The past 2 weeks have been nerve wrecking to growth and crypto investors, to say the least.
We saw Nasdaq falling 3.5% in one of the worst sell-off since October 2020, wiping out all the gains so far this year. Crypto on the other hand, also saw a price correction of 20-30% in just 2 days.
To be honest, when the price crash happen, we were feeling worried whether the price will continue to crash. That really tested our will and conviction because the thought of holding “safe haven stocks” like dividend stocks or even just cash seems less nerve wrecking.
At one point during the price correction of both the US stocks and crypto, our portfolio plunge by over S$100,000 in a day. Imagine the horror we face when we refresh our Yahoo Finance app and the figure just changes, and the portfolio value is down by over S$100,000.
So Mrs Budget and I constantly remind ourselves that when the market goes crazy, we need to be firm in our conviction and to trust that everything will be ok. Here are some stuffs we remind ourselves:
1. The stock market is a device for transferring money from the impatient to the patient. A wise and popular quote from Warren Buffett that we should be patient and not be tempted to trade and move our portfolio around. After planting the seeds, we should let the portfolio thesis plays out and that takes time.
2. The market either goes up or down. Don’t be worried about short term fluctuation. In the long run, it is on a slow upwards climb. In investing, what is comfortable is rarely profitable. Be uncomfortable.
3. We are still young and we still have a lot of time in the market. Do we need the money? Not for now – and since we do not need the money, we should just let the money stay in the market for another 5 – 10 years, or even 20 years. In the grander scheme of things, there will be even more crashes and bull runs that we will experience, and this is just one of them.
4. It is ok to build things slowly, and it is ok to not make millions of dollars in a single day or month or year. There will always be another opportunity. Every year there will always be new darlings of wall street. Choose those that you are comfortable with, build your conviction around it, and stick to it, and feel comfortable holding it over the next few years. Know what you own, and know why you own it.
5. We dont have to buy what everyone else is buying. If it is in the news, it is already too late. It is ok to lose out on new exciting stocks.
So for friends and readers who are also equally impacted by the swings of the market – get comfort in knowing that you are not alone, and we feel sian too when it is a red day. But zoom out your timeframe and horizon, and trust that in the long run, your holdings in your portfolio will “grow up” and reward you for the trust you placed in them! 🙂 Stay safe and happy investing!
Also Read: Our Crypto Portfolio and Our Thoughts On Cryptocurrencies
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3 thoughts on “Things We Remind Ourselves When The Market Goes Crazy”
Great piece. Yes, I can relate to volatile swings of the stock market. In investment, sometimes we win and sometimes we lose. In the long term, these will smoothen itself. Yes, the market is about wealth transfer from Impatient to the Patient.
Hold tight, fear not.
Warren Buffet has dismissed cryptocurrencies as “basically having no value and don’t produce anything”, “In terms of value: zero”, and “Probably rat poison squared”. Seems rather ironic that you’re quoting him while being heavily invested in cryptocurrencies.
Thanks for your comment. 🙂
Cryptocurrency do provide value – in fact all the crypto we are investing in now are revenue generating. Can take a look at ethereum: https://decrypt.co/71188/ethereum-network-revenue-set-smash-monthly-record-722-million
You can think of Ethereum as a global distributed company with almost zero fixed cost, a monthy revenue of 722 million, 600k+ active users, and growing at a high clip: https://twitter.com/draecomino/status/1394296083384348676
For comparison context, total transaction volume on Ethereum increased 20x to $713 billion in Q1 2021, compared with $33 billion in Q1 2020. PayPal, which is valued at $285 billion market cap now, generated $6.03 billion in revenue in Q1 2021, but only processed a transaction volume of $285 billion in Q1 of 2021.
So we are actually looking at crypto assets almost similar as fintech companies or banks like PayPal Square or even DBS, just that they have very high price volatility.