I’m sure that virtually everyone was excessively bored during lockdown, and a lot of us took up new hobbies. My most prominent new hobby began in January 2021, relatively recent. I began investing in stocks and cryptocurrency.
At the beginning, I only invested in stocks because it was more predictable and the volatility of the crypto market intimidated me. I hardly invested much, but it was nice to see some of my investments produce some gains. I made quite a few mistakes at the start, that lost me some money, but I learnt from those mistakes and I’m still learning.
The most commonly made mistake is purchasing a stock at an inflated price. Any rise in the stock market isn’t very sustainable, and there’s a strong chance that you’re purchasing it near a peak (or at a peak). Sadly enough, I made that mistake myself with the rise of GameStop, a retailer in computer games, and movie theater chain AMC. Ouch!
Another mistake that new traders often make is that they tend to get scared when they see some small losses in their portfolio and start selling their stocks in fear of losing more money. It’s good to be cautious, however stock charts tend to fluctuate around a certain price point before rising or falling to another price point. Therefore, it’s very common to have short term losses. However, in my first week of investing I also made that mistake. Ouch again!
Just as with everything else, there are various downsides to investing. It isn’t far-fetched to compare it to gambling, in the sense that you are staking your money on the performance of a coin or a certain company. With this idea in mind, it is also a very stressful endeavor since you are staking your hard-earned money into a very volatile market. There was a day where the entire market crashed. I recall being on my trading app and seeing everything going down in real time and losing hundreds of euros. Triple ouch!
As a result of the volatility of the market, a lot of my friends tend to check their crypto wallet more frequently than their messages. There is a certain psychological toll it has on you, when you aren’t on the app for an extended amount of time you think anything could have happened. While the stock market is only open for the timings of a regular working day in the country the company is based in, the crypto market is open 24/7. There are times where my friends and I would wake up at odd hours to check the crypto market because of predicted drops (buying opportunities!).
The majority of investors are either scared or opportunists, and neither of these are an entirely good thing. The scared ones would sell their stock/coin as soon as it starts dropping in fear of losing more money. These investors tend to miss out on opportunities for future gain because of a slight drop. When I was a beginner, I was scared every time I saw even a small loss and would sell, only to realize much later that it was just a small fluctuation.
The opportunists on the other hand view a drop in price as an opportunity to invest more and have a lower dollar-cost-average, i.e. lower price per coin/share. These investors end up investing much more money than previously intended because of these windows to buy. Then they have too much money tied into their crypto wallets or the stock market. Naturally, this means less money in their bank accounts for their daily expenses. This also happened to me, I saw an opportunity to buy Cardano at a bargain, as a result I wound up eating pasta for the last week of that month.
Personally, I don’t think I’m good at trading or investing, but I’m learning more each day and utilizing the resources available to me. I’m definitely in cryptocurrency for the long term, rather than short term so I’m not too worried about that right now. A year ago, some coins that are currently worth two euros were worth two cents, now imagine what it would be valued at a year from now?
Finally I would like to give a piece of advice to the readers who are inclined to invest in cryptocurrencies or stocks upon reading this; only invest money that you can afford to lose. If you choose to invest money, you should pretend that that money is no longer at your disposal.