Hi there,
It's been a while since I posted this series (or anything for that matter!) Family life has been busy but I have not forgotten my Steem brethren ;-) Hellooooo, everyone!! I've been thinking a lot lately about crypto investing, with some sleepless nights on whether I should trade in and out of some digital currencies. But then I remembered what I read about Alan Greenspan and his investment philosophy. Greenspan was a renowned former chairman of the Federal Reserve (aka the U.S. Central Bank) and someone that I respect and still follow. For those of you who are investors (or thinking about investing) in the turbulent world of cryptocurrencies, this article might be helpful. Enjoy!
Never sell. If you have done your homework and conducted a thorough and thoughtful analysis of a cryptocurrency, then buy some without hesitation and hang onto it for the long term! As investors, we need to do our research and once conviction sets in, then jump in. What is the ideal holding period: answer is long-term (or forever as Warren Buffett famously said, “If you aren’t thinking about owning an asset for ten years, then don’t even think about holding it for ten minutes”). Greenspan states, "The market pays a premium to those willing to endure the angst of watching their net worth fluctuate beyond what Wall Streeters call the 'sleeping point'." My personal advice for those of you watching your net worth in the digital currency markets every 2 minutes: just FORGET about it!! Believe me, you will sleep better AND your investment will have time to grow.
Don't try to time the market. This advice is very much linked to the first advice above. Some of us who invested in digital coins that had a nice run-up may feel anxious to sell out and take profits. Why? because we can see that the market is forming a bubble, right? We can all see the charts and realize that it is being 'overbought' or that the momentum shift upwards is too sudden and 'unsustainable'. We can all spot a bubble, BUT the problem is how can we tell WHEN the bubble will burst... From my many years of investing and from anecdotal evidence, it is extremely difficult to correctly call the top of the bubble. Sure, every bubble will deflate at some point in time, but when?? History tells us that market bubbles tend to burst when nobody expects it. In other words, bubbles burst when EVERYONE (including the taxi drivers and the shoe-shine boys) is super-optimistic about the prospects of an asset. This is another prime example of why we should follow the first advice and not sell out too early from a successful investment. I personally know of Ethereum crowdsale investors who sold out when it was $2 USD and take the profits off the table. Some of them have waited to try to buy the 'dips' and get back in, but the dips never came. And besides, some would argue that we are far from any kind of bubble as mainstream adoption of digital currencies and the blockchain technology have yet to occur. Good point! Yet another reason why we should not sell in the first place...
Diversify your investments. When it comes to crypto-investing, diversification is key. For one, we don't really know if that digital coin is going to succeed in the end, so we do not want to put all eggs in one basket. But in my humble opinion, diversification is also key to outperforming. Greenspan states, "When people are familiar with an investment environment, they harbor less uncertainty, and hence, less risk than they do for objectively comparable investments in distant, less-accessible environs." In other words, if we can overcome our investment bias whether it is based on geography, language, or technology, there might be opportunities to taste outsized gains. For one, I am a believer of new coins coming out of Asia, such as NEO (formerly Antshares) or QTUM (a Bitcoin/Ethereum hybrid). Just because some of these websites are in a foreign language or that they cater more to the Asian marketplace should not be an obstacle for a smart investor to overlook potential investment opportunities.
Hope you enjoyed this article and found something useful. Which advice did you like the most from Alan Greenspan? Please reply and let’s share our thoughts. Thanks for reading!
If you liked this article, check out my previous posts on personal finance.
Personal Finance Series #12: Advice from the Oracle of Omaha
Personal Finance Series #11: Tips for Newlyweds
Personal Finance Series #10: Financial Habits of the Wealthy
About the Author : I am a cryptocurrency enthusiast/investor and a U.S. Certified Public Accountant with over 16 years of experience in accounting, taxation, and finance.
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