Investors are human, therefore emotional. Knowing yourself is more important in investing than any other knowledge.
Can we make decisions about investments by examining the item’s history? Maybe we can learn a little if it is a business. Product lines, competitors, management, and industry factors. Think about something with no fundamental value, just the emotional marketplace. There is an industry though, and it is improbable that you can assess it. When there are few to no fundamentals, it is all emotion. Fear and greed will be the leaders. Where will you fit?
“If you don’t know who you are, the market is an expensive place to find out” “Adam Smith” pseudonym of George Goodman in “The Money Game.”
This is Terra’s LUNA crypto coin.
Then comes the real excitement,
You probably haven’t slept much in six months, so maybe it’s time to sell. Remember the advice, “Sell until you sleep.”
Have you become immune to volatility? Let’s hope not. You should sell. There is no chance you can understand what is happening. There are bull markets and bear markets. This is a chicken market. In a chicken market, you don’t understand what is happening. You should sell everything and hold cash until you do understand.
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For many of us, greed is a complicated emotion to conquer. The story comes to mind of a judge who advised a taxpayer that trying to get the last dime from a tax scheme is like trying to get the last drop from a beer stein. Sometimes the lid falls and hits you on the nose.
Volatility is not measurable until after the fact. At $50, you had 250 times your money. Given the volatility at that time, holding on was inviting trouble. When it hit $100, you would have felt stupid, but you look smart at the price on May 25th of $0.0001873. Actually, you would look smart if you did not buy any at all. Try to understand how this story identifies emotional commitment and maybe it will help you to know yourself some other day.
Trying to buy at the bottom and sell at the top is a fool’s mission. Tops and bottoms are only visible in hindsight.
Selling some of your holdings at $50 would have been a great choice. It would have made it easier to sell more later.
There are people who did follow the path above to the end. Some of them with far more than $2,000 invested.
Know yourself. Take this to heart, “Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong” Niall Ferguson. You are not immune, but you can defend yourself if you can recognize the feelings.
I build strategic, fact-based estate and income plans. The plans identify alternate ways to achieve spending and estate distribution goals. In the past, I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning. I have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, and Banks – from CIBC to the Business Development Bank.
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