She decided to dump her life’s savings into crypto, rationalizing her decision by saying “something is telling me I can trust this generation.”
Hmmmm...
Clearly that ‘something’ is her fear of missing out… again.
Between her envy, greed and FOMO, she’s made a monumental financial decision driven by extremely powerful emotions.
Even some of the wealthy crypto speculators show signs of extreme FOMO.
As a community there seems to be intense peer pressure to NOT sell… to hold one’s crypto holdings until the price reaches some mythical height.
They should ask my friends who held a lot of Lehman Brothers and Bear Stearns stock and refused to sell what succumbing to that pressure can mean.
One young man who allegedly made hundreds of millions of dollars in crypto told the reporter, “All I know is the price of Ether is going to go up.”
That good old crystal ball yeah?
With such prodigious gains, the rational thing to do would be to take a good deal of money off the table and lock in some of those paper profits. Any good process would require you to have done so already.
But, hey… FOMO says hold on. If the price goes up 10x from here, you'll miss out on those gains.
So, driven by some irrational belief that a market can be unidirectional and/or that they can predict the precise time to exit, they’re not selling.
That decision-making is as emotional as ‘something is telling me I can trust this generation.’
The lesson I want to highlight again is that emotional decisions tend to be bad decisions.
And these bad decisions often lead to painful outcomes that could have been easily avoided by having a good risk adjusted process in place.
Financial Freedom
I’m not suggesting to NOT buy crypto. Or that anyone should sell it for that matter. I don't know enough about it nor do I watch it trade closely enough to have an informed opinion.
What I really wrote this tome for is to hopefully convince you to establish and follow a simple money making process for yourself: don’t gamble with your savings. You worked long and hard to earn it. Put a profitable process in place to protect and grow it.
If you understand the associated risks and have a plan to consistently extract profit adjusted for that risk, you're financially free.
Let me say that again... If you have a consistently profitable for the risk being taken process in place, YOU ARE FINANCIALLY FREE.
It's not the lottery... you won't make the money all at once... but if you have a good process, you don't need to make it all at once...
And, more importantly, once you get it started that profitable process can compound... And compounding is how you build wealth.
