Time in the market beats timing the market
This article aims to help you cut out the noise and see through the short term negative media hype. If you stick to the 5 simple investing rules and principles we lay out, you’ll learn to manage these interesting times we find ourselves in. While others may make ill-informed and rushed short term decisions, following these rules will help you remain calm and level-headed while navigating the world of crypto investing.
While we have seen a recent pullback in the crypto market, the phrase that continues to ring true is: ”It's not about timing the market but rather time in the market”.
This couldn’t be truer for Bitcoin itself, with even the worst possible buy in Bitcoin generating a minimum return of +27% per year. But this only applies if you held it over a 5 year period. This equates to a +230% return over those 5 years — showing the true power of long term investing.
1) Compound interest — the 8th wonder of the world
But how do I leave my money invested for so long?
Well that leads us to our next point…
Would you rather receive $1 a day or a $0.01 that doubles everyday? “Of course I’d choose the dollar, it's 100x more money!”
What most people don’t understand about investing is compound interest, the 8th wonder of the world.
After 16 days, if you chose the dollar, you would be $16 richer. If you chose the 1 cent you would be $327.68 richer. How you may ask? Compounding.
After just 28 days, the $0.01 would have doubled 27 times and be sitting at a whopping $1 342 177.
What does this teach us about investing?
It doesn't matter how small your first investment is, what matters is consistency. Invest on a regular basis and leave your money to compound and grow just like that initial 1 cent piece.
Compound interest works like magic but it only works if you leave it to do its thing for a very long time.
2) Don’t invest money you can’t afford to lose
The golden amount to invest is different for everyone depending on their situation. But one thing is constant across every investor — don't invest more than your financial situation will allow.
The key to striking the right balance is through an investment strategy called Dollar-cost averaging.
The key to being able to leave your money invested for extended periods of time is by knowing your ideal position sizing.
Position sizing is the process of deciding how much to invest in a specific asset. This is a crucial skill that allows you to remain invested for the long term.
If you are over-invested and an unexpected accident or expense arises, you will have to sell your investments to make these payments. Therefore, you shouldn’t invest money you need to meet normal responsibilities. This act of selling interrupts your compounding interest process and reduces the power of long-term investing.
If you’re under-invested you run the risk of not capturing the full return on your investable cash, but you do at least have the option to increase your investment size by buying small amounts on a weekly or monthly basis.
3) Strategy: Dollar-cost averaging
I’m sure we’ve all been in the situation where you invest your extra money into an investment and a week later, that investment is down -10%. Now you’re sitting wishing you had more money to invest. This is where Dollar-cost averaging (DCA) becomes an integral part of being a successful investor.
DCA is an investment strategy where you divide up the total amount of money you want to invest over a time period into small, frequent purchases of the desired asset. The most common DCA schedule is to purchase the said assets at the beginning of each month. The goal is to reduce the impact of price movements and make the process of investing a habit.
Does Dollar-cost averaging work for crypto too?
If you take a look at the graph below, we compare $100 invested monthly into BTC and Gold. Over the 5 year period, you would have invested $100 60x making your total invested capital $6 000.
We can see that this strategy doesn’t only work for Bitcoin but it outperforms its yellow metal counterpart quite substantially. If you had chosen to DCA into Bitcoin, your portfolio would be valued at $67 176 (+1 019.61%) while your Gold portfolio would only be worth $7 307 (+21.79%).
4) Understand the asset class
Crypto is like early-stage tech investing.
Much like every early-stage tech innovation fighting for market share and adoption, volatility is part of the growth process.
With crypto, a whole paralleled financial ecosystem is being built live, in front of your eyes. A financial ecosystem that is built by the people, for the people. An ecosystem that encourages transparency, collaboration and free markets. Of course, there are going to be growing pains, mistakes, and failure — but that’s the price of true progress.
Now that we know what it is, we must understand the possible problem it solves and the value it creates.
In the case of crypto, it allows for a financial system and products to become transparent, faster and more efficient while protecting many from inflationary practices and corruption. It allows for the transfer of value from one to another without the need for intermediaries taking big profits for moving our money around.
For the most part, human beings hate change.
With most innovative technological advances, humans first resist it. Then they don’t agree with the need for it. Then ultimately they try to destroy it.
This happened to the internet in the late 90s. It was a time when many believed the use of email or a website was completely unnecessary because we had a functional postal service and brick and mortar stores.
As we can see below, it’s happening again.
Over the past 13 years, multiple people and sources have tried to convince the world that crypto is not needed. Much like the internet, cryptocurrencies and blockchain technologies will become so integrated into our lives that you can’t imagine a world without it.
But which cryptocurrency do I pick and how do I know it will be the winner?
5) Diversification
Investing is one of the best ways to build wealth and reach your long-term financial goals. But choosing the correct investment or asset class to help you reach your goals can be challenging. Diversification helps solve this problem by spreading your investments across a group of assets or asset classes so that you don’t risk it all on one single asset trying to deliver excellent returns.
The idea is that by exposing your portfolio to multiple cryptocurrencies, you’ll stand to benefit from uncorrelated returns.
Sure, you won’t realise the same returns as you would have if you went all-in on the highest performing cryptocurrencies. But on the flip side, you won’t risk having all your eggs in one basket. Instead, via diversification, you spread the risk and benefit from a far less volatile ride along the way.
Not only that, we can see that diversified bundles actually outperform some of the major cryptocurrencies.
Although easy to understand, diversification can be difficult for some to practically introduce into their portfolio. The vast amounts of assets in the investment world, especially in the Crypto space, can be difficult to navigate
Where do I find these diversified crypto bundles?
Revix, a crypto investment platform based in Cape Town, was founded to solve that very problem. In addition to making it easy and safe to buy individual cryptocurrencies, Revix’s claim to fame is its crypto Bundle offerings.
In the same way, you would buy into the JSE Top40, Revix Bundles allow you to invest in a group of cryptocurrencies seamlessly.
Revix currently has 3 bundle offerings:
The Top 10 Bundle is like the JSE Top40 or S&P 500 for crypto. It provides equally weighted exposure to the top 10 cryptocurrencies that make up more than 75% of the crypto market. This bundle has significantly outperformed Bitcoin over the last 12 months.
The Smart Contract Bundle provides equally weighted exposure to the top five smart contract-focused cryptocurrencies such as ethereum, solana and polkadot. These cryptocurrencies allow developers to build applications on top of their blockchains, similar to how Apple builds apps on top of its iOS operating system.
The Payment Bundle provides equally weighted exposure to the top five payment-focused cryptocurrencies looking to make payments cheaper, faster and more global. These cryptos include the likes of Bitcoin, Ripple, Stellar and Litecoin.
How would you invest if you knew you couldn't lose? Revix is giving you that chance. From 16th February to 1st March, Revix is offering you the opportunity for an investment that cannot decrease in value. And if it does, Revix has you covered. It's your chance to make money and diversify your portfolio with the confidence that you can only win.
How do I take part?
Sign up using the promo code: COVER. After signing up, you need to invest R5 000 into either the Smart Contract Bundle, the Top 10 Bundle or the Payment Bundle between the 16th February and 1st March 2022*. During this period, your investment is covered against loss. If the value of the Bundle has decreased by the end of the promotion period, Revix will pay you back the difference. It’s that simple. You will be compensated in Bundle units only. *T&Cs apply.
About Revix
Revix brings simplicity, trust and great customer service to investing. Their easy to use online platform enables anyone to securely own the world’s top investments in just a few clicks.
Revix guides new clients through the sign-up process to their first deposit and first investment. Once set up, most customers manage their own portfolio but can access support from the Revix team at any time.
For more information, please visit www.revix.com
This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose, and before investing, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
Brought to you by Revix.
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