Do you ever get investment FOMO? When you see headlines about the price of Bitcoin rising 20 percent overnight, it’s easy to feel like you’ve missed out on a big opportunity. Bitcoin is the kind of product that produces overnight millionaires – but it’s also the kind of asset that can turn millionaires into fools.
For every headline about skyrocketing cryptocurrency prices, there have been just as many about Bitcoin’s price evaporating in a matter of hours. Impulse investing is a becoming a major problem as online investing tools becomes easier. Investors have always struggled with controlling their emotions. A large number of investors suffer from loss aversion, a fear of holding onto assets as their value declines, triggering people to sell in a panic. Typically, that means they just miss out on the recovery, costing them in the long run. Loss aversion causes investors to buy high and sell low, exactly the opposite of what you should be doing.
In the past, investment decisions took a lot longer to put into action. Before the computerization of stock trading, you would have to call your broker who would then get in touch with a trader who worked in the trading pits and buy or sell in open outcry trading. It was a frenzied scene and still goes on in some markets today, but calling your broker gave you a second chance to reconsider impulse investments. Now that you can invest with the click of a button, it’s easier to be led by your emotions.
If you want to start see your investments grow, stop worrying about Bitcoin and start worrying about your real financial future. Your odds of accurately predicting the market and knowing the optimal times to buy and sell are slim. Rollercoaster investments like Bitcoin are even harder to predict.
Bitcoin’s erratic behavior may not even be exclusively about the bubble it entered at the end of 2017. The cryptocurrency has a had a long history of speculation and corrections despite its relative immaturity. The nature of Bitcoin has drawn a lot of media attention compared to other investment assets, and that lends itself to speculative investment. Smart investors don’t follow the headlines. They stay informed about investment opportunities and market conditions, but they make decisions for themselves with sound financial advice and clear goals in mind.
The secret to investment success isn’t jumping on the bandwagon. It’s creating clear financial objectives and making the right investment decisions to make them happen. If you’ve been chasing the next big thing and watching your investments suffer, you need to change your attitude. Instead of thinking about how you can make a boatload of cash, start thinking about investing to buy a house, retire, or start your own business. There’s an investment strategy for every goal and it doesn’t involve impulse investing. It involves the right balance of stocks, bonds, fixed income equities, and conservative assets like gold and silver. These are modern investment options that are designed to protect your savings and grow them. Depending on your goals, a financial advisor can help you recalibrate the balance. For example, a younger investor might be encouraged to take a riskier, growth-oriented portfolio balance, while as you get older you should move into fixed-income assets and products like gold that keep their value in a crisis. These are the three main types of modern portfolios you should consider to reach your goals:
Conservative – A conservative portfolio will be focused on wealth preservation, with a higher proportion of bonds compared to stocks. It’s ideal for those who are closer to retirement or already retired. It may also be focused on income generation through property or fixed-income equities. Alternative assets like gold bullion are also popular components, sometimes with as much as a 20 percent allocation.
Balanced – A balanced portfolio is one that tries to find the meeting point between high growth and low risk. It will balance stocks, which grow much more aggressively but can also decline quickly, with lower-yield bonds and conservative hard assets like gold bullion. Sometimes this is called the “Goldilocks strategy,” i.e., it’s just right.
Growth – A growth investment portfolio will appeal to anyone who fears they’ve been missing out on Bitcoin’s big gains without recklessly chasing after investment fantasies. With a higher focus on stocks, growth portfolios can sustain bigger losses but also provide bigger returns. One strategy for growth portfolios is counterbalancing high stock by buying gold, which typically has an inverse relationship with stock markets.
Successful investing is all about clearly defining your goals and making smart moves to reach it. Stop worrying about whether you’re getting richer than the next guy and start making a plan that will make you financially happy.
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