*Playing a PS5 FIFA football match on a random evening in 2021.*
My Friend: “I’ve been hearing about this crypto thing for a long time. I hear there is a dip, and they always say buy the dip. Al, what do you think, what should I buy?”
Me: “Umm, well, Bitcoin?”
My Friend: “No, Bitcoin is so yesterday. I need something cooler.”
My Friend: “Yes! Let’s do this. Can you help me in setting up an account?”
Me: “Are you sure you want to do this? Maybe instead, work on your football gaming skills. You’re losing 5–1.”
My Friend: “No, I really want to do this. I will leave it for five years and forget about it. Then find out that it multiplied by 10. Can you imagine that?”
Me: “Well, it happened to others. So yes.”
My Friend: “Alright, let’s do it. I am excited!”
Me: “I do not want to take responsibility for this. Are you sure you won’t call me or freak out when it drops? This market is very volatile.”
My Friend: “Five years, and if I lose my investment, it does not matter.”
Me: “Fine, after the game.”
*I help him setup an account on Binance and purchase Ethereum.*
Me: “How much do you want to buy? Ethereum is priced at $1.9k”
My Friend: “I want one Ethereum. I do not care how much it is, but I want exactly one, and if you can get it at my birth year, 1993, that would be great.”
Me: *Thinking about this for a microsecond*
Me: “Yah, that won’t work. I will just buy you whatever quantity of ETH with $1993 .”
My Friend (disappointed): “Fine…”
Me: “Done, another game?”
My Friend: “Bring it on.”
That was it, I was not expecting to hear from my friend for a while.
*The next morning*
My Friend: “Dude, it’s at $1,700. I lost a lot of money!”
Me: “What happened to five years?”
Since then, the price of Ethereum has gone on a roller coaster. Memorably, there were the good moments of 2021. In November of 2021, the price peaked at $4.27k.
What happened to my friend? I had no idea; he did not call me then. But I assume he was happy with the investment as it more than doubled.
Then the mother of all dips (so far) hit the world. Ethereum drops to $964 in June of 2022.
My Friend: “Did you check the price of Ethereum? It is $964. I should’ve just put this money in the bank or something. I am very disappointed in myself at the moment.”
Me: “I’ll block your number for four more years; call me then.”
I did not actually block his number; our video gaming routine is way too good for a block. However, looking at the price of Ethereum today, it stands at $1704. So he’s probably more subtle these days.
However, I’ve read before in a psychology book and mentioned this in a few of my articles — Human beings react stronger to losing money than winning or making it.
Hence, I am not surprised by my friend’s reaction. He does not have an investor’s mindset and would feel a little dagger in the heart each time a dollar drops. This is why it’s not humanly easy for cryptocurrency hodlers to undergo what they do every day. A core aspect of why people hodl is the support they give one another.
It’s the same as holders. As in you purchase Bitcoin, and hold it for five years, for example, rather than sell it in 5 days.
The concept of hodling is not only in cryptocurrency. Warren Buffet and Benjamin Graham highly recommend this strategy in investing in the stock market. You can not assess a company or a product by its performance in a few days. Investing is a long-term game, and those gurus know it.
“If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” — Warren Buffett.
Then over the years, dealing with others similar to my friend, I concluded four of the common mistakes of newbies investing.
1. Checking the price daily
We live in a world where you have to pay rent. Whether you like it or not, money constitutes a big part of your life. So, if there is anything that could make you live more comfortably or threaten this life, it won’t be easy for you to look away.
It’s as if I am telling you to open the door of your house, and someone will enter. They will do one of three things.
A. Leave it alone.
B. Steal a lot of things.
C. Put money on the floor.
It’s unrealistic but bear with me. The challenge is that I will tell you to be inside the house and to look into a corner, not at the person.
The thoughts will dominate your mind. It’s very challenging knowing that you might lose a lot of money while you can simply close the door.
Similarly, investing long-term, whether in stocks, gold, or crypto, will require you to look into a corner while things are happening.
2. Reading the news
You could wake up, have a fantastic cup of coffee, and check your ROI (return on investment) of $1,000,000. Then start reading the news.
You would feel that the world is collapsing in a few hours and that you must sell right now. You would do that and lose an ROI of another million.
That’s the true power of the news.
3. Listening to other “experts.”
Person 1: “Did you listen to the expert that said that Bitcoin will fall to $0?”
Person 2: “What about the expert that said Bitcoin will go to a million dollars?”
Person 3: “You are both wrong. I heard an expert who said Bitcoin is actually a person and we are feeding him money whenever we buy.”
Person 4: “Such nonsense. I do not know where you are all getting this from. Just for your information, I know for a fact that Bitcoin is the official currency of the reptilians.”
It never ends. The problem is, you would think that “Person 4” is not credible. Don’t be surprised when you google him and find out that he is a world-leading expert with a net worth of $50 billion.
One should read, create a strategy, implement, and learn. Listening to experts is a part of the game, but following every expert does not make sense.
4. Not having a goal
Why does a person invest?
Is it to have more money to travel the world?
Is it for buying a house?
Is it for the pure love of making money?
One has to understand the end goal to put an end to it.
I had an acquaintance who told me of helping a person buy $5000 worth of Bitcoin when it was priced at $5000 in 2019.
This person sold his investment when it reached $60,000 to help him pay off his mortgage. He had a target of achieving this return. He did not know that it would drop immediately after and, frankly, did not care. He had a target of $60k, and once it was reached, he sold.