Monday For Business, Being Greedy at the Right Time

Investments always carry an element of risk.
But of all the risks an investor faces,
our own minds are the biggest risk of all

By nature, humans aren’t well-suited for making investment decisions.
If we let our instincts control us, we tend to trade based on
two emotions – fear and greed.
Instinctually, we get scared when the price of a desirable asset drops and sell (or refuse to buy).
When prices soar, we get greedy.
That’s because of a different type of fear – the fear of missing out (FOMO).

A 2012 study by BlackRock is the best evidence I’ve seen of the effects these
emotions can have on investment returns.
And the results ain’t pretty.
It shows that over a 20-year period, the average investor returned just 2.1% annually,
while the overall stock market returned 7.8% annually.

Let’s take a closer look at the first sentence.

“Volatility is often the catalyst for poor decisions at inopportune times.”

Indeed it is.

Dramatic price swings mess with our emotions and impair decision making.

With cryptocurrency being far more volatile than the stock market,
it’s even more important to be a disciplined investor.

I’ve cited this study before, because it’s a critical lesson.

If we let our emotions control our trading, the results can be devastating.
Harnessing Fear

Instead of giving into fear, you can actually use it to drive
better investment decisions.

Here’s what you do.

Whenever you’re feeling fearful about the price of an asset you like, step back and evaluate the situation.

Is the long-term fundamental bullish case still intact?
Is progress still being made?
Will the asset still be desirable in the future?
Are there likely catalysts that should drive the price higher?
Am I getting a good discount?

If we use bitcoin as an example, I would say yes to each of those questions.

The technology is growing by leaps and bounds.

Infrastructure is being built out across the world.

Trust in fiat money is dropping. Inflation is creeping up (soaring in some places).

I think you will like this post.
Enjoy your Monday.
Have a good day.

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Thanks for your up-vote, comment and re-steem

(We are very grateful to this. And you continue to have success)

(Deepak Kumar Ahlawat)

@ahlawat

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