Howdy, Hedgehogians. My name is Colton Dillion, cofounder of Hedgehog, a crypto robo-adviser that offers a hassle-free way to diversify and manage your portfolio with ease.
Our goal is to empower everyone to make informed cryptocurrency investments by providing a secure and user-friendly platform that ensures optimal diversification and risk management.
Ten Simple Rules for Investors
In the realm of finance, few individuals have had as profound an impact as John C. Bogle. Renowned for his work in founding Vanguard Group and pioneering index fund investing, Bogle brought forth a paradigm shift in the investment industry through his unwavering commitment to the average investor.
Indexing has become so popular that, in 2017, the three largest index fund management companies together owned a majority stake in 88% of S&P 500 companies. Now that’s what I call influence.
In "The Clash of Cultures" written by John Bogle himself, Ten Simple Rules are given as a guide for investors to follow. These rules aim to provide individuals with a strategy to make informed decisions about their investments. While no strategy can guarantee the best results, Bogle asserts that these rules are preferable to other strategies that may be less effective.
- Remember Reversion to the Mean: Bogle emphasizes the importance of understanding that past performance does not guarantee future success. Fund managers and fund objectives can experience shifts in leadership over time, making it risky to choose funds based solely on their past performance. That’s why you might often hear investment advisers chanting the magic incantation, “Past performance is no guarantee of future returns” to ward off the evil eye of their regulators as they conjure performance charts of the last 5 years.
- Time Is Your Friend, Impulse Is Your Enemy: Bogle highlights the significance of long-term investing and compound interest. By giving investments time to grow, individuals can take advantage of the power of compounding. Impulsive decision-making based on market fluctuations can harm investment portfolios, as market timing is nearly impossible to predict accurately. We like to say “time, not timing” especially in crypto where the volatility is so high.
- Buy Right and Hold Tight: Bogle suggests establishing an appropriate asset allocation for your investment portfolio. Stocks are suitable for capital and income growth, while bonds offer capital preservation and current income. Once the allocation is determined, it is essential to hold onto the investments despite market volatility. Remember that selling assets when they dip will lock-in your losses, so you should only do so when you’re ready to get out of the game entirely; the last thing you want is to buy high and sell low, then buy in once the prices are rising again.
- Have Realistic Expectations: Bogle uses the metaphor of a bagel and a doughnut to differentiate between investment returns based on dividends and earnings growth (bagel) and speculative returns driven by changes in stock prices (doughnut). While I question John’s nutritional acumen, we agree it is important to focus on the long-term investment return rather than speculative fluctuations, as historical data shows that investment return dominates speculative return.
- Forget the Needle, Buy the Haystack: Bogle advises investors to diversify their portfolios by investing in broad market index funds instead of trying to pick individual stocks. By buying the entire "haystack" of stocks represented in an index, investors reduce the risk associated with individual stock selection. That’s exactly what we do at Hedgehog Advisers: try to get you the whole stack of sats and altcoins so you can grow with the entire crypto market.
- Minimize the Croupier's Take: Bogle emphasizes the significance of keeping investment costs low. High costs can erode investment returns over time, making it essential to consider a fund's expenses, trading costs, and its costs relative to its peer group. Crypto funds tend to be more expensive than some other asset classes because of it’s newness, but we strive always to minimize your fees while we minimize your allocation error.
- There's No Escaping Risk: Bogle reminds investors that all investments come with risks. It is crucial to understand the risk profile of a fund and its consistency of returns over different market environments. This is a good time to brush up on the meaning of a sharpe ratio, and look at that metric before you buy into a new fund.
- Beware of Fighting the Last War: Investors should be cautious about basing their decisions on past market conditions. Market dynamics can change, and attempting to replicate past strategies may not be effective in current market conditions. Remember the first rule? This is a natural extension of that whole “past performance” thing.
- The Hedgehog Bests the Fox: I know, it’s too perfect that John had to drop our brand in the middle of his 10 rules, but Bogle is referencing an essay by Isaiah Berlin to illustrate the importance of simplicity and focus in investment strategies. Investors should have a clear and straightforward plan rather than trying to chase multiple strategies simultaneously.
- Stay the Course: Bogle concludes by emphasizing the importance of staying committed to the chosen investment strategy. Market fluctuations and external factors may tempt investors to deviate from their plan, but staying disciplined and adhering to the chosen course of action is crucial for long-term success.
It would be an outright crime not to linger on a finance legend using an allegory like, The Hedgehog Bests the Fox. The imagery comes from an essay written by Isiah Berlin that was so popular it became a book in 1953. Classifying people into two types of thinkers:
The Hedgehogs, who view the world through the lens of a single defining idea.
The Foxes, who draw on a wide variety of experiences and for whom the world cannot be boiled down to a single idea.
This originally came from an idea formulated by the Greek Poet, Archilochus that was simply quoted as, “a fox knows many things, but a hedgehog knows one big thing”.
Our guiding light at Hedgehog has always been to apply Modern Portfolio Theory to cryptocurrency markets. Advising our users with proven traditional finance methods and providing the technology to automate lessons like the Ten Simple Rules, we hope to make these markets accessible to all investors.
FTX 2.0? Only in 2023 would Fyre Festival part 2 be followed by a potential FTX 2.0. Someone please reboot the simulation. It is out of hand.
Speaking of horrible simulations. An AI generated photo of the Pentagon suffering an attack made it too far into the Twitter machine causing a market sell-off event.
Ledger continues to trend on r/Cryptocurrency. The latest comes from a video clip of the CEO explaining under what circumstances they would have to turn over three encrypted shards to a government agency, ultimately giving them access to your wallet. Yikes, maybe they should offer a staking contract where you can slash their stake if you can reveal one of their private keys and we can find out just how much confidence they have!
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