Updated: Aug 16
Everyone has fears. Some rational and some irrational.
One of my biggest is missing out on the next big investment opportunity that is "going to make everyone rich."
Crypto and NFTs checked this box through much of 2020 and 2021. I made a decent amount in crypto and trading NBA TopShot cards in those years, but nowhere near the 1,000x returns some people realized.
The temptation to guess which new coin would explode or the next NFT issuance to go viral was alluring. It seemed like everything had the possibility to turn $1,000 into $1,000,000.
While the crypto craze may return, it likely will be something entirely different next time. And when the new hot investment takes TikTok and Reddit by storm, I will remind myself of a few important things:
YOU ARE ONLY HEARING STORIES ABOUT THE 0.0001% OF WINNERS
It sometimes feels like "everyone" is making big money on these investments. But the reality is there are 1000x more people who lost big by making dumb bets on similar investments. If you are going to invest, go in with realistic assumptions, not those driven by the few and far-between success stories.
IT'S OK TO PLAY, JUST DON'T MESS UP YOUR LONG-TERM PLAN
Investing in new things is fun and exciting. And many times, it's the best way to truly learn about something. But for new, risky investments, keep your initial investment to an amount that you can lose everything without causing problems. Make sure that if it goes to zero you won't risk your future. Don't stake your retirement on the new crypto project, and don't risk the kid's college savings on an NFT. Be prudent with the big things, but feel free to have fun with the little bit of extra.
HAVE A PROFIT TARGET
People made a lot of "paper money" on meme stock trading, only to lose it all in the next week as it crashed back down. If they would have maintained a consistent profit target, they may have actually captured and kept those profits, instead of going back to square one. It's alluring to think it will always continue to go up and to try and squeak a little more return.
But all big runs come to an end. Many times they end suddenly.
Instead, have profit targets that create some forced selling. Many times it can be tiered. After a 30% gain, you take 1/3 of the money out. After another 30%, you take another 1/3% out. Make the targets however aggressive you want, but stick to them when they are hit.