Today, I got a question from a fan buddy who wrote a long message. He mentioned a term called 'value speculation' and pointed out that the first personal viewpoint is stop-loss, because you might hit a Waterloo, and there could be 'black swans', like Buffett's Berkshire textile factory and the two Waterloo incidents with Kraft Heinz.
Let me quickly recap these two incidents for everyone. The textile business was something Buffett bought into in the 1960s because it was cheap, a classic case of buying undervalued good companies. However, the textile industry was already crushed by low-cost manufacturing from Asia back then. Even though Buffett kept pumping in capital, it faced continuous losses, leading him to say it was a 'bad decision' because the industry was a bad sector with no economic moat.
Kraft Heinz is a consumer product company created by Buffett and 3G Capital in 2015. It's in a mature industry with a competitive moat, but old Buffett felt it was overpriced.
These two instances are probably Buffett's more unsuccessful investment cases. I think that's perfectly normal—no one can always make the right decision throughout their investment career. It's impossible; we all grow through 'failures.' These two cases made Buffett realize he should avoid bad industries and be more cautious about industry moats.
Everyone, whether investing or speculating, builds their own 'value perspective' from failures. I've been in the game for 8 years, watching Bitcoin skyrocket from a few thousand to 100k. Having missed earlier opportunities, I cherish Bitcoin even more now. If I had the 'knowledge' I have today, I would have gone all-in back then, even leveraging debt to buy Bitcoin.
Isn't all this experience gained through 'lessons'? No one is a prophet, and no one can traverse the past. So my insistence on holding Bitcoin isn't just an investment philosophy; it's shaped by past 'lessons' I've learned!
Regarding your point about preserving capital, that's indeed very important. You have to be ready to cut losses. However, having been in the industry for a long time, I have a good sense of where Bitcoin is value-driven and should be bought, and where it’s likely 'high' and can be sold. After I finish one round of buying, I generally won’t incur losses. But when buying during a downturn, I must accept some losses. My principle is not to invest all my capital; instead, I ensure my basic living expenses and work outside the market to earn money!
Because the understanding above tells me that as long as I hold for the long term, I will definitely profit, so I remain calm inside!
However, if a real 'black swan' event occurs, like quantum computers being widely adopted and Bitcoin crashing, I might consider cutting losses. It doesn’t mean I have to hold on blindly!
To address your point about using indicators and tools to identify key buy and sell positions, that's essentially making swing trades. It’s all about personal preference; if you enjoy doing this and can earn money through constant practice, then go for it! I personally don’t like frequent trading because I believe the risk of making mistakes is extremely high. Plus, one wrong move can cost you more than getting ten right!
Let me explain this with a probability formula. Suppose your chances of making a correct trade are as high as 80%, with only a 20% chance of being wrong. That's already elite-level! However, after 10 trades, the probability of getting them all right drops to just 10%.
In other words, you have a 90% chance of making a mistake in 10 trades, so minimizing your trades is the best strategy for an average trader!
Also, regarding your point about valuation, for a company or project, valuation can currently only be assessed through comparative methods. For similar companies, I compare platforms like AAVE and Morpho, looking at their TVL against their market cap. The higher one is the better buy.
He said in the end, buy low and sell high. I think that makes sense; as long as you’re making a profit, you can sell. There's no rule saying you have to hold forever. Everyone has their own style. I don't know if Bitcoin at 12.4 was the peak; I just sold some in November when the market looked bad. I didn’t sell everything, and I don't know if 60k is the bottom. I just kept buying from 80k down to 60k during the dip. Did I profit from this move? Definitely not, because if I'd sold all at 12.4k, I'd have made the most profit. Buying in at 60k would have maximized my gains. The real issue is that I don’t know when the peak or bottom is.
What if it drops to 50k or 40k later, right? So I rarely take actions. Even when I do, I'm not going all in because I'm uncertain. I only allocate a portion of my capital. The upside is lower risk, but the downside is also lower returns.
You can’t expect to have low risk and high returns; risk/reward ratio and win rate are always opposing metrics! This brings us back to human nature: everyone wants to earn more and lose less. Greed and fear are ever-present. So I choose not to fight human nature; if I earn a little less, that's okay. Don’t dwell on short-term gains or losses; be grateful if you can still profit!
Lastly, I want to share my recent insights: gains and losses come from the same source, happiness and anger stem from the same root, success and failure are intertwined. What you gain in one area, you might lose in another. So just focus on improving yourself; strive to elevate your mindset and align your actions with your values.
Wishing: everyone can become the best version of themselves!
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