Coffee Thoughts ☕️

The goal of investments

We live in an interesting world, where if you do nothing with your money, you will have less of it. Therefore everyone is incentivized to gamble hard.

This means we can have at least 2 goals for our investments:

1️⃣ Preserve buying power/value

2️⃣ Earn income

As we have inflation, when we earn income from our investments, it is not really income, but value preservation until we reach the original value of our money. But funnily we have to pay taxes on preserving the value of our money. Tricky, ha?

Why does it all matter?

If you want to be financially independent, then you should aim for earning an income with your investments, not only preserving your wealth. Which in itself can also be hard.

In this regard, bitcoin is more like a value preserving asset. But is it really? Then how come house prices are decreasing in terms of it?

This is the interesting part. The price of things in a free market depends on the supply and demand. Bitcoin's supply is fixed, therefore it's price will only depend on the demand. As bitcoin is a "new" asset, it has to go through adoption. During adoption, more and more people start to use it, that pushes its price up. Therefore in the adoption phase, bitcoin could be also considered as an "income generating" asset. (Of course you shall sell or use it.)

Take Away:

1️⃣ Know what is your goal with your investment.

2️⃣ If you want financial independence, you shall buy income generating investments. (Bitcoin also fits)

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