Investing Strategies - What I’ve Learned Over the Years and How Crypto Plays Into It

Watch the video here for more details into the below article.

Back in the late 1990’s, I put together a diversified stock portfolio that had some great returns (upwards of 25%). I had friends who would say they were getting 30% or higher during that time. They were investing entirely in tech funds and told me I should too in order to get higher returns.

The reason why I didn’t take their advice was because I knew some of those tech companies would fail and the overall tech boom would eventually end as nothing with that much growth can sustain forever. My friend’s response was something along the lines of “tech is the future, it can’t be stopped and you’re not going to lose money in tech.” My response to that was along the lines of sure tech may be the future but the companies you're investing in may not be part of that future.

The Spring of 2000 the prophecy started to come true. Many tech stocks imploded, and portfolios concentrated in them collapsed.

A similar thing happened in 2006 with real estate investments as I was hearing the same arguments of “you can't lose money in real estate."

Single family homes were going up in value 20% per year. All leveraged with massive loans, people were making 100% or more return on their investment. They bought homes they couldn't afford and mortgage payments that were bleeding them dry. Then so many refinanced (with cash-out) to pay off their debts, buy new cars or a motor home and start all over.

In 2008 the bubble popped as loans dried up and prices plummeted. People ended up walking away from their homes losing everything.

For those that have been in Bitcoin and other cryptocurrencies for the past year, you probably know what I’m going to say next. Well the same thing happened to crypto at the end of 2017 that happened to the stock tech boom and the real estate market. They keep going up in price while we heard the same argument of “you can’t lose money with investing in these technologies as they are the future.” The same thing also happened with gold and oil before then as well.

For some reason people always figure out a way to lose money in their fool proof investment. Why? Well because no investment is ever fool proof.

There is something called "The Greater Fool Theory." You buy something speculative hoping there's a greater fool who will buy it from you for more. It works though…for a while. The problem is you just never know when it will stop.

So, what can you do? Stop trying to outguess what you never can outguess.

1.) Diversify Your Investment Funds Use some type of managed investments to get maximum diversification. See a few of the videos I've done on Wealthfront and Betterment.

2.) Diversify Industries Invest in funds diversified by the size of the companies, where they are, industries they're in. Don't just invest in tech companies.

3.) Invest Regularly Do not ever try to time the markets. You will not win. Just invest every month (dollar cost averaging).

4.) Don’t Give Up Don’t ever pull out of the “bad times”. Let is build consistently and do not uproot it. It is not timing the market but rather it is time in the market. This holds true with investing in the stock market as well as the cryptocurrency market.

In time, you'll suddenly discover you've built wealth. A little at a time. Without really noticing. And find yourself pleasantly surprised. Remember there is no such thing as get rich overnight investments. What goes up usually comes down. There is also no such thing as a fool proof investment.

I wanted to end this article with how the above ties into cryptocurrency.

Watching the price performance of Bitcoin, you can call it a relative crash already. BTC has lost 60% of its value since the beginning of this year. However, it was an expected move as the industry is maturing, the volatility is fading, and governments and regulators around the world are trying to get control over the emerging cryptocurrency market. It means that Bitcoin is going mainstream, so there will be less space for sudden ups and downs.

This does not mean that crypto can’t go lower this year. I keep hearing that the bottom of Bitcoin will be at $5k. So, you might say that now we are experiencing Bitcoin’s crash. However, if you expect Bitcoin to totally collapse this year, you shouldn’t. Bitcoin can never go to zero, at least not within the next few years. It’s impossible for it to disappear somehow because it exists on the Internet and its transactions are recorded on blockchain – it can’t go away just like that. And as soon as Bitcoin exists, the demand for it will be there too, at least some demand.

Fiat currencies are sometimes vanishing away because of hyperinflation, but Bitcoin cannot be printed out of thin air. There is a maximum supply limit, and that’s it. Besides, you should know that about 20% of Bitcoin is lost forever, according to some studies. It’s because early miners didn’t expect it to reach this level and just lost their private keys or even threw away their hard disks. So we have a limited supply on the one hand, and we also have huge funds investing in Bitcoin, massive mining facilities, giants like CBOE and CME offering Bitcoin futures for traders, presidents and officials discussing Bitcoin on the other hand – there is a whole network of people who rely on it. I really do not see a scenario in which BTC crashes to zero. But, just like the past has shown us, you should never rely on something too heavily as there is no such thing as a fool proof investment.

So – will Bitcoin crash in 2018? Well, here it is – this is the crash. You can watch it now. But I believe Bitcoin will come back even stronger and will probably finish this year on a bullish trend. These are my observations only so please do not entirely rely upon them.