To gamble, or to stop losing money

Carlos Lontro
Dec 8, 2017 · 3 min read

Hi everyone,
It can be an expensive lesson until you let go of the get rich quick dream and until you stop revenge gambling even higher.
Banks delivered yields on your savings from a few percentage points until the big financial crisis where rates dropped near zero. Financial markets have delivered on average 9–17% per year and it has years with corrections of 30%.
Even Warren Buffet on his public yearly trackrecord shows good years and bad years.
Somehow when investing people only want the good years and cant handle a little downside. The standard average risk return is 1:2. You invest and risk 1 to make 2. If a certain investment expects to make 40% you should expect it to at any given time also eventually lose 20%.
This is a general rule that over time and several years and investments proves to be reasonably right. You can manage to invest one time and dont get any downside and only enjoy the upside. But repeating this and scaling this turns out to be very unlikely.
Bitcoin now is everywhere and broke all records in history of growth and bubbles behavior and several crypto experts and analysts expect it to keep growing even further. These last weeks one had only to invest and hold to see 2 digit returns. The point where I am getting is that you should have to be able to travel in time to pullout such a onetime stunt of investing without any drawdown. Tomorrow is always uncertain and history will repeat itself.

To gamble or to stop losing money?
Check this unlucky guy who decided he could make such timing and went long on bitcoin on margin with a 100k investment. Unfortunately he experienced the crash of the 29th November, where bitcoin price reached 11.500 and then fell below 9.500 in just a few hours in an extreme volatile movement and the broker was unable to fill the stop loss, causing this user to end in debt 30k. He lost all his 100k and if the broker has not a zero account insurance the client owes to the broker 30k and his loss sums up to 130k.

One thing is a controlled and calculated loss and another is a gamble based on pure gut feeling.
Getting the best return for your investment is what everyone seeks, but past results are no guarantee for future results and timing the market is even harder.
Many are now starting to speculate on the bitcoin bubble and when should they short. My question is again, to gamble or to stop losing money?

I can only keep quoting André Kostolany on this -
“I can’t tell you how to get rich quickly. But I can tell you how to get poor quickly: by trying to get rich quickly.”

What I wish is for you to stop losing money in the first place and adopt an ESIR mindset (Earn, Save, Invest & Repeat). It can take time to grow, but diversification and preservation of wealth keeps you growing steady with no major setbacks. You are free to gamble as long it will not hurt your future financially. First invest and improve your future financially with a steady monthly plan and then gamble whats left if it makes you happy.

I have my rules that I follow and my trading strategy that can be very dynamic according the the goals I set. First never go all-in in anything. Never overtrade. Keep leverage low 5–10times effective leverage. Diversify. Budget. ESIR. I aim longterm passive income, compounding and re-investing and budgeting with a monthly investment plan. I fix a risk threshold and a working capital amount. I know markets are erratic on the short term and macro fundamentals take bigger cycles to complete.

I wish you all an amazing weekend

Follow my posts and articles about Forex and Investing

Carlos Lontro

Written by

Hi, I’m Carlos. A Popular Investor @eToro -> ESIRInvestors; and Asset Manager & administrator of ESIR Investors Community on FB.

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