Today we are pleased to have a guest post here on the BTCjam blog courtesy of Ofir Beigel. Ofir is an Entrepreneur, Bitcoin lover and blogger at 99Bitcoins.com. His site is a great resource covering many awesome topics with the Bitcoin industry. You can follow Ofir on twitter here: @ofirbeigel
My 4 rules for successful Bitcoin investments
If you’re investing with Bitcoin by buying and holding long term, – you’re doing it wrong. Today I’ll try to explain four basic rules that I follow in order to maximize my Bitcoin investment potential.
It has been almost a year since I got acquainted with BTCJam and now I realize how little I knew about Bitcoin investments back then. Keep in mind – what is written in this post is my own personal opinion about investing and you can choose to accept it or reject it, but never do anything just because “someone said so”, always understand the motive for your actions.
- Diversify your Bitcoin portfolio
I have many currencies I deal with, and for each currency I have a different portfolio. For example, for US dollars I have some of my money invested in stocks, bonds and some in Bitcoins. Under this portfolio Bitcoin will be considered as a stock, mainly due to the fluctuating exchange rate and the fact that I do not get a steady stream of income out of it.
If I look at my Bitcoin investment portfolio, just buying and holding the currency itself would be considered as normal “cash” and my cash wouldn’t be bringing in any return. It’s the equivalent of just keeping your money at the bank without investing it.
When investing in BTCjam under this portfolio I consider the investment to be a corporate bond with a specific BTCjam rating.
If I wanted to invest in stocks under my Bitcoin portfolio I’d need to find a company that is valued in Bitcoins and not in USD. However, I don’t see any reason to do so as BTCjam’s investments yield competitive returns.
Since I earn a substantial amount of my income in Bitcoin I have to make sure I make the most out of it. Here are some of the things I do:
- Keep a certain of my Bitcoins in the form of the currency itself (cash)
- Invest some of my Bitcoins in BTCjam so they will continue to grow (bonds)
- Exchange a portion of my Bitcoins to USD (another type of low risk investment)
Interestingly, BTCjam also saw the importance of diversification and received feedback that they acted on – with the launch of AutoInvest feature about a week ago. Instead of having to browse individual listings, an investor can easily diversify in 100 loans with specific quality and term parameters! One button diversification, now that is an EASY button. But if you are the investor who wants to control which specific loans get invested in, and want to understand how to do that effectively – read on.
- Conduct ample research before investing in someone
I never invest in something I don’t know about. Luckily enough since I’ve been running 99Bitcoins for 2 years now I know a lot about Bitcoin. That’s why when I come to chose an investment I usually look at the following:
Expected Yield and Rate – Most people would prefer to get the highest yield they can. I personally believe that people who have super high yields have a serious risk of not paying back their loan. On the BTC platform the lowest yield I could currently find was 22% and the highest was 37%.
You’ll notice there is a high correlation between the Yield on an investment and the low BTCjam rating of a user. Even though I’m not aware of the whole process a user goes through in order to get the BTCjam rating I’m sure this means something.
I tend to go for a low-middle yields knowing that for shorter term loans there is the be
The user profile – People who are serious about getting their investment and actually repaying it will take care of their profile. Here are some of the things I look out for:
- The user’s profile picture – nothing spells trouble more than a blank profile picture.
- Has this user repaid previous loans – I never invest with someone who hasn’t repaid a considerable amount of money in loans in the past.
- User credentials – Has the user connected his Facebook profile, LinkedIn profile and other profiles to BTCjam. If so it means he is open about his identity which is a positive indicator.
- How long has this user been a member of BTCjam – I shy away from users who joined in the past 3 months.
- BTCjam’s rating – This will usually correlate with my own findings about the profile but I treat this as a second opinion to validate my research.
- What is the investment for – If there is no detailed description for the investment I will not invest. An important question that should be answered is what will the investment be used for.
Here’s an example of my latest investment – you can take a look at the profile and detailed description.
- Never invest more than you can afford to lose
Probably the most important guideline of them all – Never invest an amount that is crucial for your survival. I’m a believer in Bitcoin but still I keep only a fraction of my entire wealth in it – why ? Because it’s too risky not too.
Whenever I enter a risky investment (e.g. Bitcoin) I try to imagine how would I react if I lost all of it. If the thought is too scary, I just don’t do it – or I lower the investment amount.
Bitcoin is a risky business, and BTCjam investments make it even riskier by lending it to strangers – but if done wisely, these investments can grow your Bitcoin wealth over time.
- If you don’t find any good investment – don’t invest!
Sometimes you just won’t be able to find someone that matches your criteria. In this case you’re better off not investing and checking back to see if there are new investment opportunities in a few days or so.
There are so many scammers out there and Bitcoin is still an extremely risky business. For example, in my initial review of BTCjam I also cover a Bitcoin investment website called “Bitcoin Trader”. That site later on turned out to be a HYIP and many users (myself included) lost their money. There is no such thing as “easy money”, make sure to conduct proper research.
To conclude, I believe that if you follow these guidelines your chances for success will increase dramatically. Please remember that this is based on my own personal opinion and experience (I have no formal investment certification). I recently finished getting back a loan on BTCjam and just invested in a new one with a larger amount of money.
Hopefully this one will go well also and I can move on to additional investments and update you about them as well. If you have your own investment tips please feel free to leave them in the comment section below, I’d love to hear them.