Baron Rothschild is famously quoted as stating, "Buy when there's blood in the streets, even if the blood is your own." With the world currently in a financial recession and the Russian-Ukraine war spilling blood, now is a great time to buy.
Common Mistakes
When the economy is booming many people spend and save less. When the economy is in a downturn many people save and spend less. If you do the opposite of this, you will develop the habit of building wealth.
When the markets are down you want the ability to 'buy the bottom.' If you spend your cash during the boom you will not be able to seize a once-in-a-decade opportunity to win massive gains; you will have to wait until the next crash.
Commonly, rookie investors buy when the market is high and when the crash comes they sell, at a loss. This bad experience leaves a poor taste in their mouth and they no longer want the responsibility of managing their own portfolio. They will then rely on their 401k or Roth IRA.
Another common mistake is that people try to time the bottom. If you want to lift the burden of portfolio management simply dollar-cost-average. Buy consistently. Find out what cadence works for your cash flow. This may be monthly, weekly, or daily. No matter what the price is, you buy a little bit each time.
Errors often occur because of FOMO (fear of missing out) or FUD (fear of dumping). Investing is an emotional game. One of the common causes of investing errors is watching your portfolio too much. Rookies open their investing app several times a day. They might see a stock going down, dump it, then the next day it recovers and rises above its previous high and now they're nauseous.
Some rookies look at investing as a form of cash flow. They want to get rich quickly. But this mentality will lead to mistakes. The idea is to hold over a long period and sell when you want to move the cash into another form of investing, like real estate (keep your capital working).
"If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes."
Warren Buffett
Play the long game.
The main reason you don't want to make the mistake of holding your cash in the bank is due to inflation. Money in the bank is like leaving wood around termites. Inflation will slowly eat away at your cash.
How Much to Invest?
How much of your capital should be invested? After you have your nest egg, I recommend a year's supply of cash. This means, keeping enough cash in the bank to get you through the year assuming you have no money coming in.
90% of the rest should be working in investments. The other 10% is held to seize opportunities that spring up unexpectedly.
How you divide your pie depends on your risk tolerance. If you are married with kids then your risk tolerance is low. If you are single with no kids and living with your parents rent-free then your risk tolerance is high.
If you have a high risk tolerance then your portfolio will carry more cryptocurrency than someone with a low risk tolerance. A high risk tolerance portfolio will carry more tech companies and young companies and if your tolerance is low then you will be heavy on blue-chip stocks and index funds.
A low risk tolerant portfolio may carry 80% blue-chips and 20% cryptocurrency. A high risk tolerant portfolio may be somewhere closer to 50/50. Ultimately, the decision is up to you.
Investing in Cryptocurrency
You will get various opinions on this subject from many different sources so do your due diligence. My suggestion is to go heavier on Bitcoin ($BTC) and lighter on Ethereum ($ETH).
Then there are thousands of other "coins." Be careful with the rest. You could lose everything!
The only other coin I will suggest, not only because they are my sponsor, but because they have sound business practices, actual use-case, and sound business practices is Syscoin ($SYS).
Stay away from trading/day-trading cryptocurrency and stocks until you become experienced.
If you want to learn cryptocurrency the best source is Bitcoin Mystery School.
If you want to learn cryptocurrency the best source is Bitcoin Mystery School.
What to Read
The best read to understand investing is a long and boring read called "The Intelligent Investor." I would suggest reading this before even taking the advice of this article. It will give you a history of the markets including its boom and bust cycles and how the wealthy take advantage of each.
Every industry has its own language and finance is certainly no different. To catch you up to speed on the jargon check out "How to Speak Money."
If you want to learn about the history of money and central banking get a copy of "The Patriot Patriot." This eye-opening title will blow your noggin (and might make you furious)!
Closing Thoughts
The goal is to beat inflation, not get rich quickly. Wealth is not built overnight. It's built with patience and timing. You don't want a few thousand dollars now. You want to turn thousands into hundreds of thousands to help you retire sooner.
(The information provided in this article is general educational information provided to illustrate certain financial ideas and concepts. This information does not take into account your personal situation and should not be considered personal financial or investment advice. In reviewing this article, you should consider whether the information presented is appropriate for your particular needs, and, where appropriate, you may wish to seek advice from a financial professional to determine what is best for your individual financial circumstances. MenofOrder.com does not make any guarantee or other promise as to any results that may be obtained from using the content of this article.)
