🤔 Is Now The Perfect Time To Invest?
👋 Hi finance enthusiasts and fellow investors!
As another week draws to a close, I hope you've had a productive and fulfilling time. This week, I wanted to address some commonly asked questions that often come my way, both through CryptoExplorer and on a personal level. So, let's dive right into it!
When the price of Bitcoin drops, does it mean that the value of Bitcoin has also decreased?
No, because price and value are not the same. Look, if you're thinking about buying Bitcoin in 2021 at a price of $60,000, what's stopping you from doing it now? The overall situation around Bitcoin has not worsened, in fact I would argue it has improved after we saw the SEC not attack Bitcoin itself. But I understand where that kind of thinking comes from. But let me give you an example:
Imagine you saw your favorite T-shirt in a store a year ago, but the price was too expensive. Now you see it and it's 50% off. Wouldn't you take the offer and buy the t-shirt now?
The same is true for Bitcoin. If you have already thought about investing at $60,000, what's stopping you from investing now that you can get it at a 50% discount?
Remember: Price ≠ Value!
What if prices goes lower? Should I wait for a better time?
Look, no one can predict the future. We don't know what will happen in the next few days, let alone in the next few months. Every investor has this question in their mind and it makes sense because we want to get the best price.
When it comes to real estate, I feel the same way right now. Putting a significant portion into something that is illiquid, is something I am not used to so far. So I currently have the money invested in cash with a risk-free return of 3.2% per year. You can do that too, I wrote about that 9 weeks ago:
The problem with real estate is that you can't split your investment into multiple smaller orders. And that leads me to my point: when it comes to crypto or the traditional financial market, you can actually split your investment!
That's why I recommend people do dollar-cost averaging (DCA). This means not buying all at once, but buying in multiple orders either over a longer period of time or at specific price levels. Price goes lower, you buy cheaper. If the price rises, your original investment has already risen and you can increase your investment or stop and let the original investment roll on 🧠
If you want me to go deeper into DCA, let me know (reply to this email).
Should I buy X or Y?
This is a question I often hear. You see, first of all, I can't make personal investment recommendations. Second, in most cases, I don't even know the project.
I can take a quick look at the project, and if there are red flags, I will share them. I also always recommend doing your research on the projects. Don't blindly believe your friend who thinks they can get rich doing it (first red flag). Take your time to research the project.
If you can't decide, I always like to ask a counter question. Why don't you invest in both projects?
Sure, if you only want to invest a small amount (less than $50), I would limit myself to one coin to avoid high fees. But if you like two things, buy both. Split your investment into multiple projects or buy one - then safe money to invest in the next project.
How much should I invest?
As a rule of thumb, especially with crypto investments: Never invest more than you can lose! But even with safer investments, make sure you don't need the money.
Make sure you always have at least 3 months of expenses saved. As you build your portfolio over the years and have a higher net worth, you can increase that amount.
And as we said earlier, you can invest in several different projects as you build your portfolio. Diversification (that's what it's called) is important for any investor!
How to keep an overview over my investments?
It is important to keep track of your own net work. For this reason, I already created a short summary a few weeks ago. You can find it here.
Start documenting your journey early! If you need to understand what you did 3 years ago (for tax reasons or whatever), you will thank your younger self. And it's very motivating to see progress after a few years! 📈
👉 The next steps
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And don't forget, I'm here to help you! If you have any questions, ideas, or specific content requests, simply reply to this email. Your feedback and input are invaluable to me!
Wishing you a fantastic weekend!
Cheers,
Stefan
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