It happened to me: I was a finance writer with some unspent money in my trading account.
I overheard an investment tip about a sure thing.
Just a few moments later, I was the owner of $600 worth of a shiny new memecoin. It promptly dropped about 10%.
“It’s fine,” I told myself. “It’ll come good.”
And the next day, it did.
But now, a month later, (an age in crypto terms, but no time at all in long-term investing terms), it’s bounced around and is down 25%.
Each morning, I log onto my trading account, check it out, and stare at it in inaction.
(This is an informational, personal account and shouldn’t be taken as financial advice. If you’re unsure what to do about your money, you should seek independent, financial advice from a professional such as an accountant or financial planner.)
Here’s my post mortem of what I did wrong.
Regrets: I have a few.
1. I invested in something I don’t understand
I don’t know a thing about crypto.
No shade, it’s just not something I’ve ever been into.
I know it makes some people do things like comb rubbish tips for missing hard drives, while others use it to fund their house deposits.
And that’s on me - if I’m investing in something I don't understand, I can’t tell if it’s a good or a bad investment. I can’t tell who to trust, and whether they know what they're talking about.
2. I invested without a plan
When I invest my money, I usually dollar-cost average with investment plans and the longer I’m in it, the better I get at coping with an asset’s inevitable ups and downs.
It works for me.
I’ve learned this from working at Spaceship, listening to our investment team, stomaching the market swings of the last few years, and absorbing what we do.
But this time I made the investment equivalent of ducking into Aldi, shopping in the middle aisle and coming home with something highly specific you can only use in limited situations.
Now I don’t know whether to hold onto it, or give it away.
3. I let FOMO get the best of me
My body acted before my brain did.
It felt like somebody had a hot ticket I could buy, and I could get lucky without doing much work on my own.
I was a walking case study in FOMO.
Half an hour prior, I was a serious, long-term investor only picking investments that resonated with my deeply held beliefs about the world and how I want it to be.
But swayed by the promise of an easy reward, I suddenly had an asset with a name that made me laugh, but volatility that didn’t.
So what should I do now?
In the grand scheme of things, $600 won’t bankrupt me. But it is about a week’s worth of rent, or 100 coffees I would otherwise drink, or a budget return flight to Bali.
Not that I could ever base it on past performance, which of course is not an indicator of future performance, but $600 invested in the S&P 500 could grow to around $1,500 if it followed its 10-year historical rates of return of about 10% per year. (Not including fees, taxes, and all that jazz.)
It’s OK to make investing mistakes.
Mistakes are how we learn. And this is a mistake I know I can learn from. Here are my options, as I see them.
1. Keep it as a cautionary tale
Some people get bad tattoos. I have a bad crypto coin. Maybe I should hold onto it to remind me to be smarter next time.
2. Dollar-cost-average out
The idea behind dollar-cost-averaging is that you can protect yourself from the extremes of an asset’s price by making smaller transactions over time.
In this case, I could decide to sell $50 of my investment per week, as an example. Then I’m not selling all of it in one go at its high or its low.
One thing I’ve had to experience to really understand is that crypto is exceptionally volatile. Today’s low might be tomorrow’s high, and vice versa.
3. HODL
The guy I took the tip from sounded pretty confident, and who knows, maybe this coin will get up in Fergie time.
The flipside of FOMO is called the sunk cost fallacy, where humans don’t want to ‘waste’ the resources, time, or money they’ve already spent on a project by abandoning it.
$600 and one month is my current sunk cost, as well as all the brainpower I’ve spent trying to figure out my next best step. Maybe it’s worth holding on.
4. Double down on my research.
What I should absolutely do is more research, so I can feel confident in my eventual decision. With a stock, this might look like checking out earnings reports, 10-Ks, market updates and consensus estimates. With a crypto coin, I’m going to have to start at the beginning - especially if I want to invest in this asset class again.
5. Remember everyone makes mistakes, and the important thing is to learn from them
Even the pros make mistakes.
Jason from our investing team said,
“My biggest mistakes have been selling too early. A successful company usually finds ways to keep growing, and I’ve learnt not to take profits if the company is still innovating and executing.”
Shin from our engineering team said,
“My biggest mistake was day trading in my early days of investment. I can never time the market right."
So what will I do now?
I’m still a finance writer with a few hundred dollars worth of a shiny new memecoin in my trading account.
Eventually I’ll know what to do, but for the moment, I’m chalking this one up to being a brain snap, and will go back to impulse buying concert tickets instead.
