Time in market beats market timing
This article aims to help you cut through the noise and see through the short-term negative hype. If you stick to the 5 simple investment rules and principles we lay out, you will learn how to manage these interesting times we find ourselves in. While others may make ill-informed and rushed short-term decisions, following these rules will help keep you calm. and weighted while navigating the world of crypto investing.
While we have seen a recent pullback in the crypto market, the phrase that continues to ring true is: ”It’s not about timing the market but more about spending time in the market”.
This couldn’t be more true for Bitcoin itself, with even the worst possible Bitcoin buy generating a minimum return of +27% per year. But this only applies if you have held it for a period of 5 years. This equates to a return of +230% over those 5 years, showing the true power of long-term investing.
1) Compound interest — the 8th wonder of the world
But how can I leave my money invested for so long?
Well, that brings us to our next point…
Would you rather receive $1 a day or $0.01 that doubles every day? “Of course, I would choose the dollar, it’s 100 times more money! »
What most people don’t understand about investing is compound interest, the 8th wonder of the world.
After 16 days, if you chose the dollar, you would be $16 richer. If you chose the 1 cent, you would be $327.68 richer. How can you ask? Compound.
After just 28 days, the $0.01 would have doubled 27 times and would be sitting at a whopping $1,342,177.
What does this tell us about investing?
No matter the size of your first investment, what matters is consistency. Invest regularly and let your money accumulate and grow like that original penny.
Compound interest works like magic, but it only works if you leave it for a very long time.
2) Don’t invest money you can’t afford to lose
The amount of gold to invest is different for everyone depending on their situation. But one thing is constant for every investor: do not invest more than your financial situation allows.
The key to finding the right balance is through an investment strategy called the cost averaging.
The key to being able to leave your money invested for long periods of time is knowing your ideal position size.
Position sizing is the process of deciding how much to invest in a specific asset. This is a crucial skill that keeps you invested for the long haul.
If you are overinvested and an unexpected accident or expense occurs, you will need to sell your investments to make those payments. Therefore, you should not invest the money you need to meet normal responsibilities. This deed of sale interrupts your compound interest process and reduces the power of long-term investments.
If you are underinvested you run the risk of not getting the full return from your investable cash, but you at least have the opportunity to increase the size of your investment by buying small amounts on a weekly or monthly basis.
3) Strategy: dollar-cost averaging
I’m sure we’ve all been in the situation where you put your extra money into an investment and a week later that investment is down -10%. Now you’re sitting there wishing you had more money to invest. This is where Cost Average (DCA) becomes an integral part of an investor’s success.
DCA is an investment strategy where you divide the total amount of money you want to invest over a period of time into small, frequent purchases of the desired asset. The most common DCA schedule is to buy said assets at the beginning of each month. The aim is to reduce the impact of price movements and make the investment process a habit.
Does dollar cost averaging also work for crypto?
If you look at the chart below, we are comparing $100 invested monthly in BTC and Gold. Over the 5 year period, you would have invested $100 60x, bringing your total invested capital to $6,000.
We can see that this strategy not only works for Bitcoin, but significantly outperforms its yellow metal counterpart. If you had chosen DCA in Bitcoin, your portfolio would be valued at $67,176 (+1,019.61%) while your Gold portfolio would be worth only $7,307 (+21.79%).
4) Understand the asset class
Crypto is like an early-stage technology investment.
Like every early-stage technology innovation struggling for market share and adoption, volatility is part of the growth process.
With crypto, a whole parallel financial ecosystem is being built live, before your eyes. A financial ecosystem built by people, for people. An ecosystem that encourages transparency, collaboration and free markets. Sure, there will be growing pains, mistakes, and failures, but that’s the price of real progress.
Now that we know what it is, we need to understand the possible problem it solves and the value it creates.
In the case of crypto, this allows a financial system and products to become transparent, faster and more efficient while protecting many from inflationary practices and corruption. It allows the transfer of value from one to another without the need for middlemen taking big profits to move our money.
For the most part, human beings hate change.
With the most innovative advances in technology, humans resist it first. Then they disagree with necessity. Then finally they try to destroy it.
It came to the internet in the late 90s. It was a time when many thought using email or a website was completely unnecessary because we had a working postal service and physical stores.
As we can see below, it happens again.
Over the past 13 years, several people and sources have tried to convince the world that cryptography is unnecessary. Just like the internet, cryptocurrencies and blockchain technologies will become so integrated into our lives that you cannot imagine a world without them.
But which cryptocurrency should I choose and how do I know if it will be the winner?
5) Diversification
Investing is one of the best ways to build wealth and achieve your long-term financial goals. But choosing the right investment or asset class to help you achieve your goals can be difficult. Diversification helps solve this problem by spreading your investments across a group of assets or asset classes so that you don’t risk everything on a single asset trying to offer great returns.
The idea is that by exposing your portfolio to multiple cryptocurrencies, you will enjoy uncorrelated returns.
Of course, you won’t get the same returns as if you opted for the top performing cryptocurrencies. But on the other hand, you don’t risk having all your eggs in one basket. Instead, through diversification, you spread the risk and benefit from a much less volatile ride along the way.
Not only that, we can see that diversified bundles actually outperform some of the major cryptocurrencies.
Although easy to understand, diversification can be difficult for some to practically introduce into their portfolio. The vast amounts of assets in the investment world, especially in the Crypto space, can be difficult to navigate
Where can I find these diverse crypto bundles?
Revix, a Cape Town-based crypto investment platform, was founded to solve this problem. In addition to making it easier and safer to buy individual cryptocurrencies, Revix’s fame is its Crypto package offerings.
The same way you would buy into the JSE Top40, Revix Bundles allows you to seamlessly invest in a group of cryptocurrencies.
Revix currently offers 3 bundles:
the Top 10 packs is like the JSE Top40 or the S&P 500 for crypto. It offers equal weighted exposure to the top 10 cryptocurrencies which account for over 75% of the crypto market. This bundle has significantly outperformed Bitcoin over the past 12 months.
the Set of smart contracts offers equal weighted exposure to the top five smart contract-focused cryptocurrencies, such as ethereum, solana, and polkadot. These cryptocurrencies allow developers to build apps on top of their blockchains, similar to how Apple builds apps on top of its iOS operating system.
the payment package offers equal weighted exposure to the top five payments-focused cryptocurrencies that seek to make payments cheaper, faster, and more global. These cryptos include the likes of Bitcoin, Ripple, Stellar, and Litecoin.
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About Revix
Revix brings simplicity, confidence and excellent customer service to investing. Their easy-to-use online platform allows anyone to securely hold the world’s best investments with just a few clicks.
Revix guides new clients through the sign-up process to their first deposit and first investment. Once set up, most customers manage their own portfolio but can access support from the Revix team at any time.
For more information, please visit http://www.revix.com
This article is intended for informational purposes only. The opinions expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, or the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose, and before investing please consider your level of experience, your investment objectives and seek independent financial advice if necessary.
Brought to you by Revix.
