Back in 2015, I read a book called, The Zurich Axioms, by Max Gunther.
Since that time, I have spent a lot of time trying to put Max’s ideas into practice.
The following are some of my reflections on what I’ve learnt about hope.
Recently I suggested that letting hope get the best of me led to times when I failed to profit.
And by profit, I, of course, mean more than just money, and so does Max.
Which is why his book is of such interest.
Mr. Gunther had this to say on hope:
When the ship starts to sink, don’t pray. Jump.
Accept small losses cheerfully as a fact of life. Expect to experience several while waiting for a large gain.
His reasoning is easily backed up by a little bit of math.
Let’s say you start with $100 and lose 10%.
You are down to $90.
Then you gain 10% and you are up to $99.
That’s right, more than an 11% increase is needed to get back to the original $100.
Yet, this is not what us new investors are known for.
We’re known for instead, we hold (or “hodl” if you’re part of the “it” crowd).
As a hoping investor, I am inspired, but not by math or any other kind of logic.
Instead, I am inspired by hope sprinkled liberally with imagination.
There are three specific things that I imagine:
1. I imagine that “It’s going to come back”
This is especially true when I’m investing cryptocurrency.
Given the volatility of the asset, wild fluctuations are entirely possible and often seen.
So, it’s easy to say, “Well, tomorrow it’ll just bounce right back.”
And the dangerous part is, sometimes that’s true!
Except tying my money up so that it can’t profit me is never the best solution.
Here’s where math often plays a role for me.
I sit down and figure out whether or not selling short and buying at a lower price will turn a profit for me.
That way, if the market does come back, I stand to profit a lot more.
If it doesn’t, I now have a position that makes me a little bit of profit.
This can also be true when investing in people.
It can be hard to give up on someone you’ve given time and effort to.
Yet, holding on too long doesn’t benefit anyone.
2. I imagine that if I haven’t sold, then I haven’t yet lost anything
Actually, this kind of thinking makes sense in one place: when you’re invested for dividends.
When buying an asset that is meant to provide dividends, the value (cost) of the asset is irrelevant as long as the dividends perform as expected.
Other than that one instance, though, imagining that paper losses aren’t real is just foolish.
Outside of the world of monetary investment, I fall for this, too.
I imagine that if I bury my nose in a book then the problem that I should be investing more time and effort into fixing will just go away.
Books may not be your particular escape, but I hope that you may still be able to relate.
Unfortunately, though I have fallen victim to this hope more than once, I have not yet worked out a fool-proof way of guarding myself against it.
I suppose you could say that escaping from escapism escapes me.
3. I imagine that I can gain 100% of the time and never lose
I want to always win and never lose.
When I choose to live in reality, though, it’s clear that losses happen.
Sports provides the go-to example to illustrate this for most people.
Even top-performing athlete loses more than s/he wins.
It is possible to build an incredible career and be considered a stellar performer with just slightly better than average performance.
Another name for “slightly better than average performance” is “the extra mile”.
How do you get to “extra mile”?
For myself, I simply look for anything that average performers complain about and just do it.
Any time someone around me says, “That’s not my job”, “I don’t get paid for that”, “That’s so beneath me” or anything like it, I roll up my sleeves and get at it!
My observation is the same as the late Zig Ziglar’s, “There are no traffic jams on the extra mile”.
Having explored a little bit about hope and the imaginings it inspires, I can say that Max Gunther is exactly right when he says, “When the ship starts to sink, don’t pray. Jump.”
I’d love to hear about any time you jumped or didn’t, and how things worked out in the comments below!
When a bull market reverses and the trend turns downward, it's probably a good time to sell. But I think there are also times when certain stocks or cryptocurrencies get oversold, and that is when I am interested in buying.
I am not sure if Steem is oversold yet but I am buying a little bit every month, so there's a good chance I'll be able to accumulate more Steem at oversold prices if the cryptocurrency goes lower.
Aside from books, I think it is important to recieve updates from investment analysts.
Mauldin Economics has served me well and I am subscribed to their free newsletters. They are predicting a financial crisis of EPIC scale in the near to mid-future.
Good luck with all your investments @wrashi and thanks for another post!
Thanks for the comment, @chrisrice! Sounds like you're on a path of learning and in my opinion, that's the best path to be on!
In the past, I have used both Dollar Cost Averaging and Value Averaging with great success. So I agree with you! If you can find a bargain, buying more for cheaper is an obviously smart move. Just keep your eyes open and don't get caught buying more and more of something that's gone bad.
Out of curiosity, how will you know if Steem (or another cryptocurrency) is oversold? What are your criteria? How often do you make your measurement?
This is just a rough estimate but I believe Steem will be oversold if it goes below $0.17 USD.
The head and shoulders pattern found on the logarithmic chart marks a low target price of $0.25 and anything $0.16 or lower places Steem at a market cap of less than $50 million.
When I traded penny stocks in the mid to late 2000's, some of the stocks I was trading had a market cap of $50 million to $200 million and these were pretty much sham companies. That leads me to believe that buying in at Steem for $0.16 to $0.17 would be an absolute steal.
I am not sure if it will go that low but if it does, there is a good chance I'll be able to purchase some Steem close to that price since I am buying a little bit of Steem every month at a level that is comfortable for my family and I.
I am not sure about this since anything can happen and I could be wrong, but I tend to believe that the head and shoulders pattern will complete itself and that Steem will head towards $0.25.
P.S. I would be happy to purchase Steem anywhere in that territory though, even if it doesn't fall to $0.16 USD.