This is the response I want to give everyone who has been asking me about Bitcoin all year. Since the beginning of time, people have been attracted to get rich quick investing. Here are a few examples to Google and read more about:
Tulip Mania…17th century
The South Sea Bubble…18th century
The British “Railway Mania”…19th century
1929 Stock Market Crash…20th century
Technology Boom and Bust…Late 1990s and early 2000s
Real Estate Market Crash…2007-2008
And there were many many more throughout history.
Why do we keep repeating the same mistakes? Greed and laziness. Most people want the outcome, but don’t want to put in the work. They want to be in shape without eating right and exercising. They want to earn high incomes without working long hours. When it comes to investing, they want to find the “sure” bet that makes a lot of money in a short period of time.
This mindset causes them to make foolish investments in assets they don’t really understand and do it confidently truly believing they are being smart. Hence, why I’m picking on Bitcoin.
This is a new asset class. That no one really understands, that governments haven’t even regulated yet, with no way to put a real valuation on the asset and is exposed to all sorts of risks known and unknown. All people know is that it made some people a lot of money over the last few years. Same reason everyone who invested in the above examples invested and lost a bunch of money.
Look, I’m not saying what you should and shouldn’t invest your money in. That’s up to you and your adviser. What I am saying, is make sure that you REALLY understand what the heck you are doing and how the asset you are investing in works before you put your hard earned money at risk. You don’t need to get crazy to be a successful investor.
You don’t believe me. January 1, 1984 (the year I was born), the S&P 500 (it tracks the 500 largest companies in the U.S…very boring) was at roughly 166 (not a typo). As of this writing, the S&P 500’s last closing price was around 2439. This is not a recommendation, but I’m just illustrating that if all you did was put your money in a boring mutual that tracked that index over time, maintained faith in the future, stayed disciplined, and we’re patient you would have done quite well.
Keep it simple. Don’t be fancy. It’s not hard to make money, it’s extremely difficult to keep it, so be wise.