Create Your Own Investment Flywheel

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14 Jan 2025

Organic Growth
Most investors apply a dollar-cost averaging strategy when building an investment portfolio. The consistent deployment of capital should cause a portfolio to increase in value over time. However, this is an unlikely outcome for the unskilled Degen memecoin investor. On the other hand, appropriate and well-planned portfolio construction should enable long-term portfolio growth with the help of a dollar-cost averaging strategy.
This is a proven path to investment success. However, what if portfolio growth was possible without deploying capital? This might sound crazy to some, but understanding and harnessing the power of Crypto and WEB3 can do just that. I have written many DePIN-related articles in recent months. However, my attention will be predominantly on DeFi for the next while. I will still be dropping DePIN content. However, DeFi is about to enter its prime.
My previous article focuses on the commencement of DeFi Summer and as mentioned, I have been actively involved in DeFi protocols for the past 3 to 4 months. Yield-bearing assets are beginning to increase in value and yields are rising. I still smile when I think of Warren Buffet who said Crypto assets can’t generate income. Not only is he incorrect, but Crypto assets outperform other traditional yield-bearing assets.
The Flywheel Effect
So, what exactly is the flywheel effect? Essentially, it’s about creating momentum with a disciplined approach or strategy. Trying to get a flywheel moving is a difficult task. However, once it begins spinning, it gains momentum and eventually takes on a life of its own. It’s difficult to stop a flywheel once it is in motion. The weight and momentum of the disc are far too great. A similar dynamic can be applied to investments.
Companies like Amazon are well-known for implementing flywheel strategies in their business models. Investments can also benefit from such a strategy. However, setting a flywheel investment strategy in motion will require an investment portfolio exposed to yield-bearing and passive income dynamics. Yields that are generated through DeFi and other passive income ideas such as DePIN and staking can be used to initiate and create momentum.
Setting up DePIN passive income models will create ongoing airdrops and passive income. This capital can be deployed in various ways and can be the “first push” at the flywheel. DeFi investments that are earning daily yields can be used to add even more momentum. As this generated capital is continuously deployed, momentum increases, ultimately becoming an unstoppable compounding force. Such a portfolio grows without deploying fresh capital and eventually takes on a life of its own.
As mentioned, DeFi will begin producing some staggering returns. Yes, the crazy 12000% APR Degen opportunities will always exist. However, I am referring to credible and established DeFi-based assets. I have begun utilizing strategies to leverage DeFi Summer and create much-needed momentum. Earning yield on an asset increasing in value is a powerful dynamic.
DeFi is a risky environment and should be avoided by those who have not studied and experimented with the asset class. The concept of a gradual increase in momentum is a foundational element. It is better to initially grow slowly than to shortcut the process. DeFi has plenty of opportunities that will cater to your greed. You have to keep it in check and proceed methodically and cautiously.
I have a strict approach and screening process regarding the protocols I consider. High APRs can be alluring. However, I have seen it all before. A new pool will often have a high APR, that’s understandable. However, it is short-lived. I am referring to random pairs of unknown assets offering insane returns. Be careful of these and exercise caution. I prefer to work with well-known and established projects within the DeFi space. It’s not a guarantee but it is a lot safer.

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Final Thoughts
Getting behind the flywheel is no small task. However, once momentum has been achieved, it’s an entirely different dynamic. Consistency and dedication are two key elements and without them, you will never be able to gain momentum. In an investment scenario, good investment decisions provide the consistency to continue generating yields. Happy planning! See you next time!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.