Share Accumulation: Focusing Your Attention On the Right Aspects of Your Portfolio
I've spoken at length to people I know about buying Bitcoin. It started several years ago when nobody had even heard of Bitcoin, let alone knew what cryptocurrency was.
It gradually evolved to the point where people were asking me about Bitcoin. Suddenly, everyone knew what it was and they all wanted to get their hands on as many BTC as they could.
Of course, the price was well over $40k by this point. Everyone was in a mad dash to get some BTC and with the benefit of hindsight, you can see how a lot of them got rekt in the inevitable downturn.
My advice to them rings true today. It's something I've been thinking about again as I review my broader portfolio strategy headed into the next crypto cycle.
One major piece of advice that I have both for myself and anyone who's investing not just in BTC but in any asset class is this: focus on share accumulation.
Share Accumulation Over Price Accumulation
Are you a day trader? If you are, then you likely will need to concern yourself with the day-to-day fluctuations in the price of the stocks or crypto you're holding.
If you're not - and I do not consider myself a trader - then you ought to focus on a much more long-term metric.
We all need to value, measure and ultimately manage our portfolios. Looking at the day-to-day $$ fluctuation of your portfolio is an easy way to cause incredible stress in your life and overall mismanagement of your portfolio.
What if there was a better way?
Enter Share Accumulation.
Whether you're building a portfolio of stocks or crypto or even just focusing solely on Bitcoin, share accumulation is the metric you want to use to judge the day-to-day of your portfolio management.
Let's say that you have 1 Bitcoin and you're aiming to build your position. The BTC price is currently $30k.
You deploy the strategy to accumulate more BTC that I always talk about as fundamentally one of the best practices you can have in the investing industry: dollar-cost averaging.
Each week, you're buying 0.1 BTC - regardless of the price.
10 weeks go by. You now have 2 BTC.
The price of BTC, over that time, dropped from $30k to $14k.
Your portfolio is worth (let's just assume some math here to make it easier) $28,000 but you have invested $29,420 (because you dollar-cost averaged your 2 BTCs).
Oh no... you look like a terrible investor. Your portfolio has lost value over a 10 week period of time. You should probably just pack it all up and go home...
The BTC price continues to drop. It drops all the way down to $10k within the next 10 weeks. Your portfolio is now worth $30k and you have invested $42,690 into Bitcoin at an average buy price of $14,230.
Your portfolio is -$12,690. Your friends tell you that you're an awful investor. Your internal dialog is telling you that you lost $12k and you could have spent that on a new car! You just wasted money for being stupid.
Conviction, Long-Term Investing and Knowing When to Ride
What was the original point of getting into BTC? Perhaps you were in it for a quick buck. If you were, then you're likely on the verge of selling it all. Frustrated at yourself. "How could I be so stupid?".
But let's say that you're a better investor than that. You did your research. You understand the fundamentals of Bitcoin. You believe in the technological prosperity of the platform.
You believe that one day, BTC will be worth a lot more. That day just isn't today. It hasn't happened yet... but it will happen soon.
This is called conviction. Doing your own research and understanding what you're investing in.
IF you have conviction, then you should deploy a long-term mindset. If you think long-term, then why does it matter if you are -$12k today?
You have 2 more BTC than you did when you started. You have 3 total BTC and you acquired them by dollar-cost averaging.
Let's say that you forget the value of your portfolio. Maintain course fren, see where this takes you.
20 weeks go by and you have continued DCA'ing. You now have 5 total BTC. During those 20 weeks, the BTC price has fluctuated wildly, but in the past few weeks, a bull market has emerged.
BTC has returned to $30k and is showing signs that it might go even higher.
You look at your portfolio and you've invested a total of $72,690 ($30k more than our last check-in).
Now, you have a total of 5 Bitcoins. Your portfolio $150,000. You are profitable! Very profitable, in fact. To the tune of $77,310.
You're now an amazing investor. Might be time to consider DCA'ing out and taking some profits slowly as Bitcoin continues to grind upward.
The point of this post has nothing to do with all these numbers. I made all of these numbers up.
The point is to illustrate that focusing on $$ is the #1 way that retail investors lose. The average investor is far too emotional to be tracking the daily $ fluctuations of their portfolio.
Instead, they ought to track the shares they hold. In this case, the investor could tack the amount of BTCs they have. Each week, they had 0.1 more BTC than the week prior.
When you combine this with a long-term conviction in the price of Bitcoin, then magical things can happen.
The investor is building a position by dollar-cost averaging.
The investor is not subject to the emotional whims of the market.
The above is exactly how I manage my crypto portfolio. I measure by the shares I have. Do I have more BTC than I did a year ago? Do I believe that BTC will be higher in the future? Then I must be doing something right. Keep pushing.
When the market moves significantly, I may check-in on the valuation of everything. The flip that will occur (the moment I turn from buyer to seller) is once BTC hits a target price.
Once it hits that price, I begin doing the opposite of what I started with. I DCA out of the position and sell a small % of BTC each week.
Eventually, the cycle repeats itself but the overall trendline is always showing my BTC "shares" increasing, and that is what I love to see.
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🙌🏻 Very good strategy @khaleelkazi. I am kinda doing it just like you described. DCA every week a little bit of Bitcoin.
By the way, you mentioned a „target price“ where you would switch from DCA
-buyer to seller. What is that number in your view regarding the upcoming bullrun?
This is the best motivational post I read lately and , yes, the word is CONVICTION ans it’s the basis of DCA strategy
These hypothetical numbers are so sweet to the ears but it’s probably because I’m only fantasizing it.
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Focusing on the shares one is accumulating instead of the $$ value will make the process less stressful and more interesting. I'll be able to focus on the long term and accumulate as much shares as I can. Great post!
Why didn't you write this earlier?! :)
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This is a great post, which will be overlooked by some who are not interested in Bitcoin, but they will be overlooking the wisdom contained within.
I think this strategy can be applied to any asset for which you feel conviction that it will go up in price in the future because of it's business model, it's niche, it's innovative and has yet to catch on.. etc
DCA as an investment model has been shown mathematically to be the most sound practice, and is used by many wealthy to get wealthier.
Many wealthy got that way with one or two assets, and even today they tell you churn, the art of constantly buying and selling is the biggest enemy of great wealth.
I think this article , combined with your previous article about using a MakerDao vault for realizing profits in a nontaxable way are important treatises for achieving wealth.
Thank you for sharing.
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I think this strategy holds up well for volatile assets like crypto. And you can look at it from another view: "What value do you place on the asset?" it can be subjective or objective. The bottom line is having a value you work with throughout your investment period that allows you to focus on accumulating rather than on market fluctuation. For instance, I value hive at a dollar. Because I believe that the peak of the market Hive will cross the dollar threshold so it is safe to equate it to a dollar. So the cheaper it gets the easier it is to accumulate and the higher it gets (over a dollar) the more sceptical I get about buying
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