It often times boggles my mind when you see analysts on CNBC and elsewhere talk about a stock or a cryptocurrency being in a bubble or volatile, and how you may want to stay away. Another thing that drives me crazy is how we were never taught in school how to make money in the markets, about the life cycles of markets, about dollar-cost averaging, and so on, and so forth.
All I was ever really taught in school were things which ended up being completely useless. The basic kindergarten through high school system in the United States is completely broken. You are only given knowledge that doesn’t really help you succeed, unless of course you plan on being a rocket scientist or something so you can use your algebra, etc.. know-how. The system is designed to build herds of people who graduate, then go on to spend unnecessary money on a college education, and end up working some 9-5 job and being in debt the rest of their life (or most of it anyway).
Why doesn’t the school system give an option of a different set of learning/life skills for those that don’t want to go this route? Why can’t they teach entrepreneurship skills, ways to budget, save, and invest your money, and how to start your own business? Why can’t they teach about the Stock Market and these days, the Cryptocurrency Market? Why do we have to keep the curriculum the same and not adjust it to modern times? This isn’t the 1950’s anymore, things have changed.
While the price of Bitcoin and other cryptocurrencies soared at the end of 2017, all you heard in the media was about how it was a bubble, how bad it was, how it was going to zero… STAY AWAY! Completely ridiculous. Obviously Bitcoin was in a bubble, which is normal. It’s a part of a normal market cycle. We’ve now reached what is likely a bottom, and the price will fluctuate a while, find a floor, and begin to rise again. This time we’ll likely be going much higher, my guess is around $30,000 per Bitcoin as I mentioned in my last blog. You need to go against the “traditional thinking,” study, form your own opinions, and try to time the markets the best you can to buy at a low, and sell at a high. You can’t always time it exactly right, but if you pay close attention and learn from your own trial and error, you can get it pretty close.
Once Bitcoin recently hit around $6,500 and another cryptocurrency, Ethereum, hit around $650 I jumped in and bought more of each. As of this writing Bitcoin is sitting right around $8,200 and Ethereum is sitting right around $820. I see them both climbing MUCH higher over the next month and beyond. It will be volatile, there will be swings, but that is exactly what you want to happen. If the swings are wide enough I may even do some swing trades in addition to my long term holding strategy. You better believe though, once we get around the $30,000-per-Bitcoin mark as I am predicting, I will be selling a large majority. I’ll then wait until another huge drop, try and determine a floor, and buy back in. Then I will have more fiat currency to reinvest. Rinse and repeat, over and over. As I said, you can’t always guess exactly right, but if you are at least trying, you’re doing better than 99% of the rest of the population.
If one of your holdings falls, and you still believe in the holding as much as you did when you originally bought it, buy more. This is dollar-cost averaging. If you buy more of something at a lower price, you have now lowered the average cost of your entire holding, so when it rises back up again, you’ll see more profit. What do you know? Yet another thing that we were never taught in school! Likely because most of the teachers don’t even understand this concept.
Right now the traditional Stock Market has even become more volatile. As of this writing, the Dow Jones is up around 250 points, coming after being up around 500 points yesterday, following a day which saw us go down around 1,100 points and another which saw us shed around 666 points. Yes, that’s volatility. I still believe in the investments I recently held and mentioned in my last blog, but as we swung up large after the large drop, I sold my entire stock portfolio as I was sitting on about a 20% gain for the past six months. Once I decide that I’m ready to buy back some of my favorite positions (hint, likely Netflix, Facebook & Amazon first), I’ll hopefully be able to get in at a much lower price than I sold for. If I don’t, it’s a lesson learned. It happens, and I’m more than happy with my profit in those trades!
Do you agree that our school system is broken? Do you understand the concept that a bubble isn’t necessarily a bad thing? Any other thoughts or comments? I’d love to hear them!