For long term investors and given the volatile nature of the cryptocurrencies market, I think the best strategy out there is dollar-cost averaging into your investment. In the short term, the detrimental impact is lower if the market falls OR when an event like a Black Swan day occurs.
- A Black Swan in crypto is the possible occurrence of an event that is unexpected that may result in severe risks such as the plunging of bitcoin by 50%. A recent example was when the Global pandemic was announced back in March 2020 for Covid-19; border closing, country-wide lockdowns, the global market was on hold; The entire world was in a FUD state. Or, the September 11 attacks.
What Is Dollar-Cost Averaging (DCA)?
Dollar-cost averaging (DCA) is an investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase. The purchases occur regardless of the asset’s price and at regular intervals- Investopia
I found this tool recently from a Youtube video, it enables you to calculate the possible returns when you DCA your investment into Bitcoin; it blew my mind. If I was to invest $50 into BTC fortnightly for 3 years, my profit will be at 409% or $16 920
now, imagine doing this for 10 years :) I don’t think we can ever get crazy returns like this through our Super/401k.
Play around with the tool here, it will give you some braingasm.
At the moment, after all my monthly expenses, I should still have approx. 40% of my salary left to invest in my hobbies. Below is a visual graph of my plan going live from July 21.
Crypto: an equal share into 3 types of coin, this could likely be Cardano, BTC and Ethereum.
Stock: I am considering investing in ETFs such as Vanguard’s ETFs.
Entertainment: food, yes I love food too much and I need to allocate a fund to fulfil my passion to eat 😆
Saving: to deposit UST into Anchor and forget about it.
Before I go, just a reminder to my fellow traders to buy your fears and sell your greed.
Check out the link above to measure the fear and greed index, typically I would buy in the red and sell in the green based on this graph. When the index is green, investors are likely ready to take profit and often time, this is when we will see that the price will fall or slight market correction.
Please note, everything in this post are based on my personal opinion and experience, it is not financial advice.
