Diversify & HODL: The Risk Free Way to Retire Early
It might be tempting to cash out when you see your stocks or cryptocurrencies mooning. Good profit right? Similarly when you see a 10-20% loss your hands start getting weak and your instincts call for selling. Things is, statistically, for the average folk, if you start trading you eventually going to suffer big losses. Trading advice is also (most likely) a scam like I mentioned in my previous post.
If you don't have a big capital, the best you can do is Hodl for the longterm. When it comes to the young market of cryptocurrencies — if you genuinely believe that the future will be build around blockchain technologies — a broad diversification (top 20 currencies) would suffice for you to retire in 10 to 15 years from now. The worse thing that can happen is for you to gain an overall 2-3% gain over your original capital. It is highly improbable for you to lose your entire capital. For that to happen the entire blockchain idea has to collapse.
At this point of cryptos, with that kind of market cap, you can't completely lose your money if you diversify on the top 20. Those are technologies with a backbone that breach wide even in the FIAT world. Even if half don't make it 10 years from now, you are going to see huge gains on the survivors.
No matter what is going around you, no matter how painful some days might be, hold tight. Patience is a great virtue and will pay out accordingly.
The stock market is a rigged casino.
All the people who are stuck in 401k's are being fleeced left and right.
Trend trading works, if you are good at recognizing the trends.
Technical analysis also works, if you are ok with 60% odds.
In both, you have to keep your fear in check.
And both you need to have a strong knowledge of the market.
The things I hate about the stock market is that:
How did you come up with 60%?
It is a rounded number from the basics of technical analysis. (books)
Given such a pattern in a stock price / volume, then the likelihood is that the stock is going to do X.
This is better than a 50/50 guess, but not by much.
If you see a cup and handle, the price is going to go up... a lot of the time.
If you see a shoulder and head, then you will probably see another shoulder... a lot of the time.
Statistics is nothing but history.
It does not tell the future.
60% chance of being right is still 40% chance of not being right.
Do not bet the house on the 60%.
Bet a little on many different assets that will moon if you are right.
Recommendation:
Black Swan by @nntaleb
The Black Swan is why I don't place any trust in the stock market at all.
And yes, technical trading is betting on just above average odds. But there are people who make a living off of it.
My recommendation, to be more succinct,
If you don't have the skill, the knowledge and the guts (emotional control) for technical trading, Don't do it. All you will do is lose money.
The problem is a lot of people will overestimate their skill, knowledge and emotional control for technical trading.
That is indeed very true. (And truth be told, many of them are just addicted to gambling.)
"If you see a cup and handle, the price is going to go up... a lot of the time.
If you see a shoulder and head, then you will probably see another shoulder... a lot of the time."
This is exactly how the large boys take your money. Because they know you know these things.
I agree that the stock market is rigged. Index funds are the safest way to go although one might not enjoy big gains.
Trend trading does not work. Obviously everyone knows the trends but some lose and some win. That game is also rigged from whales that sell false hopes and pull out early with inside training. Most traders, on the long run, are going to suffer big losses even if they know the trends.
"Computer algorithms are designed to front run your order. So, the actual investor pays more / gets fleeced with each transaction."
Read "Flash Boys". it describes this very well.
As an example of trends losing, as you say. Gold. The trend for gold is up... but the reality has been flatlined. Mostly because of huge market manipulations, but still...
This is why indexing is smarter than trading.
https://twitter.com/RichardCrill/status/863209962465525760
Disclaimer: I am just a bot trying to be helpful.
Agreed.
Buy solid tokens and never sell unless you need the money for emergencies.
It is the brave thing to do to get financial freedom.
ok..what are your top 5 cryptos to have invested of then??
Thinly spread over most of the top 50.
50 is too much for a naive person about cryptos..steemit was way to easy to learn compared to the rest :)
Don't learn it, just buy it.
Buy with only what you can afford to lose.
Then start learning and buying or even earning more as you learn more.
Good post. This is my plan too.
Can't do wrong really
great post
Thank you
you're welcome
A very interesting post dear friend @kyriacos, thank you very much for your point of view and all this information
My pleasure
I invest in three coins. There's no doubt that there is a possibility one or a few of them could reach the value of Bitcoin in a few years. The technology caught on quick and it's being developed quicker.
I use to trade frequently to make money fast, but I realized I could make a lot more if I saved up instead.
I think 3 is a little too few. Way too much risk.
I try to explain to people that buying some crypto for the long-term is like betting on electricity and the internet. It's weird that no one thinks twice of spending entertainment money on beer, movies, whatever, but they get all uptight about just throwing some modest amount on some coins as if that's more like ''wasting'' money. There's probably a fallacy named for that type of thinking.
HODL the internet
Great post! I totally agree :)
glad you enjoyed it! :)