Invest Like You Are Buying Groceries... ON SALE!
Why People Love Sales, Except When Investing
Just the other week the local grocery store was selling pints of strawberries for just 75 cents each, down from the normal price of $1.99. What did I do? I loaded up my cart with the maximum amount (It was limited to 5) I was able to purchase in one transaction while it was cheaply priced.
I went back this week and strawberries were back to $1.99 per pint. So I thought I might check and see what other fruit was on sale this week.
This is how I shop, and I think most people shop as well.
A computer gamer, like myself, might hardly purchase a new game – no matter how much they want to play – because they know it will have a large discount during the Steam Summer Sale.
If you wanted a new car, a bargain shopper might wait until the dealer is trying to make room for the next years models and unloading last years for a decent price.
I think many people tend to look at what they are buying with a nod towards the value they are getting for the price they pay. When things go one sale and prices drop they buy more of what they need and want.
Except when it comes to the crypto market.
In the crypto market there is an almost irresistible pull towards the newest ICO that everyone seems to be talking about. It is the coin of the future! A new paradigm! If you don't buy in now you will miss this amazing opportunity!
It is not just the average investor that feels this way, even the pros can find themselves investing in the latest ICO “Just in case.”
It appears to be human nature. Nobody wants to miss the boat on the latest hot coin everyone is talking about. Plus, it is comforting to know that lots of other people are buying in as well. It's almost like being surrounded by supporters of the same politician. There is comfort in sharing the exact same ideas and hearing them repeated from many different sources (even if it originated from the same source).
It is this circle of comfort that allows investors to feel good even if their investments are going down. I mean, you may be down but so is everyone else you are listening to.
The other set of investors, the ones that don't live in the circle of comfort, end up disillusioned and with a bad taste in their mouths when their investments drop. They cannot stomach buying more when the price is low and often end up selling. Everything they see is doom and gloom and they get scared.
But crypto investing shouldn't be any different than buying strawberries when they go on sale. You want to load up when they are on sale, not when they are being talked up to sky-high prices. But when they are cheap it is not exciting, and few people want to get into something when it is “boring.”
Everyone Is A Genius When The Market Is Rising
Think back to November and December of last year, new highs were being reached almost every day in the crypto market. People were talking up this or that ICO or saying XYZ coin is the next coin to pop.
And they were probably right. Everything was going up. It didn't take a genius to pick a winner. Even the most obvious scams were some of the best places to make money (if you could sell to some schmuck before it all collapsed).
But it is important to understand that NOTHING grows at super high rates forever. Growth WILL slow, but often not before prices have been bid up to astronomical highs. When the bubble pops, the financial injury to the bagholders is high.
So just as like it is smart to buy strawberries when they are on sale, it is smart to buy your crypto investments when they are as well.
Just like it makes more financial sense to buy last years model car when it is on sale. Not only do you save money, you also can learn more about its performance. For example, you can read reviews from current owners. Maybe some important issues were found and a recall was required to fix them. Maybe people say they now hate the car because of this or that thing.
So maybe its time to look at what was hot last year but hasn't been found to have any large problems and is only down because of market sentiment?
Food for thought.
I do the same thing at the store. To a certain extent, I buy what's on sale. There are certain things that we have to get a specific item because the regular one contains something that we can't eat, but for the most part, I try to stay brand and flavor-flexible. If Fuji apples are on sale this week, that's what I'll eat. If Gala are on sale the next week, I'll switch to that. It's an easy way to save money.
I think one of my issues with looking at crypto like this is that the value of the strawberries you bought was well-defined. We all know that a pint should cost around $2.00 if it's not on sale. The problem for some people with using the similar style for cryptos is that the crypto is an ownership in a company, organization, or group. It's value is flexible. For an uninformed investor, the drop in price could be related to tangibles (CEO leaving, anti-trust investigation, lawsuit, etc...) or it could be FUD. If you haven't done the research, it's hard to keep up.
Also, because all of this is so new, it's difficult to tell what the "regular price" is for most cryptos. I know a number of people who got caught day trading crypto because they bought at sale prices in January, only to see the bottom fall out. I think as the markets get more mature, the prices will level a bit (sort of like the stock market) once people really figure out the value and some idea of a P/E (price to earnings) of a crypto.
All that being said, I agree with you. I can't give investment advice, but if a person really believes in a specific crypto and thinks it's going to do better in the long-term because there aren't any real reasons for the price to be depressed, it's a great time to buy in. Why not save the $1.25 on strawberries. You're going to eat them anyways. :)
Excellent comment noname, thanks for it! :D
Certainly is a whole new market to figure out, for everyone.
Wow, I forgot I did such a long reply. Sorry about that. Ha ha!
Everyone has different risk tolerances, and the people who have a higher tolerance are the ones who have the potential to reap some big rewards!
I think my problem with crypto is that I struggle with how to value it. Please let me know if you all have found a way; besides potential % of the money supply.
There's still that thought in the back of my head wondering if the current mainstream name will just be replaced with the next big thing.
I'm not one that panic sells, as I've chosen to manage my risk by position sizing. If they all go to 0, I'll be the sucker hodling till the end. But, that also unfortunately keeps me from taking on large positions.
Sometimes jumping on the momentum train, and getting off during the ride, is just easier for me mentally from a risk perspective.
So much easier to buy value when you know what you're buying, and you know its value to you.
The real trade here is buying those strawberries from your market and selling them in NYC for 4X :)
The people I see in cryptos are trying to be a trader of cryptos when all that guarantees that your going to get destroyed by fees and taxes. 99.9% of traders in the normal stock market do worse than those that buy and hold an index fund. Wish I was binance or a trading platform..
We do have to be very careful to look at each ipo or crypto or any investments for that matter that we aren't having a bias toward what we know. It can make it seem like something is a good idea but it's actually terrible.
The problem I've seen in many crypto investors, is that everyone wants to become millionaires with a single investment, but at the same time, they only dare to invest when prices are rising, I really have lost the sense of that logic.
Everyone wants easy money, but they only end up BEING the easy money...
What you say about strawberries makes the most sense and that is how people should buy in normal countries.
But about crypto, the problem is how to identify a bottom? A few months when Steem was priced at 4$ it seemed like a stable price, and now it is less than half of that.
Of course buying crypto right now should be a good decision, but most people willing to invest in crypto already invested a few months ago after having already experienced a strong price drop. Anyhow, I agree right now is an excellent time to buy any crypto, but perhaps because it is summer people are focusing their attention in other stuffs.
But about crypto, the problem is how to identify a bottom?
Ahh, and that's the rub.
But for me? I wrote about it all and don't believe it will rebound until Bitcoin trades between $1-2K again.
The same thing happens with each new coin listed on Binance. Such a huge pump in the price followed by the dump. Its all about the hype unfortunately.
That's all it really is right now. Steem is the only one being used every single second as intended.
I really think that Steem is once of the best examples of the blockchain working in practice with decent adoption too. So many crypto currencies out there just have absolutely no application / working product and they are valued higher than Steem. I think Steem is undervalued because of that fact and can't wait for it to reach its potential.
@getonthetrain I want to buy some more crypto but everything in my bones tells me to keep buying the Silver I like.............
Gotta follow your passion
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