A Casual Talk on Timing in Crypto Investing: How to Face the Future?

Let’s continue discussing the time series of investment.

Today, mainly, let’s talk about what our attitude towards the future is in the context of time. First, we need to understand that stock prices are unpredictable in the short term,

so don’t see today’s sharp decline in stock prices,

think that it will also fall tomorrow,

or believe that it will rise.

The short-term fluctuations of stock prices,

depend on the buying and selling results of thousands of people tomorrow.

You don’t know these people,

you don’t even know what you will do tomorrow,

let alone judge strangers,

and the outcomes of their buying and selling that affect stock prices. So don’t try to predict stock prices,

don’t let current emotions influence your judgment of future trends.

Human nature is easily influenced by the present,

for example, if it rains today,

it’s hard to imagine that tomorrow will be sunny,

if today is sunny,

it’s hard to imagine that it will rain tomorrow.

Although we gain many experiences every day,

our error correction ability is not very strong,

and we haven’t evolved much,

this is limited by our genes.

If the stock price rises today,

don’t think it will continue to rise tomorrow,

don’t have too many expectations for the future,

especially avoid being infected by current emotions,

thinking that the future will be the same.

So, many people find it difficult to think optimistically about the future when in trouble; or when optimistic,

it’s hard to remain cautious.

These are very noble qualities (not influenced by the present),

and also very strong abilities,

but most people lack them.

At the same time, we must also believe in the natural order,

which says that sooner or later, prices will return to their value.

We must believe in this natural law,

but we don’t know the specific time of return,

so we don’t predict.

However, we can predict the direction of stocks,

as long as the price falls within a certain value range,

no matter how low the stock price is, we should have confidence to hold.

Don’t worry about what might happen tomorrow,

because everyone has different expectations for tomorrow,

a thousand people have a thousand different versions,

but only one reality tomorrow,

guessing what will happen tomorrow is a low-probability event.

The current state of a company,

and how it will operate in the future,

has a certain continuity,

so don’t think that a drop in stock price

means the company’s operations have problems,

or that a rise in stock price

means there is good news for the company.

These thoughts are not appropriate.

Although companies do change,

the change is very slow,

while stock prices fluctuate greatly.

Therefore, regarding stock prices,

we need to control our hearts,

our mind is the greatest variable,

the biggest danger among all risks,

comes from ourselves as investors.

Don’t worry about future events because of minor fluctuations,

which might cause you to lose the stocks you’ve worked hard to buy,

there’s a large element of luck in the future,

don’t overthink the future.

You cannot control luck,

because it has a probability distribution,

you can only consider the worst-case scenario.

And whether you can bear this worst-case scenario,

if you can, then buy and hold.

If you think you can’t bear this worst-case scenario,

then don’t buy.

Give up on uncertain things,

don’t take risks just because of a small possibility in the future,

gambling is not investing.

Make the worst-case preparations,

this involves the safety margin in stock buying,

because sometimes, luck is unfavorable,

and low-probability events can happen.

So, the lower the purchase price, the better,

because many unpredictable luck factors are involved,

and the lower your safety margin, the better.

Low price,

and a large discount,

can offset future uncertainties.

Another way to control risk is through position sizing.

No matter how certain something seems,

you shouldn’t invest most of your funds in a single stock,

because many things in the future are unpredictable.

If you haven’t fully estimated the worst-case result,

it could lead to huge losses,

even permanent losses.

In managing your position size, maintain an objective attitude towards the future,

don’t be arrogant,

don’t think you know everything,

and after investment failures,

blame value investing.

Therefore, risk control is the most important principle,

first, abandon uncertain things,

don’t be arrogant,

don’t think you know everything.

Many value investors, after some success,

overestimate themselves or become path-dependent.

Because they made a lot of money with this method,

they start to trust it blindly,

forgetting to objectively face reality.

Overconfidence leads them to believe that certainty is high,

and they don’t conduct thorough independent investigations.

They buy stocks based on their experience,

and increase their positions,

ultimately leading to investment failure,

wasting time at best,

or suffering significant capital loss at worst.

Experienced value investors need to avoid path dependence.

First, don’t predict the timing of price rises or falls in the future,

and also believe that prices will return to their natural value.

We should be confident about the future,

and have a basic attitude towards prices.

We should believe that the company’s operations and future have a certain continuity.

So don’t be swayed by minor fluctuations,

and think that every small change is a sign of a trend.

At the same time, pay attention to subtle signs,

to see if there are any trend changes in the industry.

If the industry undergoes fundamental changes,

it won’t happen overnight,

but gradually,

these changes are slow,

and will be reflected in multiple aspects,

and will be clearly visible,

with unmistakable signals.

Believe in the element of luck,

make the worst-case plans,

if it happens, can you bear it? If not, don’t do it,

or reduce your position.

Don’t blindly trust yourself,

which often leads to overexposure in a single stock,

a common reason for failure among experienced value investors.