Everyone is a Genius in a Bull Market

Bull Market

Disclaimer: I hold a net-long Ethereum position and net long Global equities position
If you’re reading this blog it’s safe to assume that you are probably aware of the unprecedented rally in crypto currencies over the past year.
At time of writing, Bitcoin has rallied 1,132.93% in the past 12 months; Ethereum has grown at an astounding 10,475.62% over the same period.

To be clear, that means an investor with the foresight to invest $100 Bitcoin and $100 into Ethereum a year ago would currently be sitting on a portfolio worth $11,808.55
> Bitcoin: $1,232.93
> Ether: $10,575.62

In comparison, Apple stock has rallied 42.91%; Amazon is up 67.67%.
The same level of investment in these would leave you with a portfolio of $310.58
> Apple: $142.91
> Amazon: $167.76

If we take a look at some diversified equity funds we can see VWRD (Global equities) grew by 28.11%; VTI (US equities) grew by 26.38%
The same level of investment here would leave you with a portfolio of $254.47
> VWRD: $128.11
> VTI: $126.36

When we look at these side by side, we can see the cryptos returns completely dwarf equities.
Annual Growth of Investments
Re-plotting the chart with these excluded we can see that the tech companies equities make the equities funds look fairly tame.
Annual Growth of Investments
Let’s extrapolate this data little further.
If we take the previous twelve months returns for the above investments and work out the monthly CAGR we can use this to forwards plot the same rate of growth in the future, provided the rate of growth remains the same.

Running the maths we can see the equivalent monthly CAGR for each of the above breaks down as follows:

Cash VTI VWRD Apple Amazon Bitcoin Ethereum
0.00% 1.97% 2.09% 3.02% 4.41% 23.29% 47.47%

If we take cues from the recent article that 1 in 6 millennials have $100,000 in savings and use this as our baseline for investment today, we can see how the next 10 years would play out if invested in the above assets, and the growth rate remains constant for the next decade.

$100,000 invested today in each of these assets would be worth the following in 10 years time:

Cash VTI VWRD Apple Amazon Bitcoin Ethereum
$100,000 $1,039,179 $1,196,698 $3,552,920 $17,743,998 $8,153,466,849,768,890 $17,556,649,132,076,000,000,000,000

$100,000 invested today, would be worth Seventeen Septillion, Five Hundred Fifty-Six Sextillion, Six Hundred Forty-Nine Quintillion, One Hundred Thirty-Two Quadrillion, Seventy-Six Trillion Dollars in 10 years time if the current rate of growth of the last twelve months were to hold.

Many, many, many time more than the entire value of all money on earth (upper estimates including the derivatives market are 1.2 Quintillion)

The same investment in Bitcoin would be worth Eight Quadrillion, One Hundred Fifty-Three Trillion, Four Hundred Sixty-Six Billion, Eight Hundred Forty-Nine Million, Seven Hundred Sixty-Eight Thousand, Eight Hundred Ninety Dollars.

The gulf between the two is so large that even Bitcoin appears flat when plotted next to the Ethereum growth.
If we remove cryptos, we can see that $100,000 in Amazon would yield just under Eighteen Million Dollars, and leave the broad market funds for dust:

Removing the direct investment in the tech equities and stumping for the broad market equity funds alone, we can see a $100,000 investment today would balloon to over a Million Dollars within the decade.

That is to say, if you threw $100,000 into a broad market equity fund today, and didn’t save a single penny for the next decade, you would have over a Million Dollars.

I don’t know what the markets will look like for the next decade, but if I had $100,000 to gamble, I’d bet they will under-perform the above projections, by quite some margin.

Keep that in mind the next time you evaluate an investment based on the previous performance.

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