150 was just transferred recently).
If there’s anything I’ve learned from this it’s that everything our boomer parents tell us about investing is bullshit. “Diversify your portfolio.” “Put your money in a mutual fund.” “Invest in companies that are doing well.” “Invest in what you buy.” “Buy stocks for the dividends, not for capital gains.” I’m going to dispel all of these ideas here, and I’m also going to detail my current plan for transitioning from a broke loser on welfare to a multimillionaire by the time I’m 40.
I’m currently in the process of selling off my Corona-Chan investments and reinvesting in companies that are in booming industries. I don’t invest for dividends, nor do I look at companies that are currently going up. I only look at growth potential. Maybe if I were already a millionaire and I just wanted some extra income, I’d diversify my portfolio and invest for the dividends. But I’m poor, so my initial investment is obviously going to be very low. I have to invest for capital gains in order to make any nontrivial amount of money.
At the beginning of the pandemic I bought $400 worth of stocks because I knew they would go up after the pandemic was over. That’s growth potential. It’s all about buying low and selling high. Of the six companies that I bought, there are two that I believe have already recovered from the pandemic and are only going to grow with the index from now on. I’ve dumped both of these stocks now, and I sold them for a whopping (for me) $580 profit. The airline and cruise line stocks I’m going to hold onto, because they haven’t beaten the index yet, and I’m predicting they will skyrocket once the vaccines are rolled out and people start traveling again.
This graph shows the growth of Dicks’ Sporting Goods since I bought it last March. As you can see, its value has nearly quadrupled, beating the index by a huge margin. Darden Restaurants’ gains were similar but not quite as dramatic. Basically, these are services that adapted to the pandemic by moving online and/or by opening up again after lockdown with social distancing protocols. Dick’s has been profitable because their brick-and-mortar stores have been open most of this time and you can also order stuff online. DRI has been profitable due to things like GrubHub and Uber Eats. I think it’s safe to say that both these companies have fully recovered from the pandemic and any future growth will be marginal. So I sold them.
I dumped my DRI and DKS stocks for two reasons: first, because I didn’t see much further growth potential as I mentioned, and I wanted to have cash to reinvest in companies that did have growth potential; and second, because we’re probably going to have another stock market crash sometime this year, and I want to sell at the top and then buy at the bottom when the market has crashed and stocks are super-cheap again. This is how you get massive capital gains: you sell as soon as it’s clear that the stock market is going to tank, and then you buy after it does. Keep repeating this process with every stock market crash, and you will get filthy rich.
How do I know the stock market’s going to crash? Because I’ve done my research. During the bond yield crisis that happened earlier this year, I did some research to see if we really were headed for another crash. Turns out we are, but not because of rising bond yields. As this article explains, the Shiller price-to-earnings ratio is too high, which indicates another crash is imminent. Basically, stock prices are way up, but at the same time people are still struggling to make ends meet, which means buying stocks is unaffordable for the average American and many people are going to be selling their stocks to put food on the table. Any time the index does not accurately reflect the actual economic situation, it’s an indication that the current trajectory is not sustainable. I don’t know when the stock market will crash, but I’m pretty certain it will crash sometime in the next year.
At the same time, economists are also predicting a pattern of hyperinflation due to the Fed printing money like there’s no tomorrow. According to one source I saw, the dollar is supposed to lose 20% of its value in the next few months. This is why a lot of people are putting their money into cryptocurrencies, driving up crypto prices to record highs.
Of course this puts crypto in a price bubble, and that bubble is going to pop pretty soon, so I would say investing in crypto is a really dumb idea at this point. We have no idea how far up the price of bitcoin will go during its current bull run, nor can we predict where it will settle after it crashes. What we do know is it’s not just going to go up and up into infinity like a lot of crypto shills want us to believe.
So basically, we’re in a situation where all markets are extremely unstable. The stock market will crash at some point, as will the crypto market. The dollar is hyperinflating, and other fiat currencies are hyperinflating even more, so forex isn’t a viable option. You might think that putting your money into gold and silver is a good bet, but those markets are extremely volatile right now as well, and there are additional operating costs associated with buying those assets. So some diversification is obviously necessary.
I’ve pulled a lot of my money out of the stock market for now and have roughly $600-$700 in cash in case the stock market crash shows up. At the same time I have several hundred dollars still in stocks to cover the inflation in case the crash doesn’t show up in time. I’ve bought about $300 worth of silver from a trusted bullion store on the web, and I’ve stored it in a safe place where no one will ever find it. I’ve also started earning crypto through the Brave Browser and Basic Attention Token. So my assets are spread out over a number of different markets.
Now let’s take a closer look at stocks. Below is a screenshot of my current portfolio (it’s from a few weeks after the previous two screenshots, so obviously the price isn’t the same).
As you can see I’m still holding onto my American Airlines, Delta Airlines, and Carnival Cruises stocks, because I expect them to skyrocket once the pandemic is completely over. At the same time I’ve also started building Phase 2 of my portfolio – I guess you could call it my second portfolio. This time the strategy is no longer to invest in industries affected by the pandemic. Rather, it is to invest in industries that are rapidly developing and thus have a lot of future growth potential.
There are four industries I’m focusing on: renewable energy, 5G, AI, and self-driving cars. I’m concentrating on the first two with the latter two being secondary investments. 5G is set to explode in the coming years, causing a revolution in tech and a massive surge in stock prices similar to what we saw with Big Tech in the 2000’s. Therefore I have invested about $100 in Ericsson, the biggest holder of 5G patents, and I plan to buy more shares in the future.
Renewable energy is going to take off as well, now that Biden is in charge and has made addressing climate change a priority, not to mention the endorsement of Bill Gates, who is one of the most universally admired people on the planet. If Bill Gates gives something the green light, you know it has a bright future. Of course there are a lot of competing renewable energy technologies, including things like natural gas, solar power, wind power, and electric cars. So I’m diversifying over these different sectors so I can reap profits from whichever one wins. I bought 4 shares of CLNE, which is a natural gas company, and I’ve just purchased 2 shares of Volkswagon upon hearing that they will be competing directly with Tesla to be the industry leader for electric cars. I would invest in Tesla too, but their share price is a bit outside my price range, and I’m not allowed to buy partial shares.
AI and self-driving cars are covered by my investments in Tencent Holdings and Uber respectively. I’ve decided not to concentrate on these because I think they have less growth potential than the other two industries. AI has already been growing and flourishing for about a decade. Of course there are new advancements made in the field of artificial intelligence on almost a daily basis, so clearly there’s growth potential, but I would say the industry has mostly matured at this point and I missed any chance I had to invest in it during its infancy.
Self-driving cars may explode in the coming years, but that industry presents another problem as things like patent wars and concerns over safety hold the industry back. So it’s a bit more risky than the other three, and I don’t want to put a lot of my money there. I’m holding onto my Uber stock (which was originally part of my Corona-Chan portfolio) because they have self-driving car patents, and they’re directly competing with Google, but as before I can’t invest in both sides of the conflict on this one because Google’s stock is well over $1000 a share.
Through my investing journey I’ve come up with a handful of rules that I use to win big in the stock market:
1. Invest for capital gains, not dividends.
Don’t invest for dividends until you’re already a millionaire, or until you’re already at the point where you think you have enough. Considering that dividends are a tiny fraction of the stock price, and stock prices always go up over time, even if you invest completely randomly and only grow with the index, your capital gains will still probably outstrip your dividends by a significant margin. This is something I learned from just putting 2 and 2 together when looking at the stock market. Unless you’re extremely unlucky, you’ll always make more money from capital gains than from dividends, so just invest for capital gains.
2. Never buy or sell at a loss, even if you’re losing money.
The reason most people end up buying high and selling low is because they buy companies that are currently doing really well out of FOMO and then panic-sell those stocks as soon as they start going down. I avoid the temptation to panic-sell by never allowing myself to sell at a loss, regardless of whether the stock is going up or down. This makes it easier for me to hold onto stocks that are currently plummeting, knowing that they will eventually go back up. At the same time I will never buy at a loss either, meaning if I sell a stock, I will never buy it again for a higher price than I sold it for. I look at the cost basis for a stock, that is what I bought it for, and if the current price is below that, I hold onto it. Same thing with buying companies I’ve already owned and sold. If you follow this one simple rule, it’s mathematically impossible to lose money long-term.
3. Diversify within industries, not over industries.
The problem with mutual funds is not that they’re diversified. It’s that they’re diversified over many different industries, and these industries will be in various states of growth or decline at any given point. Therefore, your losses will almost always cancel out your gains. What you want to do is find a small handful of industries that you think have good growth potential and invest entirely in those industries. And the way you mitigate risk is by diversifying within those industries. So if one company in a booming industry fails, other companies will pick up the slack and do well themselves, therefore if you own at least two or three major companies in the industries you’re concentrating on, you will be protected from losses, while still being almost guaranteed significant capital gains as your chosen industries grow.
Recently I’ve come across another rule via the Internet which is the technique of dollar-cost averaging. This basically means that every period (be it a week, a month, or a quarter) you invest a certain dollar amount in the stock market. If the market is up, you will end up buying fewer shares. If the market is down, you will end up buying more shares. This method virtually guarantees that, on average, most of your shares will be purchased when the market is down, which is the optimal time to buy. Since I don’t have that much money, I’m putting in ~$60 a month (this month’s $60 was spent on Volkswagon as you can see). If I use the $600-$700 cash currently in my portfolio, along with the money I will likely receive from my 2020 tax return, I will be able to keep doing this for the next year (this is assuming I’m unable to get a job in that time and I get no more stimulus money from the government). Then if and when the stock market crash shows up, I just invest whatever cash I have left when it bottoms out.
I want to take a look now at so-called “meme assets” – assets that have a lot of hype behind them, especially among normies and people who aren’t particularly business-savvy. I’m talking about the WallStreetBets types, or people whose investing strategy is basically “I’m going to invest in black-owned businesses.” See, this is why you’re still poor – because your investment decisions are based on the skin color of the business owners and not on whether you think their businesses have growth potential.
Your investment decisions should not be influenced by social pressure or FOMO; the only thing you should look at is “What is my likely return on investment?” If you’re investing in something because everyone else is investing in it too, then two things are going to happen. First, the economic principle of scarcity will dictate that if everyone has lots of something, it becomes essentially worthless. Second, by the time you buy it, tens of thousands of other investors will have already bought the same thing, driving its price way up. Generally speaking, by the time an asset becomes a meme, it’s already too late. Think of how many people invested in GameStop after their stock skyrocketed and then sold it after the ensuing crash. They would have lost probably 90% of their money.
It’s the same thing with cryptos. About a year ago everyone was buying chainlink and talking about how they were going to become absurdly wealthy within a year. And of course what really happened was chainlink grew at roughly the same rate as all the other cryptos. If these people had just bought bitcoin instead of chainlink, they’d be better off. Speaking of which, the current explosion in people buying crypto means that all cryptos are currently meme assets. People are only buying them because all the crypto shills say they’re going to take off to the moon. But what happened the last two times bitcoin’s price skyrocketed? It crashed shortly afterward (most notably in 2018, but if you look carefully at bitcoin’s price history you’ll see another smaller bubble that popped a few years earlier). Many people lost their life’s savings, entire businesses went bankrupt, and all because they invested in what was at that time a meme asset.
Like I said, by the time something becomes a meme, it’s already too late. You have to invest in it before it skyrockets, not as it’s skyrocketing. Again, this is one of the primary reasons why most people buy high and sell low. They look at how well an asset is currently doing, as opposed to how it will potentially do in the future. And of course if your purchasing decisions are based on how something is doing right now, you will always end up buying high.
Incidentally, this is also why I didn’t buy Apple, Netflix, Amazon, or other Big Tech stock during the pandemic. Those companies’ stock prices soared during this time because everyone was at home watching Netflix on their Apple TV’s, and people who bought those stocks before the pandemic started made a killing. However, people who waited until after the pandemic was in full-swing to invest in those companies (meaning most investors who aren’t rich and didn’t have inside knowledge) only gained a marginal amount, and I’m predicting they will lose it all and then some once the pandemic is over and people are no longer binge-watching Netflix.
Now let’s look at non-stock assets. I’ve gotten started building a portfolio of precious metals as well as cryptos. I’m going to wait until after the crypto market crashes to buy anything, but I’ve been earning some crypto on the side through Basic Attention Token. This means I get paid to view ads and surf the web through the Brave Browser.
As for precious metals, I’ve bought pic related from an online bullion store:
This is a ten-ounce bar of silver, worth about $300 when I bought it. The price of silver has dropped since then, but this is not an investment that I’m hoping to make significant capital gains on. The silver is more of a contingency plan in case shit hits the fan in terms of hyperinflation and the dollar simply collapses, making all my cash as well as all my domestic stocks worthless. Part of my contingency plan involves investing in foreign companies, and the other part involves currencies that are not tied to the dollar, meaning crypto, gold, and silver. I bought silver because gold is outside my price range at the moment. I mostly just wanted to get my feet wet in precious metal investing, and get started on a long-term contingency plan.
Ideally gold and silver should only be about 5-10% of your assets, and you want most of your assets to be in a form that’s more easily liquidated in case you need money right away. Of all the assets out there, precious metals are probably the hardest to liquidate, and generally speaking people who need cash now and only have gold or silver end up going to one of those “Cash for Gold” places and only being paid a tiny fraction of what their metal is actually worth. Precious metals should be a long-term investment that you hold onto for at least ten years or so to cover inflation and hyperinflation.
While I’m putting my investable cash into stocks, cryptocurrency, and precious metals, I’m also working on maximizing my non-investable (disability) money and putting it into ventures that will have long-term gains. By law I’m not allowed to invest disability money in assets, but I am allowed to invest it in a business, because that’s covered by so-called “lifestyle improvements” which are something I can spend my money on as long as I spend it on necessities first. I’ve come up with a budgeting plan that involves structuring my diet around sales so that I spend less money on food and thus have more money available for my businesses.
There are two business ventures I have in the works right now that I want to invest money in. The first is this one – the Psycho Cod3r content marketing business. The second is my record label, which I’m using to informally sign myself as a music artist. I have a SoundCloud account with an EP with five songs uploaded, but I’m not going to link to it right now as I plan to take down that album and re-upload it with revised versions of the tracks. My musical career is sort of in a limbo at the moment.
For these businesses, my money will be going into two main things: first, paying for a premium or business plan on the platforms that I’m using, so that I can actually monetize my content; and second, paying for advertising. I’m not going to go with Google Adsense or anything similar because I know how shitty those services are. I once did SEO for a friend’s business and I found that Google Adsense which they were using to promote the business was advertising on completely unrelated sites in foreign countries. This was enough to convince me that Google’s advertising service sucks. Despite making a business of intrusively collecting data on people so they can target them with ads, they still will not target your ads at the right people unless you’re a gigantic corporation with a boatload of money.
So instead, I’m going to pitch my content to other content creators on different platforms. I was thinking of doing YouTube sponsorships, because I’m sure there are a lot of techie content creators on YouTube who would be happy to give me a plug for a reasonable amount of cash up-front. I figure Google ads are the old way of doing things, and they don’t work that well anymore. When people see ads on YouTube or Facebook, they’re not thinking “Gee, I want to buy that. Thanks for notifying me of its existence.” No, they’re thinking “Ugh, another ad! I hate whoever is doing this.” I feel like sponsorships that are done by content creators that everyone knows and loves would get better reception. IMO, sponsoring content creators is the modern way of advertising on the Internet. I say out with the old and in with the new.
Through investments and through monetizing content, while at the same time living well below my means, I hope to gradually accumulate wealth over time at an exponential rate. If my money triples every year like it did the last two years, I estimate I will have about $5 million at the age of 40. I don’t want this for the number in my bank account. To me, money is just a means to an end, it is not an end in itself. Focusing on the dollar amount in your portfolio as opposed to what sort of lifestyle you want to enable yourself to live with that money is how young entrepreneurs turn into fat middle-aged men in BMWs, as Tim Ferriss so eloquently put it. I don’t want a midlife crisis. I want excitement and fulfillment. The only reason I’m doing this is because right now I’m not living the lifestyle I want. I want to travel, see the world, go to conventions like DEF CON, and other exciting things. So while I’m making my millions I’m going to make sure to remember why I started.