Investors, by default, tend to be a pretty bullish bunch. Because the pessimist does not invest. In general terms, investing is the belief in a better future. That does not imply that it is always a good time to invest. And that does not imply that every asset is a good investment at all times. Namely, optimism is not blind faith. We well know that markets have cycles. The trend is sometimes down and sometimes up. Therefore, the price is weighed in the context of a forecast. Namely, today’s price is cheap or expensive in relation to tomorrow’s possible price. Volatility and uncertainty reduce our ability to forecast. So, in such conditions, the risk of our investment increases.
What is the difference between an opinion and advice? An opinion is a point of view. It is a subjective approach on a subject given by an individual. An advice is a call to action with objective information given by an expert. I remind you, dear reader, that this is an opinion article. As a writer, I don’t give advice. But, as an investor who writes, the situation forces me to formulate a personal opinion. What is the use of an outside opinion? It helps us form our own opinion. By contrast or comparison, the opinion of others stimulates reflection in us.
Admittedly, these are very difficult times for investors. Why? Because the macroeconomic and geopolitical situation is so atypical and complex that traditional prediction models are not working. We have no choice but to live one day at a time. In other words, we have to invest very cautiously. Of course there are people who invest for non-financial purposes. In fact, there are people who are willing to lose money for their ideas. That’s the idiosyncratic investor. In this case, it is an activist investor with a political agenda in mind such as the promotion of a monetary reform or the implementation of a libertarian utopia. This article is not for them. This article is for investors with purely financial goals. Make money period.
What type of investor are you? Focus is the key to success. And this includes having your goals very clear and defined. What is the priority? What is the task? The growth of our portfolio. That means increasing our income, reducing our expenses, and minimizing our debt. Then, design, with our capital, a diversified and balanced portfolio, carefully weighing the risks and opportunities. This is done with the intention of obtaining additional income for reinvestment and to enrich our lifestyle.
Basic principle: It is better to lose an opportunity than to lose money. How much does your lifestyle cost? What is the unit of account used to define this lifestyle? If your expenses are measured in dollars, my recommendation is to use dollars as your primary measure of value. On the other hand, if our expenses are continuous, our income must also be continuous. That means that our investment must have risk management. This applies to both our long-term investments and our short-term investments.
Reminder: Unrealized losses are also losses. On the one hand, they remind us that we buy very expensive. On the other hand, recovery takes time. And time is money. Every investment must weigh the alternatives during the same period. If a person bought BTC for $60K last year, they are now under water. Spot. That investor has unrealized losses of more than 50% in less than a year. His portfolio, whether he likes it or not, records the loss. During that same period, other investments have increased in value. How long will the recovery come? When will BTC return to $60K? We do not know for sure.
In times of volatility and uncertainty, the most sensible thing is to add stability and predictability to our portfolio. yesIf expenses and debts are denominated in dollars, volatility and uncertainty means increased risk. The smart thing to do is manage that risk. There are times to grow. And there are times to protect what we already have. I mean, it’s not too unreasonable to have a little more cash and bonds in your portfolio during these exceptional times.
Around “buy the fall”. If we buy the dip too early at the start of a down cycle, we risk buying too high. If we buy the dip trying to find the bottom, we are in danger of running out of liquidity at the time of the true bottom. Personally, I am conservative when buying and calculating when selling. I buy with a bullish forecast. Then, I sell looking for the maximum. Or I sell fast, if my prognosis failed clearly and conspicuously. It seems to me a mistake to buy and wait without a strategy. That is, invest based on the promises of Twitter.
well we know that Bitcoin is a highly volatile asset. Big price crashes are not uncommon for Bitcoin. So it shouldn’t surprise us too much. Because it is a warned war. In other words, before buying, we must be prepared for a possible collapse. The first thing is to make an objective forecast. Don’t buy crazy. And if our forecast fails, the second thing is to drive a stop loss. In this way, we reduce our risk to a predetermined amount. The third thing is to have other investments whose income covers possible losses. The fourth thing is to have enough liquidity to be able to buy at better prices and average our bad purchases.
It is not very wise to extend the losses waiting for the miracle. The bad adviser tells you about the opportunity, but he hides the risks from you. In the speech, he creates a false sense of security in you. An illusion of certainty about an inevitable future. I fear that It is a trap to attract capital and followers. In this space, narratives are abused to radicalize the community. In this way, prosper financially and professionally, taking advantage of the credulity of the other. The influencer who says whatever it takes to be able to monetize his channel. The subject looking for a better job by self-promoting on social networks. The businessman selling hopes to increase his clientele. And so.
The intelligent investor must resist the temptation to lose objectivity in his contact with the different digital tribes. Polarization, resentment and identity politics are phenomena that transform the truth into a prefabricated script. Unfortunately, social movements turn the individual into an automaton of the masses. The same ideas, the same slogans, the same phrases, over and over again. Dogmas and more dogmas. Like in an Orwellian universe. Suddenly, the financial goal is forgotten. What matters is the “revolution”. “I don’t care about the price,” writes a tweeter with lights in his eyes. Invest in this environment? Yes, but with caution, prudence and strategy.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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