Disclaimer: This is not investment advice, I am not an expert.
At the beginning of the summer I had a major issue.
I just accepted a new job and between the work hours, the commute, meals, and a workout I was left with at most an hour of free time a day during the work week.
This was a major problem because I’m a learning addict. I need to be mastering something outside of work or I start to stagnate. But an hour a day didn’t seem like it was going to be enough to get anywhere on any subject.
So I asked myself “How can I best leverage an hour a day?”
I did what I always do when faced with a tough problem, I made a list.
So which one did I pick?
I was leaning towards learning Spanish, but then I had three friends message me about cryptocurrency. All of them said this was something I needed to look into. After a half hour of reading about cryptocurrencies I knew I had found my project for the summer.
At first, the reading was exciting. Cryptocurrency, a revolution in electronic money transfer that could easily snowball into something as world-changing as the internet.
I thoroughly enjoyed reading through the different business plans each cryptocurrency had. Each one had their own strategy to secure their place in the market. I thought it was fascinating to see a currency have a business plan.
My first obstacle, the blockchain
I hit my first wall when learning about the blockchain. The blockchain is one of the most important technologies underlying how cryptocurrencies work. Unfortunately, I found learning about the blockchain boring and confusing. It was the last thing I wanted to be reading about after a tough day at work.
I started to lose interest in cryptocurrency. My once productive hour started to get whittled down by Facebook, emails and other distractions. I had to do something to get myself back on track, but how could I make the blockchain interesting?
I decided I would make some stakes.
I found a reputable online cryptocurrency exchange, typed in my credit card number and bought 100 dollars worth of Litecoin (a cryptocurrency).
At the time I didn’t even know how to transfer the cryptocurrency back into U.S. dollars. For all I knew I just sent my money into the oblivion.
But, now I was an investor.
I felt more connected to the subject, it was the breath of fresh air I needed. The next day I sat down and read as feverishly as an ivy league researcher.
I decided to make a class out of it
I was impressed by how much of an impact investing had on my motivation so I decided to take it a step further. I decided to turn this little adventure of mine into a class.
I refined the subject from cryptocurrency to cryptocurrency investing and decided the cost of the class would be 5000 dollars.
I would throw 5000 dollars into the cryptocurrency market assuming I would lose it all. I figured the knowledge I would gain from learning about investing and cryptocurrency would be worth much more than the 5000 dollar cost.
Why 5000 dollars?
- It was around the cost of a class on investing at a top university
- It was 90% of the savings I would make over the summer. I wanted it to be a large enough amount that I would have an emotional connection to the money. I wanted to see how I would react when I started losing it.
*I don’t recommend anyone else invest such a large portion of their savings.
What did my course look like:
- Read and take notes on a classic investing book. [ June 1st to June 14th]
- Obtain a high-level understanding of what cryptocurrencies are and what their future applications might be [June 15th to June 26th]
- Pick up to three cryptocurrencies to invest in [ June 27th to July 11th]
- Develop a buying and selling strategy [July 12th to July 13th]
- Invest and see what happens [July 14th — Sept. 1st]
1) Read and take notes on a classic investing book
I only had enough time in my course for one book on traditional investing so I had to be very picky about it.
After asking mentors, friends, and the internet, the most commonly cited book was “The Intelligent Investor” by Benjamin Graham. I decided this would be the book for my course.
While parts of the book were a little dated (it came out in 1949) I found the core principals helpful.
- Do your research into a company and only invest when you are confident they have a high chance of long-term success.
- Don’t let the market scare you, rely on the research you did.
- Stick to a formula, don’t arbitrarily buy and sell.
2) Obtain an overview of what cryptocurrencies are and what their future applications might be
I used a combination of podcasts, YouTube videos, and websites to educate myself about the cryptocurrency space. I cheated a little bit on my hour rule and listened to the podcasts during my commute.
My main takeaways were that cryptocurrencies are a cheaper, more secure and more versatile way to digitally transfer money.
There is a lot more to be said on this subject that I’ll write about in a separate piece. I’ve included all the resources I used at the end of this article in case anyone wants to jump into the subject.
3) Research and pick up to three cryptocurrencies to invest in
I didn’t want to invest in more than three cryptocurrencies because I felt that even three was spreading my focus too thin.
As per Benjamin Graham’s advice I wanted to have a deep understanding of each cryptocurrency(or company) I was investing in. This would take a lot of time and time was something I didn’t have much of.
After doing light research into ten different cryptocurrencies I decided I liked Bitcoin, Ethereum, and Ripple. So I started to dig deeper into these three currencies. I looked at:
- How strong is their team
- What is their long-term strategy
- Who is backing them
I was happy with what I found and confident that these three currencies had a high chance of long-term success. So now all I had to do was figure out a plan of action.
4) Develop a buying and selling strategy
I wanted to keep my buying and selling strategy simple so I gave myself three rules:
- Don’t buy when it is at an all-time high
- Don’t sell for a loss, meaning I would either earn a profit or lose everything if the currency disappeared
- Sell when my investment went up by 35%
I picked the 35% target because it seemed unreachable for a two-month investment.
5) Invest and see what happens
I had my cryptocurrencies of choice and I had my buying and selling strategy, now all that was left was to invest.
In mid-July, I started to put my money into the market.
I invested 2000 dollars into Ethereum on July 14th at ~ $203/ether
I invested 2000 dollars into Ripple on July 14th at ~$0.19/ripple
I invested 1000 dollars into Bitcoin on July 14th at ~$2300/bitcoin
Then the real life portion of the course started
The first few moments after the money left my bank account were good. I felt like a success for committing to a big plan, but then panic set in.
I always thought the mental side of investing was overplayed. I’m a logical, easy going individual, I didn’t think fluctuations in market price would affect me. Plus I had even planned to lose all the money I invested. Losing or earning money wasn’t going to corrupt me.
Well, I was wrong.
My life exploded
After my money went into the market, the hour a day I allotted for my cryptocurrency investing course became insufficient. My life quickly became ruled by my investments.
I developed an awful habit of checking the price charts every ten minutes. If the investments were doing well I’d get a hit of dopamine and feel great. If my investments were doing bad I would freak out and start pouring over market analysis after market analysis.
I forgot everything I learned in “The Intelligent Investor”. I let the market play with my emotions.
I reached a breaking point at the end of July. After staying up late for the third night in a row reading about cryptocurrency news and price predictions, I slept through my morning alarm. I wound up waking up late and missing an important meeting at work.
After a myriad of apologies to the vice presidents of the company, I was ready to end my course.
I told myself “This isn’t worth my job”
How I got my life back on track
I sat with that thought the whole day. Then I looked at the problem as if I was really taking a university class.
If I got a bad grade in a class would I drop it? No! I would figure out why I got the bad grade and then develop a strategy so it didn’t happen again.
I decided I could do it, it was OK that I failed, failure is how you learn.
I reminded myself why I was taking the course, to learn, not to make money. I knew that I was going to need more than willpower to stop myself from looking at the price charts and market analysis thought. So I found two tools that I would depend on.
Tool number one: Blockfolio
- Blockfolio is a phone app that lets you set price targets for your cryptocurrency investments. I set it so I would only get alerted if my investments ever hit their targets. This way I had no good reason to convince myself that I needed to check the price charts.
Tool number two: A bet with my friend
- I gave a friend 50 dollars and told him if I read one more market analysis to burn the money in front of my face. It was the honor system so I could always just lie to him about it, but I knew I would feel like a scumbag if I did and no one likes feeling like a scumbag.
The week following my break down was tough. I wanted to check how my investments were doing constantly. I kept reassuring myself that Blockfolio would notify me if anything major happened.
One day I even sat with “Ethereum price analysis” typed into google for 5 minutes. My mouse sat there hovering over the search button, but I wouldn’t let myself click. I didn’t want to to have 50 dollars burned in front of my face.
After the initial week, it got much easier and then near the end of August, my phone started buzzing off the table.
So how did my investments fair?
On August 6th, while I was furiously typing away at a report my phone came to life.
“Bitcoin is above 3105”
$3105 was my 35% price target! I didn’t know what to do, I told myself I would sell when it hit 35% but I couldn’t bring my self to sell. I was so high on the fact that I hit what I thought was an impossible target that I thought I could do anything. So I said, well if it hit 35%, 45% shouldn’t be much of a stretch.
Then on August 9th my phone buzzed again
“ Ethereum is above 274”
“Bitcoin is above 3,335”
$3,335! An all-time high for bitcoin! (at least back then it was), the confidence I had three days earlier started to melt away. Would the price keep going up, or would the whole market collapse. Did I invest in a scam and was the carpet about to be pulled out from underneath me?
I was letting the market control my emotions again, so I took a long walk and thought.
I had confidence that all three cryptocurrencies I picked had a future, but I only had three weeks left of my course. How could I best play these last three weeks?
I looked at my three investments and saw Bitcoin and Ethereum jumping up but Ripple staying relatively calm.
I reasoned that the jump in Bitcoin and Ethereum would bring new investors to the market. These new investors might be interested in ripple just like I was. I also knew other investors had to be afraid that the bitcoin price might crash because of its quick rise.
I thought other investors might want to hedge their bets against a bitcoin crash by moving money out of bitcoin and into other currencies. Ripple had a high chance of being one of those other currencies.
So I put all my investments and earnings into ripple.
On August 10, I invested all of my Bitcoin and Ethereum ($4150 worth) into ripple at ~0.18 dollars/ripple
So now I had $6150 invested in ripple. I set an alert on Blockfolio for 0.24 dollars/ripple ( 35% increase) and did my best to forgot about the whole thing.
Unfortunately, news kept popping up about Bitcoin reaching all new heights. It made me feel like an idiot for not keeping my money in Bitcoin. Why did I switch it all over to ripple I should have put it in Bitcoin.
Frustrated I called a close friend and mentor to tell him about my stupid investment decisions. After I told him what a moron I was, he gave me the best piece of investment advice I’ve ever received.
He said “ Joe, this is one of the biggest problems with investing, everybody is trying to buy at the feet and sell at the head. The thing is, you never know when you are at either. Instead, aim for buying at the knees and selling at the shoulders. Don’t beat yourself up if it goes higher, be happy with what you made. If you get greedy and try to go for the head those investments will ruin your life.”
I stopped stressing about missing out on bitcoins rise in price and instead was happy with how well I was doing at this investment course. I wasn’t calling every shot perfectly but so far I had turned 3000 into 4150 in less than a month, I should be proud of that.
Then on August 24th while I was in a meeting my phone went off
“Ripple is above 0.24”
By the time I got out of the meeting the price had already hit 0.27. Part of me wanted to hold on for longer, but I remembered my friend’s advice, aim for the shoulders, not the head. I sold it all right then and there.
My initial 2000 dollar investment grew to 2,842 dollars and my 4150 investment had grown to 6,225.
I still had 7 days left in my investment course but under the mantra of “don’t be greedy,” I decided to keep it out of the market. I spent the last week reflecting on the experience.
In total my 5000 investment turned into 9,064 dollars. Not too shabby for a month and a half. At the same time, people are currently seeing 1000% plus returns in this market so I shouldn’t get too full of myself. I still have a long way to go.
1) If spent right, a focused hour a day can compound to something huge
The key to making a focused hour add up to something major is to first figure out your goal.
- My goal was to learn about cryptocurrency investing.
Then you have to break down your goal into measurable, time-sensitive chunks.
- I did this by making my course, i.e read and take notes on “The Intelligent Investor” by June 14th
Finally, you have to set some metric to measure your overall success. How will you know when you accomplished your goal?
- I did this by adding in the 35% selling target
2) Having trouble sticking to your plan, set stakes
If you find your motivation waning, give yourself some real-life consequences for not achieving your goal. If you do this, I guarantee you’ll be more motivated to accomplish your goal.
- I did this three times throughout the summer. The first time was when I invested 100 dollars in Litecoin. The second was when I invested 5000 dollars into Bitcoin, Ethereum, and Ripple. Finally, the third time was when I gave my friend 50 dollars to burn in front of my face if I looked at one more market analysis. Each of these gave me real consequences for not continuing towards my goal.
3) Losing or earning money on an investment will mess with your head, be prepared for it
This was the biggest revelation for me. I didn’t think investing was going to take over my life as much as it did. I severely underestimated how much it was going to play with my emotions.
If you invest, prepare some mechanisms so that the status of your investments isn’t the status of your life.
4) Don’t trust the market analysis, trust your research
When making an investment don’t let the market rule your life. Do research on whatever you are investing in and trust in your research, not the market analysis.
5) You will never trade at the best moment, but that doesn’t mean you can’t make money
You will never time all of the peaks and valleys in the market correctly. Stick to your buying strategy and don’t worry about what could have been. Focus on what you should do next.
Thanks for the read :)