Do you have cash stashed away somewhere that you’ve been hesitant about or unsure what to do with? Maybe you have a random savings, checking, or money market account that you forgot about.

For us, that would be $10K that’s been sitting in a Vanguard money market account for a couple of years. (Note: this is separate from our regular emergency cash account). We meant to invest it, but never quite knew where to put it. Yes, we know this is a first-world problem.

The question is where should we invest this money now? Conventional FIRE wisdom would say “just throw into VTSAX and forget about it.” The thing is we already have a lot of our net worth invested in VTSAX and other index funds.

 

Our Current Asset Allocation

Before deciding where to invest that $10k, it may be helpful to show how our current assets are allocated.

While we’re not as simplified as JL Collins’ 100% VTSAX from The Simple Path to Wealth, we do have all of our holdings in six funds (note: this does not include other assets like real estate, property, and cash):

• VTSAX: Total US Stock
• VTIAX: Total International Stock
• VBTLX: Total US Bond
• VTABX: Total International Bond
• VGSLX: REIT Fund
• VGPMX: Precious Metal Fund

The pie chart below shows the percent allocation of these six funds. It comes out to 64% equities, 30% bonds, and 6% other (REIT and metals). 

 

Other than the REIT and the precious metals funds, we have mainly stayed with straightforward (and very low cost) stock and bond funds. It’s relatively boring (that’s the point), but it has worked well for us over the years. 

 

The Experiment

We thought we would have a little fun with this $10K. We came up with five investments that are very different from each other but are interesting to us for various reasons. Our plan is to invest $2K in each investment, and then see how they perform against each other over the next 12 months (we’ll provide an update every three months).

Obviously, you don’t invest only for a one-year period; however, this gives us a timeframe to work with for our comparison. It will also help with our prediction analysis. We can apply our rationale based on current events like the COVID-19 pandemic, the vaccination rollout, the Biden administration’s initiatives, etc.

Here is what we will look at for each investment:

• Why we chose it
• Pros and cons
• Similar investments
• Our predictions 

Although we will be using real money, this experiment is mainly for fun, as well as an exercise in investment decision-making. Let’s look at the five contenders...

 

1. Green ETF (QCLN)

Green ETFs are exchange traded funds that track stocks related to “renewable or alternative energy” like electric cars, solar power, wind energy, etc. We chose QCLN as our Green ETF investment.  

Why: It seems clear the trend is continuing to move from fossil fuels like oil and coal to renewable sources like wind, hydro, and solar. Concerns about global warming are driving demand for cleaner options, and the Biden administration is looking to invest $2 trillion in this sector with a goal of getting to zero carbon emissions by 2050.

Pros: Investing in green energy stocks just feels good and the right thing to do. We’ll be putting our money into companies working to make the world a cleaner and better place. It also looks like the US is finally working to become a leader in renewable energy.

Cons: The oil industry is still very powerful, and green energy has become a political issue. If Republicans retake the House, Senate, and/or Presidency, it could derail many of the Biden initiatives before they take hold.

Options: There are a number of options for “green,” clean energy, or alternative energy ETFs. QCLN, ICLN, and PBW were the three that came up most in our research. We decided to go with QCLN, mainly because it includes a broad mix of sub-sectors in the space (e.g. solar, biofuels, advanced batteries, etc.).

Prediction: We anticipate strong performance over the next 12 months due to the Biden administration’s focus on clean energy. 

 

2. Tesla (TSLA)

 

Unless you’ve been living in a cave for the past few years, you’ve inevitably heard lots of commotion about Tesla. CEO Elon Musk is seen as an icon, revolutionary, and an almost “Tony Stark” type of presence in the technology space.

Why: We wanted to include at least one individual stock that has been getting a lot of buzz and has the potential to continue to innovate and do big things. Tesla had an amazing 2020; its stock price climbed 695% and it became one of the largest companies in the world.

Pros: CEO Elon Musk has proven to be daring, innovative, and brilliant. The same advantages as the Green ETF apply to Tesla: increased demand for and investments into cleaner technology like electric vehicles. 

Cons: There is a lot of competition in both the electric vehicle and autonomous driving space (e.g. ,GM and Google). After their huge 2020, Tesla’s stock is considered by many to be overvalued. Yahoo’s “Recommendation Rating” has TSLA at a 2.8 on a 1-5 scale (1 is strong buy, 3 is hold, and 5 is strong sell).

Options: You could invest in another leading electric vehicle company like Nio (NIO) or Arcimoto (FUV). You could also focus on the most innovative companies like Apple, Alphabet, Amazon, Microsoft, Samsung, or IBM.

Prediction: Because of fierce competition and its already sky high valuation, it will be tough for Tesla to continue its upward climb. I think it will stay relatively flat over the next 12 months. Let’s face it -- you can’t count out Elon Musk, who is also innovating space exploration, connecting brains to computers, and, some say, can even bring back dinosaurs.

 

3. Berkshire Hathaway (BRK.B)

Berkshire Hathaway holds significant ownership in a number of household brands like Geico, Duracell, Dairy Queen, American Express, and Coca-Cola. Not everyone is familiar with Berkshire Hathaway, but everyone knows their legendary CEO, Warren Buffett.

Their Class A shares cost a whopping $400,000 per share; however, you can purchase their Class B shares, which are essentially the same product but priced at only about $260.

Why: We have always been big fans of Warren Buffett and his investment strategies around value investing. Rather than trying to copy his investments, it’s easier to take advantage of his knowledge and insights by investing in Berkshire Hathaway.

Pros: Although he’s now 90 years old, Warren Buffett is still at the helm, and he has a good team around him. The way the company is structured allows it to make strategic moves between their holdings and investments, and they have a lot of cash on hand. 

Cons: One disadvantage is that Buffett has largely eschewed tech stocks (other than Apple), and so BH has missed out on the huge tech gains of the past few years (luckily we’re already heavily invested in tech, so this won’t be a major hole in our investments). Another concern is Buffett’s age and the sad fact that he won’t be around forever.

Options: Rather than invest directly in Berkshire Hathaway, you could copy the investments of their holdings. You could also invest in a similar company like Alleghany (Y) or Markel (MKL).

Prediction: My guess is that BH will do well over the next 12 months but nothing spectacular. Since it wasn’t invested in the overheated tech sector, it seems to be priced well (if not underpriced). I imagine this will be one of the safer bets for this experiment.

 

4. Norwegian Cruise Line (NCLH)

Before the COVID-19 pandemic, we were pretty avid cruisers, primarily on Norwegian Cruise Line. We cruised in the Mediterranean, the Caribbean, around Southeast Asia, across the Atlantic, through the Panama Canal (twice), and many others.

Why: There are two reasons for investing in NCL. The first is that we anticipate the cruising industry to pick back up dramatically over the next 12 months as more people get vaccinated. The second reason is that NCL offers onboard credit bonuses for their shareholders.

Pros: People love to travel and take cruises, and there’s a lot of pent up demand from the year-long pandemic. NCL is already planning on cruising the Caribbean and Greek Isles this summer. Before COVID-19, the stock price hovered around $60 for several years, so $30 seems like a bargain right now. 

Cons: Even though many people are itching to get back to cruising, there will be a certain percentage of past cruisers who will be forever spooked by COVID-19. They will either never cruise again or take years to get back. Also, while the U.S. has been doing very well in the vaccination efforts, most countries have not. It may take awhile to open up safe international cruise destinations. 

Options: In addition to NCL, there are other publicly traded cruise companies, like Carnival (CCL) and Royal Caribbean (RCL). You could also invest in other travel-related companies such as Expedia (EXPE), airlines (AAL, UAL, DAL, etc.), hotels (Wyndham - WH), car rentals (Avis - CAR), and entertainment (Walt Disney - DIS).

Prediction: I may be biased, but I think NCL will do fairly well over the next 12 months. We won’t be on the first round of cruises, but I can definitely see us back on the high seas in 2022.

 

5. Blockchain ETF (BLOK)

Confession: We dabbled in crypto several years ago but sold all our coins before their valuations exploded. Granted, we didn’t have much invested ($1500 total in three coins), but that $1500 would have been worth over $5000 if we had held on.

A Blockchain ETF (the technology behind cryptocurrencies) is an alternative to directly buying Bitcoin or other coins. We chose the Amplify Transformational Data Sharing ETF (BLOK). It’s the first and most successful blockchain ETF and only actively managed option.

Why: I really don’t want to get back into the craze of buying Bitcoin again, but I believe there’s value in the blockchain technology. An ETF like BLOK is an easy way to play in the space and take advantage of the popularity of crypto while investing in blue-chip tech companies.

Pros: Blockchain ETFs offer several advantages over buying crypto directly: professional management, diversification, security, tax efficiency, and less volatility. In general, crypto seems to be gaining popularity, so it seems smart to have at least a small piece of it. 

Cons: There are two things I really dislike about crypto: its impact on the environment and the way it’s valued. Bitcoin’s carbon footprint is on par with entire countries like New Zealand and the Netherlands. And unlike stocks, which are valued by things like sales, earnings, innovation, and strategy, cryptocurrency value is based mainly on supply and demand. It’s why people who own a lot of crypto are always trying to get you to buy in!

Options: There are three alternatives to investing in the crypto space: 1) purchase Bitcoin (or other coins) directly; 2) purchase a blockchain ETF like BLOK (other options are BLCN and LEGR).; or 3) invest in Coinbase (a platform to buy crypto) which is going public this week. Just make sure to do your research!

Prediction: This is a tough one, because crypto is so volatile and it has had a huge run lately. I feel like the recent surge may have been a hedge against stocks and other investments during the pandemic. Now that we’re getting back to normal, investors may start to move back away from crypto to more traditional investments. 

 

Our Final Predictions

While trying to predict the markets or individual stock performance is nearly impossible, we can make some educated guesses about how our investments will perform over the next 12 months.

After digesting all the data, we have come up with our order of performance…drum roll please…

1. Green ETF: The Biden administration’s initiatives into clean energy bode well for alternative energy companies.
2. NCL: The pent up demand for travel should lead to a nice boost for cruise companies.
3. Blockchain ETF: I think we’ll continue to see a lot of volatility in the crypto space with a slight net positive for this fund.
4. Berkshire Hathaway: This stock is all about slow and steady progress - nothing great, but no big losses either.
5. Tesla: With its currently too-high valuation and a slew of increased competition, Tesla may struggle over the next year.

We will make all of our purchases on the same day this week, and then we will check in three, six, nine, and 12 months later. The criteria will be percent increase (or decrease) in value.

Do you agree with our predictions? If not, how would you rank these investments over the next 12 months?

 

Conclusion

For most investors, the smartest strategy is to just “set it and forget it.” Invest in some low cost index funds (like VTSAX or an S&P 500 fund) and hold them for as long as possible.

This is basically what we have done (with a few tweaks) over the past 20+ years, and it’s one of the main reasons we were able to FIRE in our early 40s.

That being said, it’s OK to have a little bit of fun with your investments if you can afford it. For us, that means playing with less than 1% of our nest egg for these types of experiments. Depending on your risk tolerance, you might play with a higher percentage (or decide not to play at all).

If you had a few thousand dollars to experiment with, what would you invest in? What are some companies or industries that you think are poised to be the next Apple or technical revolution (e.g. AI, space exploration, robotics, etc.)?

Finally, this is a good time to reiterate our general disclaimer: “the information on our site is not intended to offer tax, legal, financial or investment advice for any specific individual.” We share what we do, but our financial strategies may not be the perfect plan for you. Just remember to do your research, and if necessary, check with a licensed financial planner or analyst.