Not sure how many people (if any) on my friend's list have recently gotten burnt in the cryptocurrency markets.
It hurts to see how many people bought at extremely high prices, and were recently forced to sell taking hits close to 100% in some cases.
Regardless if you were affected or not - most millennials like myself (and generations after) will need to eventually invest our money.
We simply can't prosper in this economy anymore without doing so - so it's important to point out the key investment rules that were broken during this recent downtrend by so many people - so we can avoid similar huge losses like this in the future.
Firstly - just a disclaimer - I am NOT a financial advisor or an investment professional - but I have been investing and trading for over 13 years and i've made every mistake in the book.
By the same token - I've also learned from these mistakes, and I was also able leverage what I learned to:
get into the US dollar when it was almost at par with the Canadian Dollar.
purchase and hold Netflix, Shopify, and Facebook stocks near their IPO dates
take positions in Medical Marijuana, Bitcoin, and Litecoin all back in 2013.
My portfolio currently consists of a well diversified mix of real estate, cryptocurrencies, low cost index funds, bonds, commodities, pot stocks, tech stocks, and several different currencies and has grown at a rate faster than and mutual fund I've been able find.
I wouldn't have gotten to this myself to this point if I didn't have a set of rules to follow so I want to share them with you in case you're not already aware of them.
Had these been followed - a lot of people would've prevented themselves from losing a lot of money over this past couple weeks.
There's still a tonne of money to make investing into things like cryptocurrencies and pot stocks but these industries can cripple you if you don't play by the rules:
Rule #1: Buy Low - Sell High
I didn't make this up - and you've all heard this before. Maybe that's the reason why it seems so cliche at this point.
It's so obvious - but for some reason - nobody knows how to do this right.
You wanna know why we can't do this right?
It's because we buy into the HYPE!
Ignore the hype, and leverage the fear instead.
My rules of engagement are simple:
1. When everybody else is buying, I'm either taking profits or sitting on my hands if it's a long term investment.
2. When everybody's shit-scared to get into the market is the only time I want to invest.
The latter is usually the most difficult. We usually catch ourselves saying 'I'm scared it'll go down more' and yet somehow justifying a purchase at double that price.
Which brings me to the second rule
Rule #2: Don't invest any money you're not willing to lose
Putting yourself into any market with emotion attached will force you to make emotional decisions as opposed to pragmatic ones.
If you know that you wouldn't put your money anywhere else - then it's a lot easier to leave your money in the market and not panic when times are tough.
and finally,
Rule #3: Diversify your portfolio
Don't put all of your eggs into one basket.
You never know what can or will happen - albeit we can be a lot more confident in the long-term than we can the short term.
By understanding what you're investing into, and diversifying yourself into different markets and market verticals that have bright futures - you'll build a boat of investments that can weather any storm.
Ask yourself if you're breaking any of these rules.
Do you have money to invest that you're afraid to put in the market because it's currently scary and not hyped up?
Have you spread your money around to different types of investments?
Are you overly-emotional about your investments.
Perhaps it's time to rethink your investment strategy if you're answering yes to any of these.