Let’s explore the attributes we must have to become a great investor. It is relatively easy to be a mediocre investor. It is much more difficult to stand out from the mass. What is an investor? What differentiates you from the entrepreneur? What does it mean to be a mediocre investor? Is it a matter of technique? Is it an intelligence matter? Or is it a matter of relationships and contacts?
Investing is placing capital to put it to work. That implies that having A capital is an essential requirement when it comes to being an investor. Without capital, there can be no investment. Capital, time and profitability. Those are the three pillars of investing. Note that he uses the word “capital” and does not use the word “money.” Why? Well, because there is a difference. Money is a medium of exchange. In other words, the money is used to buy things. Capital is a financing instrument. It is used to invest. It is money that generates money.
Money can come from many sources. But capital usually comes from the difference between our income and our expenses. Suppose we have a monthly income of $ 1,000 and monthly expenses of $ 800. Assuming that we are covered in health (with good health insurance) and a generous emergency fund, those USD 200 that we accumulate every month can serve as capital to invest. In other words, we are not talking about money for consumption. Capital is money that can be used to invest. That is, money that we do not need to support our lifestyle. And we can afford not to see it for a long time.
Capital, time, and performance. The discipline it is one of the fundamental attributes of a great investor. You need to have discipline. However, having the discipline means spending less, being able to spend more. If we lead a life of luxury, that means we lead a life of spending. Which, in turn, means that our capital suffers due to spending. We are not talking about the fact that we should live in misery. In many cases, a businessman must flaunt prosperity as a strategy to attract the attention of other businessmen. In other words, to earn a reputation as a successful person and attract more business. Sometimes it is necessary to entertain others in pleasant environments to interact with potential partners or clients. However, when it comes to investment outright, the best thing is to accumulate a lot, reinvest almost everything and spend as little as possible Warren Buffett style.
Time is a key player in the investment world. Which means that patience is another of the fundamental attributes of a great investor. We must have the ability to wait years and decades. If we are disciplined and lead a life that we enjoy, we can afford to wait a long time. On the other hand, if we invest with credit, spend a lot, and are impatient, we are destined for failure. It’s not about making a quick buck. Anyone can get lucky in a bull cycle. But the great investor manages to survive the years and decades, the downturns and the bullish cycles. Great fortunes are built in the long term.
We talk about discipline and patience. Now let’s talk about the cold head. I mean objectivity. Or rather, the lack of emotions. The mediocre investor usually suffers from blind faith and delusional optimism. You buy an asset with high expectations, thinking that nothing can go wrong. In the crypto space, emotionality is a pandemic. People fall in love with projects and idealize them to the extreme. Therefore, there is a lot of fanaticism. If, in this space, you tell someone that Bitcoin could fall in price at any moment, the puzzled reaction is from the other world. “I don’t think so” – they tell you instantly with a frown and lost eyes. Then Bitcoin goes down and what we have are millions of broken hearts. Panic invades the market. That is immaturity. Everything that goes up can come down. Especially an asset as volatile as Bitcoin.
Emotionality. The idea that Bitcoin will go up forever. The idea that it will collapse and reach zero. We have greed, for one thing. And we are afraid, for the other. The investor must be pragmatic. Bitcoin is volatile. I mean, go down and up. If it goes up a lot and we are overbought, we sell. And if it goes too low and we are oversold, we buy. It is best to buy from the fearful and sell to the optimistic. Mass is essentially irrational. In other words, the majority are usually wrong. If everyone in the press and on the networks tells you that Bitcoin is going to go up, worry. The whales take advantage of those moments to sell.
It’s all a matter of character: Discipline, patience, and a cool head. The resourceful investor buys in the hope of making a lot of money in a short time. He is excited. Fall in love. And he puts all his faith in an illusion. One day you are lucky. Sell. And he indulges in a few luxuries, believing himself to be a high-finance genius. I mean the arrogant and know-it-all retailer who goes active on social media promoting nonsense. Those are undisciplined, impatient, and emotional investors. Those are the radicals who are always fighting others on Twitter. That is the irrational mass to avoid.
Risks and opportunities. Everything in the world of investing is a calculation of risks and opportunities. Big investors are not in the business of getting rich overnight. They are in the business of accumulating capital, investing, and reinvesting through the years and decades. They are slow, controlled and pragmatic people. Character is more important than ambition or technique. Discipline, patience and a cool head are the necessary components to become a great investor.
In the cryptocurrency market, there are a lot of hot young heads. Generally speaking, this is an extremely immature market. But this immaturity is a huge opportunity for the great investor. In other words, you can take advantage of the collective madness more easily. A retailer with good character (discipline, patience, and a cool head) who accumulates, invests and reinvests in the long term will have their success assured in this space. It is an unavoidable fact. As simple as that.