The goal of the Hard REIT Income and Bitcoin strategy is to create a growth and monthly income portfolio designed to thrive in an inflationary environment while benefitting from the volatility of Bitcoin through rebalancing and DCA dividend investing.
Originally, when I first starting using this strategy, I chose a 70% Income / 30% growth structure. Today, I find myself with the barbell reversed with growth at 70% and income at 30%.
Each individual investor will need to find their own personal balance between growth and income.
Combining REITS and Bitcoin in a portfolio with regular rebalancing results in passive income increasing automatically over time. If Bitcoin increases dramatically you rebalance by selling bitcoin and by buying additional income. If bitcoin is doing poorly you are able to stack additional sats via the monthly dividends. The DCA strategy works very well in bitcoin.
You are simultaneously trying to maximize both the monthly income you receive and the amount of sats that you own. Balancing income and growth through volatility.
70% Growth 30% Hard Income
Bitcoin/MicroStrategy Reits/Dividends
Long Term Capital Medium Term Capital +
Short Term Cashflow
70 % Growth: Bitcoin and MicroStrategy
Bitcoin is the best choice as a growth engine in a portfolio. It has has offered the strongest annualized returns of any asset class since 2011.
Bitcoin 147%/year average vs Nasdaq QQQ at 18.6%/year since 2011.
For long term capital bitcoin is clearly the best choice.
There is no second best if you have the time to wait out a few bitcoin cycles.
Every fourth year Bitcoin has had a major correction 2014, 2018, 2022 (watch out for 2026!). The Income component of the portfolio will help you weather the bear market storm and buy monthly through the volatility.
Bitcoin acts as the growth engine and MicroStrategy levers up the bitcoin using very cheap fixed rate debt without taking on any personal debt or debt servicing. You can choose to increase or decrease the MSTR position within the growth allocation to increase or decrease your volatility and exposure to bitcoin. The MSTR counts for double Bitcoin price exposure due to the leverage/concentration/premium relative to bitcoin.
MicroStrategy sells at a significant premium to NAV. This premium exists as investors are willing to pay extra for MicroStrategy as it is effectively using capital allocation moves to buy bitcoin in an accretive way. This slowly increases the amount of bitcoin per share and adds an additional method of growth on top of the software business and bitcoin price fluctuations.
If you imagine a bitcoin miner consumes electricity, overhead and equipment depreciation to generate sats. Each MicroStrategy share is generating passive sats without any overhead or operating costs and with less risk. MicroStrategy has defined this concept as BTC Yield KPI.
I have not invested in any bitcoin miners and believe the MSTR levered hodl business model is more effective and robust vs. public miners who have to deal with a rising hash rate, higher competition and the halvening impairing their revenue economics every four years.
MSTR benefits from each halvening while public miners try and survive each halvening.
How is Saylor generating this additional value through capital allocation?
Saylor has been issuing low interest rate convertible bonds and buying bitcoin. He is essentially providing a way for market participants to purchase bitcoin exposure in a low risk bond format by giving up some of the initial upside. This is similar to a bank selling a hedged equity product to a customer which has both a limited downside and upside.
Saylor is also selling equity shares to the market and taking advantage of the MSTR growth premium to buy bitcoin and increase the amount of bitcoin in each share. Arbitraging the value between equity markets and spot bitcoin.
MSTR is targeting a 4-8% increase in bitcoin / share or annual BTC Yield KPI going forward through by using these strategic capital allocation strategies.
This extra internal bitcoin growth on top of bitcoins natural growth is one of the reasons MicroStrategy trades at a premium and is the rare public equity that is increasing Bitcoin per share consistently.
30% Hard Income: Real Estate Investment Trusts
Real Estate Investment Trusts are a good choice for medium term capital. REITs are liquid, generate monthly dividend cashflow and can offer positive real returns as an inflation hedge. Income Investment Criteria
Target 8-12% Total Returns
Target 6-8% Dividend Yield
Business must maintain pricing power and benefit from inflation.
Sustainable Payout Ratios
History of Growth / Dividend Growth
Conservative debt to equity
No External Management
No Small Cap
Target Sectors :
Real Estate Investment Trusts, Energy Equities w/ Dividend, Inflation Resistant Dividend Equities
Use a diversified basket of income spread risk across multiple positions / sectors / countries / currencies if possible.
Contrarian Income Investing
Buy Income at a discount when possible as excellent value will help build an inflationary moat around the income portfolio. Look for the rare fat pitch income opportunities and buy big. Quality income investments with a temporary problem.
Rebalancing Guidelines
Each month you can reinvest the monthly dividend to help rebalance you back towards the 70 growth / 30 income target allocation.
MSTR/BTC Euphoria = Increases Monthly Cashflow by selling BTC and buying Income
MSTR/BTC Fear/Dip = DCA Bitcoin/MSTR with Dividends
In extreme situations you can choose to sell some income investments to buy Bitcoin however try not to lower your income significantly. This way your income is constantly increasing to new levels over time benefiting from the bitcoin volatility.
Comentarios