How Can We Put The Odds In Our Favour?
When it comes to investing, simple advice isn’t simple at all. For starters, patience is mostly understood, rarely practised. What makes it worse is that we tend to associate complexity with added value. We’re constantly wooed by its morbid attraction. The sore truth is that complexity sells better. There is a comforting impression of control, whereas simplicity is hard to distinguish from cluelessness. However, investing is merely a game of probability. The best we can do is to stack the odds in our favour. In a game of blackjack, we can’t do much if unfavourable cards show up after an advantageous starting hand. We would take the same good bet again, even if it turns out to be an unfavourable outcome.
BTC, ETH and BNB are examples of a good bet in Crypto world.
I’ll rate these three assets as high-probability bets, however we need to understand that we can be right for the wrong reasons and be wrong for the right reasons too. Instead of simply asking “are the odds of success in our favour?”, we should ask “are the odds of failure enough to ruin our life?” At the end of the day, we need to be able to account and afford for a low-probability loss. The loss isn’t just monetary, because the biggest investment fees are intangible. We pay through anxiety and uncertainty. We know for a fact that there will be market declines, but are we able to handle the emotional turmoil? The admission fee for sizable returns is finding out that one day our portfolio is worth less than last month with no exact timeline of a rebound. It is a mental surcharge we pay with cortisol rather than cash.
There will be many phases when we’ll need to ride out periods temporarily unfavourable to our views.
Furthermore, it is easy to convince ourselves of something we desperately want to believe. We tend to cling onto data that shows we’re right and ignore information that reveals we’re wrong. Humans are the only living creatures that can be wrong and confident at the same time, and it is evident especially in moments when we’re already sunk significant effort and money into one conclusion. The notion of “It has to work” is a common way for us to go broke. We will not get everything right. We need to understand this. It is what it is. There will be moments when markets don’t flow the way we expect them to and it tears away at our faith and patience, sometimes for weeks and other times for years. The best we can do is to put the odds in our favour.
A discounted price of an asset should be clear and obvious. If it requires deep calculations, there is a high chance we are doing what it takes to justify our belief.
We usually pause and hesitate due to the asset being a little too volatile for our liking or the price is a little shy from our desired market value. I don’t think we have an issue taking profits, unless greed takes over. It is that simple. We only buy when things are blindingly clear. It seems obvious to me that BTC, ETH and BNB are here to stay. Next, we need to decide what is a discounted price for us and it differs for everyone. If it doesn’t stay, it simply means crypto is dead. I’ll take this bet anytime, especially at the current rate at how money is being printed. We often see this question a lot: “What is going to change in the next 10 years?” The truth is, we don’t know. We have an inkling like how self-driving cars are the future. Will it be the next 10 years? Maybe. Could it be the next 20 years? Maybe. Let’s turn the question around. “What is not going to change in the next 10 years?”
My bet is that Crypto isn’t going away for the next 10 years.
There is a real chance that it may not be BTC, ETH and BNB leading the way. I might be terribly wrong in my assumption. But I believe it is safe to say that I’ve placed the odds in my favour. Still, it isn’t gonna be smooth-sailing. When it comes to investing, the market doesn’t owe us anything. It doesn’t care of our wants, needs, hopes and dreams. This is how the market works. There will be periods, particularly after this crash happens, where nothing much move for years. This is the time when we need to zoom out. It is a reminder not just for anyone reading this, but for myself too. When we pick the right asset, markets look phenomenal and rewarding when we look at the big picture.
However, we don’t live zoomed out.
We live day to day, month to month, with the conviction that patience and endurance is required to reap the long-term rewards of pain today and payoff tomorrow. The absence of these traits is what separates the ruined from the rich. Ultimately, personal finance is deeply personal. Like a doctor who can give a perfectly rational advice or a financial advisor who can lay out recommendations and allocations, the decision needs to be ours to make. Even on the same subject matter, how risk is being viewed by the doctor, financial advisor and us can be totally different. We manage our money in a way that fits our personality and I’ll argue that no one knows us better than we know ourselves. There is no one-size-fits-all formula. There can be two rational people having the same finances coming to totally different conclusions on what is right for them. It is also true for two people having the same cancer picking radically different treatments. What may be simple advice to us, may not be simple to others. It may be academically superior for what it is worth, but if it doesn’t allow you to sleep better, it is a useless advice. I believe simple advice are the ones when basic beats flashy. It is the equivalent of our doctor telling us to eat our veggies and go for a run. It is the equivalent of being patient when we invest. However, they’re not that simple of an advice. As ironic as it sounds, simplicity is harder to accept than complexity.
