I talk about investing all the time. I speak to groups at investment conferences. I talk about investing on multiple podcasts. I write about investing. I text about it with my friends. My barber talks to me about it while I’m getting a haircut (I’d rather talk football, but it’s the offseason). And right now, one sentiment underscores every conversation I have: FEAR.
People, for the most part, are not afraid for their existing portfolios. They believe their existing investments will bounce back in time. But they are afraid of investing in anything new. They’re worried that if they invest in something new, the price will go down. And they’ll be kicking themselves for not waiting for a better market.
I get it. Psychologically, the most difficult thing in investing is to buy into a falling or bear market. It’s not fun to watch the value of your portfolio plummet as you’re buying positions. It’s even less fun to watch something you just bought fall off a cliff.
Buying into a bear market is different than buying the dip. When you buy the dip, there’s a belief that the price will go up shortly — and you won’t have to wait long to see a return. It’s the investment version of immediate gratification.
When you’re investing in an extended bear market, it’s all about delayed gratification. You have to fight your impulse to get an immediate reward with the knowledge that there’s a far greater prize down the road. Delayed gratification is psychologically tortuous. It can feel like the markets are taunting you.
But the truth is that bear markets are the best time to buy for longer-term investors. The whole point of investing is to buy low and sell high. And you get the lowest prices during bear markets.
So how do you invest in a bear market without engaging in psychological torture? The current Crypto Asset Strategies portfolio (six of our eight coins are in the green) offers some insights.
Any Green Ink Is a Win
When you invest at low prices, even a modest market rally can turn your investment into a (temporary) winner. As of this writing, three of the four coins I’ve recommended to you this year are showing positive returns. PancakeSwap is up by more than 53%. Aave is up 31%. Ethereum Name Service is up 10%. Take the wins (but don’t sell!). Savor them. Enjoy them. It won’t always be like this. The bear market will eventually bring those prices down. But use these days to remind yourself that when the next bull market hits, you’re holding on to potentially big winners.
Ignore Bad Timing
I recommended Stargate Finance (STG) to you right before one of the biggest market crashes this year. First, sorry about that. More importantly, know that I’m not terribly worried about it.
STG is on Coinbase’s road map now. When coins start trading on Coinbase, they usually receive a nice boost because a large swath of investors can now invest in them. More importantly, I still believe in the project and the team. When the crypto markets rebound, I believe STG will as well. So I’m not going to worry about it for now.
Diversification Is Important
Crypto is a volatile asset class. And its volatility can sink a portfolio that isn’t properly constructed. For example, if you own mostly DeFi coins and the DeFi sector collapses, it’s tough to fully recover from that. But if only one or two coins have DeFi exposure, then there’s a good chance that the portfolio can recover.
Additionally, if multiple crypto sectors are doing well, exposure to all of those sectors can increase your returns.
The Crypto Asset Strategies portfolio is designed to mitigate risk during bear markets AND give investors multiple paths to success in bull markets. So far the portfolio is doing its job. We have coins in a variety of different sectors — interoperability, DeFi, exchanges and more. That limits risk and provides an opportunity to take advantage of multiple sectors as they take off.
Let’s enjoy the green ink while it lasts. I don’t believe this bear market is over. And keep investing. Buying low now will pay off in the long run.