When many people first start investing (regardless of the asset), they worry too much about the short term price action. They panic if it drops a few percentage points and think that they will make thousands off their genius investment when it goes up a few percent.
Investing can be fairly complicated and most people, including myself, trick themselves into thinking that they know what they are doing. Sorry to say this but we don’t know nothing (“You know nothing, John Snow,” for all the Game of Thrones fans out there).
We trick ourselves into thinking we can beat the market average and we think we can make lots of money in the short term. While I am a huge advocate for “doing your own research,” always keep in mind that we aren’t professionals, well unless you are, then nevermind.
Keeping that in mind, there are a few ways to make general smart decisions that work for me.
Don’t FOMO (Fear Of Missing Out)
If the price of a stock, cryptocurrency, or any asset rises a crazy amount in a short period of time, DON’T BUY IT. The moment you buy in, the big players in the market will sell, the price will drop, and you will be sitting there with a sizeable loss. The flip side of the coin is boredom, if there is an asset you truly believe in and the price is stagnant or dropping, perfect, this is the best time to buy. When there is little or no hype about a specific asset. This is when the big investors and “smart money” buys in. This is also how they buy low and sell high. A good investor has good foresight.
I screwed up by investing into cryptocurrencies in late 2017 and early 2018. I got in too late and didn’t understand enough to know when to cash out. While I am still a big believer in cryptocurrencies (mostly Bitcoin and Ethereum) and have done hundreds of hours of research on how they work, I should have taken a step back and recognize that the overall market prices were too high and simply wait. Instead I stupidly kept buying more way too early. I still buy to this day, but if I had been more patient, I could have had more of the individual currencies than I do now.
Dollar Cost Average
It might seem like it costs a fortune in order to hold a sizeable amount of assets, truth is, it doesn’t. If there is a particular asset you like and feel comfortable holding for the long term (at least one year), dollar cost average into it. Tell yourself that every week or month you will buy X amount or spend X amount on a specific asset regardless of price. By doing this, over the long term, there will be less risk and your assets will grow very fast. You don’t have to concern yourself with doing any chart reading, just buy consistently.
For the last 4 months I have bought Bitcoin weekly. It doesn’t matter if the price is $12,000 or $5,000, I am buying a predetermined dollar value worth of Bitcoin.
In addition, I have started to buy gold and silver. I will be buying a set amount of gold and silver every month on the 15th regardless of the price.
Keep Decisions Simple
There are too many assets and types of assets to know everything that is going on. Instead stick what you know and what you research. If you don’t understand an asset, learn it before you buy it or don’t buy it at all. The less knowledge of an asset you have, the more of a gamble it really is.
The best time to learn is before you need the information. When you try to learn something when you need it, you cut corners and assume things you should really question and your investment affects your criticality of said investment. Therefore the most critical and important time to learn is before you have any stake in the asset. By being an outsider while observing and learning, you will arrive at better conclusions.
Don’t buy something because your friend or family member told you they made a lot of money on something. Buy it because you believe in it. If the asset price drops and you lose money, the only person who is 100% responsible for the decision is you.
Those are my three main investment tips that work for me. Whenever I find myself looking to invest, I go through those steps. It is important to realize that we are small investors and bigger investors can drop the hammer on us at their discretion. Be safe, protect yourself, and invest wisely.
TLDR:
You don’t need to be a financial genius to invest wisely. The following advice works for me:
Don’t FOMO- If your Uber driver is telling you to buy something, don’t. If you have that asset, get out of that asset.
Dollar-Cost-Average- Buy assets you love in small portions over time.
Keep it simple- Learn the asset before you have a stake in it, you will make better decisions.
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