March 17. 2020 – These are challenging times. Right now the Coronavirus pandemic is sweeping through the world and through my home country of Switzerland. People are freaking out and the future is insecure. Nobody knows if the spread curve of this virus can be flattened effectively or which long term consequences there will be for the society and economy. This year will go into the history books as a evil combination of 1918 and 1929, when the Spanish Flu and the Great Depression respectively brought the world to it’s knees. But you came here for investment tips.
While I can’t know the long term social impact of this black swan event, I do have some thoughts to offer on the economic side to try to navigate these volatile waters. I am not particularly successful or anything. I just have a little bit experience and made all the mistakes myself and tried to learn from them the hard way. But a recent conversation with a friend motivated me to write this post about investment tips. These are just my thoughts and obviously I am not a financial adviser and I can’t take any responsibility for any losses. But feel free to tip me if I prevented you from doing anything stupid 😁. Provided that you already panic-bought canned food and all the toilet paper available here are my tips if you are now thinking to buy the dip, stay sane and sleep a little bit better while preparing for the apocalypse.
#1 investment tip is: Stay the F**k off the 5-Minute or 1-Minute candles, seriously! Save yourself several micro-heart-attacks and set your charts AT LEAST to 1-Hour and 4-Hours. There is absolutely no need for minute charts unless you are a day-trader (but then you wouldn’t need these kind of tips). Trading is a game where the ones win who are more patient the others.
#2 Are you scared? Perfect! Contrarian Investing is your friend! As hard as it sounds, buy when there is blood on the streets and sell when everybody else hypes. The Human Species is more homogeneous then it knows and nor psychology of the masses nor game theory change.
#3 Do not shoot all you powder at once! Split up your investment into several smaller orders of 10 – 20% each. Especially if you are a beginner it will help you to keep your mental sanity.
How? Well, think about it. Let’s say you have 1000$ capital to invest. Let’s say you want to buy Bitcoins with it and the current price is 5000$/BTC. You maybe tempted to think that it is a good price because it dipped lately and so you buy 0.2 BTC for the whole 1000$. So far so good, but what are you going to do if it goes even lower, for example to 4000$? Are you going to sell to avoid losing even more? Understand that you position yourself as a weak hand if you spend to much at once.
Contrast that to the situation where you spend 20% of your 1000$ at a time. Let’s say you buy 0.04 BTC @ 5000$ for 200$. If it now goes down to 4000$ you don’t panic, because you just buy even more with the next purchase: 0.045 BTC @ 4000$ for another 200$.
Your mean entry price is of this investment is 4500$/BTC and you slept better 👍 This is also called dollar cost averaging, but I prefer calling it riding down the bear 🙄
A quick side-note on Cryptocurrencies: If you use a stop-loss you will get stopped out within a couple of days. Either set it real low (>30%) or even better: Don’t set a stop-loss, believe in the project long term and HODL.
#4 of my investment tips is: Don’t be afraid to sell a part of the profits when you’re in the green. This is the one I struggle the most with. Make a plan for yourself and when the moment comes, execute the plan. The exact percentage varies from asset class to class. In the classic stock market a 20% profit may be enough to sell confidently, while in the Crypto world it may be 200%. But don’t be afraid to take profits! Nobody goes broke when he takes profits. Pigs are gonna get slaughtered anyway.
#5 Diversify, but don’t dilute. I advocate to invest in different asset classes. Some good Cryptocurrencies, some good tech-related stocks and some precious metals. Especially in Cryptocurrencies it is essential to not just buy the Top 10 sorted by Market Cap! These things will bite you in the ass, man let me tell you. Think about what criteria is important for you, analyze the fundamentals and hand-pick the few best-in-class per each asset class.
Bonus-Tip 🎉: Do not only look at the Dollar-Price of an asset but keep an eye on the ratios within two assets in the same class. For instance Gold-Silver-ratio or the BTC-ETH-ratio. You will be able to see many more correlations and spot important leverage opportunities.
If you found these tips useful, you can send a useful tip to these Bitcoin Address, thanks!
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