Alain Guillot

Life, Leadership, and Money Matters

Allocating 5% of a Portfolio for Moonshot Investments

Moonshot Investments

Recently I became financially independent. That’s right. My passive income is enough to pay for my living expenses.

No, I don’t live in a luxury castle, drinking cocktails in a fancy neighborhood.

I live in a small apartment. I don’t have a car, I use the cheapest phone plan, I don’t go to expensive restaurants, and I hardly ever buy new clothes. That’s why I am financially independent because my expenses are so low.

As I continue earning money from my blog, my podcast, and my rental property, I am finding myself with a little bit of extra cash.

What could I do with that extra cash? I could become a gangsta and waste it on blow and hoes, or… I could try to find moonshot investments.

My investments have been broad based index funds

As an investor, I have always followed the train of thinking of Warren Buffett; to find a reasonably priced stock and hold it for a long time, ideally forever.

But this investment philosophy automatically disqualifies any unreasonably priced stocks from my portfolio.

For example, Amazon lost money for 10 consecutive years, before it made its first profit. And even after it made some profit, the stock price was too high when compared with its earnings.

Hundreds of other examples come to mind. Netflix, Google, Tesla, so on and so on.

I have been happy to stay away from these high-flyers because I have invested in broad, slow-moving index funds, and in the old-reliable stocks such as banks that pay dividends every quarter without fail. These are boring investments, but I felt that my money was safer. And it has paid out. It was the right move for me at the time.

It’s time to roll the dice

But now, with my excess cash, I am planning to roll the dice and invest in these stocks that were never part of my investment philosophy.

The idea is to find the next Amazon, the next Tesla. And because my retirement is already secured, I will be better able to withstand the ups and down of the riskier stocks.

Also, by placing a lot of little bets in many companies, I accept the fact that many of them will fail, but also, I will have a better chance of finding the next 100X that will compensate for all the losing bets.

Notice, that this is money that I can afford to lose. It’s not the main part of my portfolio.

Also, the new technology, with lower commission from stock brokers, it’s making this possible.

I used to pay $10 per transaction to my brick and mortar broker, but now I can pay as little as $1 to my digital broker. Since commission expense is not an issue, I can afford to make more small bets in different moonshot investments.

The one major drawback is the mental bandwidth required to be aware of many more moving parts of the economy in order to find those moonshot investments and the emotional pull of being an active player in the market.

Are you considering dipping your toe in moonshot investments?

I am writing this article from a position of power. I can afford to lose a few hundred dollars this month, and if lose it, I can afford to lose another few hundreds more next month. My rent and my food money is not jeopardized.

Before starting a moonshot investment strategy, make sure it’s money you can afford to lose. For every Tesla out there, there are hundreds of WeWork that are destroying money. You have to go through a lot of WeWork to find the next Tesla.

I have a friend who has put all his savings into Tesla. He has made more than 100% return on his investment in less than a year. But that was his whole savings. He could have lost it all.

One of the biggest secrets to success in life and in business is to make sure you can stay in the game. Although his investment turned out to be a good one, he could have lost most of that money. These are things to consider when you are thinking about moonshot investments.

In short, if you have the money to play, my answer is “Why not? YOLO!” But if you are still struggling to pay the rent, maybe you could wait a bit longer.

Note:

In the future, I will make more investment-related blog posts. I will be looking for moonshot investments and sharing my findings with you. Many of them will fail but some will succeed. I will be The Man In The Arena mentioned in Theodore Roosevelt’s famous speech. You can watch from the benches if you want to.

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