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How To Invest As A Digital Nomad

Posted July 11, 2022 in Engineering Around Travel - Last updated November 9, 2023

The topic of investing is vast, so let’s narrow this article to specifically around investing strategies for those who want a mobile lifestyle. There are a lot of ways to go wrong with investing, too. I aim for this to be a primer for some to understand some concepts around good investing. Let’s explore how to invest as a digital nomad.

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Understanding The Risks Of Investments As A Digital Nomad

First and foremost, investing is utilizing the money to buy time. More or less, making money works for you. Given the complexities of our sociological world and how new technology, sociological-driven directions, and change in environments drive change. Knowing where you can adequately buy a strong return of time and, ultimately, opportunity back to you is impossible. There is always risk in investing. However, there are ways to identify the level of risk and make strategic judgments over that risk to mitigate the damages and loss to your monetary investments.

There Is Never A Completely Safe Investment

Going back to the idea that investments are trading money for time, an excellent way to think of an investment is by judging an investment as a long-term process where time compounds your money. Time will either eat your investment or give you a more substantial return. The idea of trading money for money without time in the equation is usually a fool’s game to watch out for. On top of that, there is never a safe investment.

How do you ever feel comfortable with the possibility of losing 100% of your money investments? By research and understanding. Investors will understand what they are investing deeply before investing their money there. It would be best if you felt confident that money placed will highly likely yield results because the core fundamentals of the asset match your own. In today’s world, apps like Robinhood, Webull, etc., and electronic coin markets make it very easy to give money into investments. It’s almost too easy as you often don’t need to understand what you are investing in entirely. This makes a perfect market for scammers and companies with improper business fundamentals to take your money.

Investments Versus Gambles

How do I define investments and gambles? Being an investment tends to have less risk and reward than a gamble optimized for higher risk and reward. An investment, to me, has at least ten years or more of stable growth that matches roughly the market of the time. Also, you must believe through its fundamentals that you see no significant detriment to the asset over the next ten years. A gamble is anything less than that. Without a long history of stability, I consider the asset a gamble, and its future growth purely speculative. It might be a new company with all the risks of building a business. It might be a new technology with a lot of speculation behind its adoption by people. These classifiers balance me regardless of the “fear of missing out” around an asset.

I also want to note that passive investing is usually better than just holding cash or leaving cash in the bank. Savings accounts generally have a minimum yield that isn’t the dollar’s inflation. Inflation is generally around 3% historically, but at the moment in time, it is much higher. This means you are losing money by just having cash. A good strategy is to try and figure out where you can invest that money to beat the inflation % of the dollar, hopefully. Cash has its uses, though. Cash gives you the ability to buy when opportunities come. I am not trying to vilify cash, as there is a balance to how much you want.

Risk Versus Reward

With that in mind, how should you approach the risks of investments and gambles? First, you can put money into investments. Over ten years expect a reasonable return for your money that may be close to or beat the general market bar of asset 7% appreciation. It is not foolproof but generally acceptably safe for you to put a majority of your money into these assets for stable growth that will continue to beat market inflation (usually).

A gamble is often where you take more risk with the potential of speculation for a higher reward. The hype and speculation can lead to much higher gains than the market standard of 7%. At the same time, the new infrastructure, technology, competition in the market, etc., will lead to market churn. This means your asset may become worthless overnight. Nevertheless, it is the game you must play and the acceptance of stress over it.

You must acknowledge it is impossible to know what tomorrow brings. Your deep analysis will continuously only be educated and experienced guesses. To that end, I generally adopt a high money ratio into stable investments versus gambles. It is okay to gamble, but always set aside a very explicit budget and mentally be ready to accept when you lose big money.

Optimizing Your Investments For Time As A Digital Nomad

Investments you trade money for time will yield you returns in two significant ways: appreciation and cash flow. Appreciation is often a much higher yield but requires you to sell or borrow against the asset. Cashflow is a way to make the asset work for you over time and bring in continuous payments with the asset. These are two levers of evaluation of an asset and an excellent way to keep in mind how you might make a yield from your investments.

Also worth noting, you are buying an asset for the long haul. There may be market dips in the short term. You need the confidence and mental strength to stave off the stress that leads to selling your assets on the dips. You should feel confident in what you are buying. It will pull through in that rough 10-year plan regardless of worldwide or local dips.

Buy And Hold

The primary idea I mentioned behind investing is trading money for the time that will offer appreciation and cash flow from the asset you buy into. Time is the core component that makes this work, and you must be comfortable with the need for that time.

With that in mind, most investors call this a “buy and hold” strategy, which also means you want to buy into assets you believe will be more valuable ten years later. This also allows you to lead the life you want comfortably. You may be living on the other side of the world where your assets are. That is okay because you feel good about the research and are comfortable with the fundamentals of the asset. Being a digital nomad, you want this piece of mind. A noisy asset that only introduces stress into your life should be avoided.

Use Asset Managers

There are ways to mitigate potential noise from assets, too. You can hire a management team. For example, in real estate, there are property managers. Some assets may be entirely hands-off, like stocks, given if you buy company shares, you trust that company’s direction and leadership. The company and leadership will continue to try to make the asset grow for you. You already paid for this management with your investment. If you buy a business, you’d want to find and hire a trusted management team to enact your vision and automate the asset. All this to say, you want to always invest for the long haul. Make it as easy and automated for yourself as you can. Factor in the management costs to your cost/benefit analysis.

Optimizing Your Investments For Cashflow And Appreciation Balance

Returning to what I mentioned about appreciation and cashflow levers in your investments. These are two levers you’ll want to consider in every investment. They may be personal to what you need in your life. Appreciation generally has much more substantial long-term gains. When you are younger, appreciation might be where you want to focus.

Generally, as you get older and think of retirement, you want to shift appreciated assets into cash-flowing assets. This is because you no longer care about the long-term gains and are more about them here and now. You want continuous monthly payments that may support you now even if these monthly payments are a much lower yield for your long-term investments, for example, against that 7% appreciation standard bar.

Planning For Your Retirement From The Need For Employment

Both appreciation and cash flow assets may be relatively safe, but it is rare to find assets with a strong appreciation and cash flow as perks. You usually need to choose one or the other. Retirement doesn’t always need to be old, either. You might be at a point where you want to shift everything to give you monthly income. This becomes your source of living. In many ways, this is how you can earn financial independence. You no longer need to be employed as the cash-flowing assets yield what you need to live.

Generally, the rule of thumb focuses on appreciating assets with higher yields. Then, when the time is right for you, you can calculate that you have enough assets to sell off and buy into cash-flowing assets, then make the shift and earn that financial stability or independence. It is still good to have long-term appreciating assets if you retire early. They will have better long-term payoffs when you sell them. But, as you get older, you need to weigh in on whether you have long-term investments worth it.

In conclusion, I hope this was helpful information. I wanted to share, as an avid traveler, how I’ve been optimizing and focusing on living life more. Investments are one thing that is not always easy to pick up on, and there is a lot of insufficient information. I also did not explore any specific type of investment asset here. I wanted to keep this generic and more about investing philosophy and how you can evaluate any asset with these tips in mind. If you like this article, please let me know, and I’ll write more on the topic here on Travel-Wise!

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