Let me begin my saying I am not even going to touch the topic of whether or not CryptoCurrency is a good investment. I just think that the way people flocked to invest in it and later sold out highlights the investing mistake far too many people make. I'm going to try list a few of the usual mistakes and relate them to the recent Bitcoin Hype.
Buying High and Selling Low
When you invest the goal is to buy low and sell high. The idea is simple but way too many people don't follow it. Why? Because by nature we act when everyone else is acting. In this chart we see how the increasing value of bitcoin is directly correlated to the Google Search trend. As the price increase, more people wanted to invest in hopes of getting rich. Everyone focused on the high returns thinking they could become rich overnight. Now that CryptoCurrency is crashing people have already starting to pull out. It's such a massive influx that Coinbase went down. The people who invested before the hype made money, but the people who invested at the peak and are now panicking to get out either lost money or broke even. This isn't unique to CryptoCurrency either; the same thing happened with the dot com boom, the pre housing market crash of 2007 and the current bull market. The point is you shouldn't invest in something when its popular because chances are you're investing at the peak.
Timing the Market over Time in the Market
If you had invested in a Total Market Fund in 2007 (the peak of the market) and held your money through the 2008 crash until today you would have doubled your initial investment. Trying to figure out when the price of something is "low" or "high" is almost impossible for the average investor (heck, it's no cakewalk for the pros either). You need to put your money somewhere safe and just wait. Warren Buffet once said "If you aren't ready to hold an investment for 10 years don't think about investing for more than 10 minutes". The example with buying at the 2007 peak is a perfect example of that saying. Crypt is yet another example of people rushing in and then rushing out of an investment.
Betting it All on One Hand
Let be clear: investing is just gambling with more fancy charts. Think you know what investment is going up? Think again. A group of monkeys throwing darts will probably build a better portfolio. That's not in insult of your intelligence, it shows how unpredictable the market can be. I mean in 2016 one of the best performing stocks was Domino's Pizza. Who saw that coming? Almost nobody. You can't beat the market so you need to diversify your investments. Putting $10K on Bitcoin in hopes of turning it into $20K is just asking to lose money.
I know a lot of people are going to reply and say that Crypto could go back up. I also know that there have been some Bitcoin ETFs poping up which some people consider diversified. I don't want to argue about those topics because I feel like they defeat the purpose of this post. I honestly just felt like the incredible popularity of Bitcoin is a great example of the mistakes people make when investing. Hope this helps some people learn how to better invest their money.
Submitted December 22, 2017 at 10:17PM by SalahAssana http://ift.tt/2pdghr6
