My evolving analytical framework for evaluating investments…

My plan to cash in some of my stocks to buy land has got me thinking about why I invest in various asset classes, and I’ve come up with seven criteria I use to evaluate my investments.

For me, investing isn’t just about getting as much of a pure monetary return in as short a time as possible, there are other factors as well, namely:

  • Practical utility - how usable is the investment?
  • Basic needs security - to what extent can I use the Vest to meet my basic needs for food, water, shelter etc?
  • Theft security - how secure is it from malicious actors - such as The State, hackers or zombies?
  • Store of value - how likely is it to not depreciate in the long-term?
  • Return on investment - what is the potential for getting a return - either in terms of passive income or just a gain in value?
  • Ethics - to what extent does it fit in with decentralisation, and sustainability for example?
  • Personal affinity - this is a combination of how much I know about the investment and how far it just ‘clicks’ with me.

I give an investment a ‘ball park’ score out of 10. These scores are based on my own somewhat limited knowledge of investing and there is an element of subjectivity here, but it works for me ATM.

The scores I give are also relative to other investments, and so may change as I subject more investments to this analysis.

Land compared to BTC compared to stocks scores


Below is an example of how I’ve scored three different categories of investment - Land, BTC and stocks, the later is just my generalised portfolio, a fund, so it’s a mix of companies.

CriteriaLandBTCStocks
Practical utility1021
Basic needs security1053
Theft security784
Store of value1054
Return on investment195
Ethics10102
Personal affinity741]

Notes on the scores….

  • Practical utility - Land gets a very high score because it’s very usable compared to the other two, BTC scores higher than stocks because I can use it as a way into Hive, which is useful.
  • Basic needs security - This goes hand in hand with above criteria, again land scores very highly. I can use BTC and stocks to buy in my basic human needs, but it was hard to give these values - I think BTC is going to do better than stocks, so I’ve given it a higher score, but no more than 5 due its volatility.
  • Theft security - BTC scores very highly - i’m not giving it 10 as someone can hold me up at gunpoint and demand my keys. Land and stocks are slightly worse - I’m not expecting people to come and occupy my land, so I’ve gone for 7. And property rights are pretty well established in law.
  • Store of value - land scores most highly as its value isn’t primarily financial - and I’ve given the other two scores based on what I think their relative performance is going to be. I just don’t know with BTC hence the 5.
  • Return on investment - this is purely financial - BTC offers a much better potential return.
  • Ethics - Land and BTC are both ethical - in line with decentralisation. I’ve penalised BTC for the sustainability issue.
  • Stocks - do I trust corporations, no!
  • Personal affinity - I feel pretty good about buying land, I want to do it, I like BTC too, but i don’t feel an emotional attachment to it, and stocks, not my thing at all really, they are just an investment!

As the scores stand, seems Land is a great investment for me, and stocks a VERY good choice as a swap.

Final thoughts


This is really just a thought exercise to help me think about investments, and it's the first time I've really done this - up until this point I've just diversified generally.

I might in the future add more criteria, collapse some of the above into one, or both!

Turns out that my feeling that it’s the right move to cash in some stocks for land is born out by some loose statistical analysis.

Either that or I’m just being a tad subjective!

Posted Using LeoFinance



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3 comments
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I like you approach. I will also sell some stocks and buy land or a property if I had the opportunity. Looking forward for that moment.
Cheers!

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Well comparing land with btc isn't really fair, as I feel they don't have to be mutually exclusive. However, I feel if it is a case of opportunity cost at the moment then BTC would win it for me. After all those returns could fetch me a land and a ton of cash all for the price of one

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