Investing
This is a continuation of what I wrote about money and what great philosophers thought about money in order to document for myself but mostly to share with you what I think I learned about this topic.
Here I want to share some of my experiences with investing.
By the end of 2021, after Bitcoin and Ethereum had rallied up to astronomical prices and everyone was thinking it would continue like this, the FOMO (Fear Of Missing Out) finally grabbed me.
This was the first and the biggest mistake I made. I bought Bitcoin and Eth for almost 1500€ over a few weeks and now, a bit more than a year later, their value has dropped to a third and I essentially lost 1000€.
First lesson: Don't follow your fear. Don't follow the crowd.
Second lesson: Don't put all your eggs in one basket.
Now, a year later, I feel like I learned these lessons, my investments are spread over 17 different positions, I successfully closed 3, and while I enjoy to have some skin in the game of what we call the global economy, I can still remain relatively calm and let go of what's happening when I need to.
And I still find it interesting to think about how compounding interest works and how anyone can put this mechanisms of capital to work.
Today, all my assets on average gained 0.5% in value. What doesn't sound like much would, if repeated every day of the year, amount to 600%.
And guess how much it would have grown after two years.
If you started with 111€, after only five years of this, you'd be a millionaire. So 0.5% in a day is a lot. If only it wouldn't come back down...
And the most important aspect of investing is stability. You don't want the chance of 600% growth if it's coupled to a risk of losing everything. You want chances and risks to definitively form a positive balance, and the straight-forward way to do that is to spread your assets such that a catastrophic loss is technically impossible. Hold some assets that perform well during inflation, and some that perform well in case of a deflation (money really works here!)
While hedging the risk of a catastrophic loss, the best investors and hedge-fond managers roughly aim for doubling their asset worth every 5-10 years. Still not bad if you keep going for a couple of decades, but they're the best of the best and are working around the clock. So anything more seems unlikely.
And as a beginner who can't invest much time, I probably need to be more modest as well, although I can also afford to take some risk as I don't yet have much to loose. Money that's needed as a reserve stays liquid in form of stable currencies, but the rest is not as important.
It seems to me as if Cryptocurrencies can only gain from now. Today's gain in my crypto portfolio was around 1.7% and over the last 30 days it was around 7.5% – I really hope that this time around, the time for investing was better. Patience seems to be an important skill in this game.
Over the past weeks, as Crypto markets were as low as they weren't since two years, I kept automatically investing 100€ every week and while it's a strange feeling to pour your money into a deep valley, it's a lot easier when it's automated. No need to make a new decision every week, it just happens.
If the monthly rate of 7.5% continues for a year, the value will have doubled and compensated my previous losses.
I find it insane how simple the access is, yet the majority drowns in noise.
The majority of small investors simply gets ripped off. And I totally understand why. There are promises that are so unrealistic yet so tempting that it's still easy to fall for them. For example, there was this one friend who recommended another “friend” on Instagram who helped her to 10x her investment with Crypto mining. I got curious and actually contacted her and decided to trust her with 150$. It was not an investment, it was an experiment. Of course it ended up being school money. Never trust someone who promises you too much too soon.
What I also find interesting is to take this view of investing into our lives, not in the sense of involving money into everything, but in the sense of applying the concepts of compounding interest, slow but steady growth, filtering out the noise, keeping to what's working, patience, documenting and evaluating our decisions, and other concepts and principles that work in the world of investing to the rest of our lives.