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Comment by paulpauper | Hacker News Reader

BItocin has among the worst risk-adjusted returns of any investment. I would not touch it. NASDAQ 100 and or fang portfolio way better.

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This is clearly false- Bitcoin had a return of 100000% in the last decade. It's completely irrelevant with those kinds of numbers what the "risk" was.

...Now, you may have a personal opinion that the next decade will not see similar returns, but that is a completely subjective assessment on your part, even if you try to pretend that you're being objective by using the phrase "risk-adjusted returns".

the bulk of those returns were from 2010-2013

Why not have 5% or less in BTC, if it does well, good for you, if it does not, its just 5% of your portfolio.

by that logic, why not just buy lotto tickets?

The probability of BTC going to zero is very very low, the probability of you not winning the lotto is very very high.

You know... what I am curious, does this logic make sense?

Why wouldn't a given % be allocated to lotto tickets?!

Quite curious from a risk/reward portfolio formula.

Yes, it does, despite the negative expected value. In corporate finance it's known that companies that are approaching failure are often willing to pay for volatility.

This is also why lotto tickets are more popular with the poor.

The argument to not buy lottery tickets, is if you have no need of the return so it's not worth giving up the 5% of your portfolio that could be reliably generating returns for you.

Software engineers for example are easily capable of reliably earning six figures in the US, outside of the Bay Area. With stock compensation their earnings potential is that much higher. It's a solid multi-millionaire track if you grind away at that career path and keep your expenses in line.

So why bother with the lottery in that case? Because a few million dollars isn't enough?

If you're earning $40,000 per year with an inability to generate much in the way of savings (compared to the software engineer), your job prospects are highly capped, you do manual labor in a factory in a 2nd tier city, your education level is weak, and your shot at a multi-millionaire outcome is essentially zero, maybe giving up 5% of your savings makes sense for a shot at an epic outcome to escape that lower middle class trap.

Lottery tickets are a mechanism for taxing hope.

What I've read is that one has to distribute the portfolio across a risk spectrum. A big % to very low risk / low yield instruments (say, bonds), a medium % to blue chip stocks, a smaller % to more risky stocks, etc.

So, following that logic with cypto or lottery tickets, a very small % could be put in anything that has a high risk high reward.

When you say bother you mean effort but in theory you could outsource your potfolio so there's not more work by following one strategy or another.

Thus... are lottery tickets a good thing to have in the portfolio?

I'm quite curious if there is an answer to this from a statistics or investing point of view.

It's all about Expected Return. lotto's expected return is probably ~25% of the ticket price. You could look at past performance for BTC's expected return, and that would give something >100%. But as is always mentioned "past performance is no indication for the future"

Because of the environmental and societal consequences of that action. It is a collossal miallocation of electricity, advanced manufactured goods, and the time and focus of intelligent people all around the planet.

Why not 10% in comic books or any other limited non-productive asset? If we could just convince everyone to put in 10% of their savings into comic book collections, comic books too would become incredibly valuable.

> If we could just convince everyone to put in 10% of their savings into comic book collections

Satoshi did the hard work for Crypto, you can try putting the same effort for comic books. If it catches on, sure why not.

~300% return YoY is bad now? Just put a small % of your portfolio and if it fails, not a big loss, but if it increases at those rates, it'll naturally end up becoming a large % of your portfolio.

There is no free lunch. Your hypothesis is fed-driven policy will continue to be effective (the easy money gravy train). It's likely a better thesis, but after a decade of great returns, people are under the illusion that the Fed has actual control of markets (they can only shape sentiment via policy).

This sounds made up

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