On diversifying your income and assets

It is important to diversify your assets because it is impossible to know which assets will go up in value in the future. This is because of the market efficiency hypothesis - will such quick access to information, all assets should be reasonably priced. There is also the argument by Taleb in 'Fooled by Randomness' which states that markets are determined largely by randomness, and it is impossible for the investor to predict which way assets will move. Because of this uncertainty, we need to diversify because nobody knows which way the assets will move, nor can anybody predict crashes or bull markets.

 Always be skeptical of any asset that promises to exceed more than 6-7% per year as the growth will be unlikely to be sustainable, e.g. some cryptos which boast excess of 1000% annual returns. Think about it, Warren Buffet, the world's greatest investor, does not make more than 10-20% returns per year, so anything promising wild returns is a scam.

Diversify your income for the same reason - you do not know when one industry will fall on hard times. For example, nobody would have predicted that the hospitality sector would have suffered recently as nobody could have predicted Covid, a black swan event (see Taleb). Aim to build a new income stream when you feel comfortable with your proficiency in one.

You also want to diversify your income and assets geographically. Hold some precious metals offshore to prevent government theft risk. Maybe hold some land in another country, which can act as a store of value. Diversify any cash holdings in another currency to avoid devaluation by a single government printing money (QE). For income, have income sources that can be applied across jurisdictions. For example, TEFL can be diversified to a lot of different countries. Maybe you offer bookkeeping services to clients in different countries.

Asset Classes

• Precious metals: gold, silver, platinum, palladium
• Jurisdictions: Switzerland, Singapore, Austria, New Zealand
• Real estate: Land or Buildings
• Stocks and bonds
• See Benjamin Graham for how to invest in these
• Avoid mutual funds

• You want to diversify within these (e.g. owning, say, 20 different stocks) and between these (owning all three categories).

Income

• Pick up different skills by learning, some examples are: teaching online, accounting services, SEO, etc.
• Think about gaps that exist geographically, and fit these skills into addressing these gaps.