Category Archives: Investment

How the Hodlers Fail the Crypto-Economy

December 2017 was a missed opportunity for hodlers as well as the crypto-market in general.

Hodlers could act responsibly in December 2017 and be rewarded for their actions. Instead they’ve chosen to be greedy. They’ve lost the opportunity to profit and to contribute to the stability of the crypto-market.

By hodlers, I don’t mean the average investor who made a humble investment into Bitcoin and held on to it through the ups and downs of the market. By hodlers, I mean the crypto-geeks who built a significant holding back in the day when Bitcoin was less than $10. By hodlers, I also mean the early investors who invested a significant amount in Bitcoin when Bitcoin was less than $1000.

Lack of Market Making

Hodlers had a responsibility in December 2017. They had the responsibility of market making. They had the responsibility of selling some of their holdings when the markets went out of control in 2017. If they did that in a controlled fashion, we wouldn’t have the crazy ups and downs. We would still have a healthy bull market now. We would be attracting more and more investors to the crypto-space. Mainstream adoption wouldn’t be a joke that it is right now.

Confusing on paper profits with real profits was an illusion.

Instead, hodlers chose to hold on to their portfolios and they became the victims of their greed. Holding on to their portfolio so tightly was an illusion for hodlers. Their illusion was confusing on paper profits with real profits. The markets have punished them for not taking some of their profits, which they could put in use when the markets withdrew later in December 2017 and January 2018.

In a way, Charlie Lee, the creator of the LiteCoin, did what was responsible and sold all of his LiteCoin holdings at the height of the market in December 2017. He did what was responsible for the crypto-market in general and for his portfolio in particular.

It was a no-brainer to sell a portion of one’s portfolio above $10K in December 2017, even a few percentage points of one’s holdings.

I’m 100% aware that one person cannot influence the market by themselves. However, when the markets go crazy and you have sufficient amount of funds, it’s a no-brainer to put some of those funds, for example 10% of your holdings, into the market. It was a no-brainer to sell a portion of one’s portfolio above $10K in December 2017, even a few percentage points of one’s holdings.

Responsibility to Act Rationally

As crypto-investors, we have a responsibility. That responsibility is to act rationally in this market. That is to only invest what we can afford to lose. That is to accept the fact that Bitcoin prices can crash for 80% or more any time. That is to accept that our Bitcoin accounts can be hacked any time. Moreover, our responsibility is to act as market makers, even if we can’t influence the market just by ourselves.

By market making, I mean deploying up to 10% of our holdings when the price swings exceed rational expectations. It is really not that difficult to gauge whether the markets act irrationally or not.

Did gold, silver, oil, or another commodity made a 2000% price move in 2017? No, they didn’t. Did the whole financial system collapse? No, it didn’t. Did we experience hyper-inflation? No, we didn’t. Then why did the price of Bitcoin increase almost 2000% in 2017? It did not have a reason. Serious Bitcoin investors had the responsibility to act against that move, instead of getting excited about profits on paper.

My 2018 Crypto Game Plan

In order to fulfill my responsibility to the market and to my own portfolio, I’ll keep investing in Bitcoin in 2018, because I expect the price to withdraw throughout 2018. At the moment, 3% of my savings are in Bitcoin. My plan is to increase this percentage to 5% throughout 2018 in 12 installments over 12 months. I have already invested three installments in January 2018 at $11K, $10K, and $9.2K

I plan to add passive orders under market prices and wait for them to be fulfilled. If they aren’t, I plan to buy from the market price in the last week of each month.

In the unlikely event of 2018 being a copy of 2017 and the Bitcoin price exceeding $100K without a rational reason such as hyperinflation, I will start to sell up to 10% of my Bitcoin investments. That is my responsibility as an investor. Taking profits in irrational upswings is also sound portfolio management.

Please don’t interpret the paragraph above that I expect Bitcoin to go above $100K in 2018. As I explained in my previous Bitcoin related post, BTC can end up anywhere between $1K and $100K in 2018. Moreover, if it ends up at $1K, it can stay there for several years. Hence, maximum 5% portfolio allocation from my side.


Depending on their long term investment objectives, I believe whales, hodlers, and even regular investors have the responsibility to act against irrational market movements. Unfortunately, 2017 is a missed opportunity for many hodlers and the crypto-markets in general.

I hope, we, the crypto-investors, learn our lessons and use up to 10% of our portfolios to contribute to the stability of the crypto-markets, if prices start to act irrationally. This is not only our responsibility to the crypto-economy at large. This is also our responsibility to our own portfolio.

If we don’t act on our responsibility, the crypto-economy will remain as the Wild West of finance. We won’t see people and businesses using it as a means of exchange, not even store of value. It will be a casino, attracting gamblers that are only after quick bucks. And the mainstream adoption will remain as a dream.


This post is for information purposes only and not intended to be investment advice.

The Dark Side of Bitcoin

No this post isn’t about Criminals, Drug Dealers, or Terrorists.

The most common argument against Bitcoin is that it is used by criminals, drug dealers, and terrorists. Well, guess what? The US Dollar is also used by these groups. Shall we ban all cash?

While we are at it, we should go ahead and ban computers, phones, and the Internet as well, all of which are used by criminals, drug dealers, and terrorists. So, its use by criminals is not an argument against Bitcoin.

Energy Usage

How about its energy usage? Well, this isn’t a sufficient argument against Bitcoin either. Our financial system is mostly online and that uses energy as well. Mining and securing gold requires energy. Until an energy neutral way to store and transfer funds is invented, energy usage is not a sufficient argument against Bitcoin.

Bitcoin is a Ponzi scheme.

In a Ponzi scheme, there is a central operator promising unusual returns. They pay these unusual returns with the deposits from newcomers. The operation goes on until there is no more fresh money entering the operation and it collapses.

There is no central authority in Bitcoin nor promise of unusual returns. Unfortunately, some investors look at the past price movements and they hope for unusual returns. This doesn’t make Bitcoin a Ponzi scheme.

Bitcoin is based on the greater fool theory.

Bitcoin is only valuable if the following two requirements are met.

  1. The Bitcoin network stays operational.
  2. There are other people who also believe that Bitcoin is valuable.

The second requirement could be called a sort of greater fool theory, if the fiat currencies weren’t inflationary. The fiat currencies, currencies issued by central banks such as the US Dollar and Euro, are inflationary by design. It’s the official policy that they lose their value by a few percentage points every year to stimulate the economy.

If the fiat currencies weren’t inflationary, Bitcoin would be worthless except for its use to transfer funds. In that case, the greater fool theory argument would make sense. However, with the inflationary policies and low interest rates, the greater fool theory argument isn’t that strong either.

Only rich people can afford it.

Who can afford to buy a Bitcoin at $11K? Only rich people, right? Wrong. You can buy one hundred millionth of a Bitcoin. That wouldn’t make much sense, but it’s definitely possible to invest in Bitcoins starting with a few dollars.

1800 Freshly Minted Bitcoins per Day

This is where it gets serious. At this moment, 1800 new Bitcoins are minted every day to reward miners who maintain the underlying network of Bitcoin. At the time of writing this post, one Bitcoin costs more than $11K. 1800 new Bitcoins per day means approximately $19.8 million worth of new Bitcoins entering the market every day.

If the miners choose to sell all of their freshly minted coins every day, the rest of the market has to pay them $19.8 million in cash every day, just to keep the Bitcoin price at its current level.

An inflow of $19.8 million a day is not a problem during a bull market like the one we had until mid-December 2017. From then on, we experienced a pullback. As the prices pull back, I don’t see investors pouring $19.8 million every day to Bitcoin.

If the freshly minted coins are not offset with net inflow of cash, we will see the continuation of the pullback until a balance is reached.

My intuition says that the Bitcoin price will slowly pull back for the rest of 2018. I don’t see any reason for new money flowing into the market, because the average person only invests in assets that are already in an upwards trend. We are already past that point in Bitcoin.

Having said that, I’m not pessimistic about Bitcoin in the long term. I don’t think neither me nor anyone else can predict what will happen with the Bitcoin price in 2018. It can end up anywhere between $1K and $100K in 2018. So, take into account all the possible scenarios when investing into Bitcoin.

I believe 2018 will be the year the smart money will be accumulating Bitcoin. My plan is to join them. 3% of my savings are already in Bitcoin. I plan to increase this percentage to 5% in 2018.

My game plan is to divide the 2% of my savings in 12 and buy that amount of Bitcoin every calendar month. This plan matches my assumptions.

  1. Fiat currencies lose 2% of their value every year by design. (Official government policy)
  2. You can’t time the market. You can’t say when the market is at its highest or lowest point.
  3. You can’t predict the market, the lowest or highest prices of an asset.

Therefore, I’ll be using dollar cost averaging strategy over twelve months in 2018. In a given calendar month, I’ll enter a passive buy order below the market price order. If this order doesn’t get filled, I’ll buy from the market price in the last week of the month. I’ll repeat that for each month in 2018. This strategy worked in January and I was able to buy at $11K and $10K in January.


There are a lot of arguments circulating in the media against Bitcoin. Most of these arguments aren’t convincing. While people are busy discussing weak arguments, they are missing an obvious but strong argument against it: the constant cash inflow requirement to keep the Bitcoin price at its current level. Yet, even that might not stop Bitcoin in the long term.

If you have any other arguments against Bitcoin, let me know in the comments and I may discuss the serious ones in future posts.

Disclaimer and Disclosure

This post is for information purposes only and not intended to be investment advice. At the moment of writing this post, 3% of my savings was in Bitcoins.

Technical Analysis of Stock Prices is Useless

Holidays have been just over and I had some great time with family and friends. I met an old friend in my hometown and most of our conversation was focused on cryptocurrencies. At a certain moment, my friend started to explain his technical analysis on Bitcoin and Bitcoin Cash.

My old friend told me to switch from Bitcoin to Bitcoin Cash, if the price of a Bitcoin retraces from $16K to $8K, because he expected Bitcoin Cash to increase fourfold in that case. He started to explain his theory, but I couldn’t listen to him. His hypothesis that 50% retracement in Bitcoin triggering a 400% increase in Bitcoin Cash sounded farfetched to me.

I could easily discard my friend’s theory, if he didn’t told me to invest in XRP before it increased tenfold.

He is also a successful visual artist and he spends a lot of time looking at live price charts, as trading happens. So, I suspect that he might see some patterns in there. But I’m not 100% sure that the patterns he sees predict the future with statistical significance.

In order to believe in my friend’s technical analysis, I need to do some statistical analysis on his trade results. Until then, technical analysis will be something like fortune telling to me. It might be fun, but not rational or realistic.

Looking at price charts and trying to predict their future reminds me of fortune tellers that look at the remainders of a cup of coffee that you have just drank and tell you what’s going to happen in your future.

What If It Worked?

Let’s assume that technical analysis accurately predicted the price moves in the future. That would create a huge incentive to develop automated trading systems around them. Once those systems got deployed in the field, they would make the signals of technical analysis useless.

Automated trading systems would create instant price gaps as soon as a technical analysis signal got triggered. This is the same effect as how public news move prices. If you think about it, price moves are actually public news. You can’t make any more money from technical analysis than from public news.

Why Do We Buy Into Technical Analysis?

There are several biases and fallacies in play when it comes to technical analysis. One of them is our tendency to see patterns in random data. We intuitively assume that we live in a well-ordered universe and everything has a reason. In reality, we live in a universe where chaos and randomness play a huge role.

Another bias that makes us believe in technical analysis is the optimism bias. What if it was true? We could make a lot of money just by clicking a few buttons. Wouldn’t it be great? Unfortunately, it doesn’t work like that. You can read more about these and other biases and fallacies in the book Thinking Fast and Slow by Daniel Kahneman.


If you want to preserve and increase your savings, it’s important to base your investment decisions on sound assumptions. Technical analysis is not a sound assumption. If you want to read about which assumptions are sound and which are not, then you can read my previous post.


This post is published for information purposes only and not meant to be investment advice.

7 Irrational Investment Beliefs and Their Alternatives

Most of the beginner investors have intuitive assumptions that don’t match the reality of the markets. These intuitive assumptions are part of human nature. We need to let go of these assumptions to improve our results as investors.

1. A good investor must know which asset is going to appreciate or depreciate the most.

It’s impossible to know which asset is going to appreciate or depreciate the most. Therefore, it doesn’t make sense to invest all of our savings into a single asset. Holding a diversified portfolio is the best strategy for the retail investor like you and me.

The only exception to that rule are the fiat currencies such as USD and Euro. We know that they will depreciate over time, because it’s the official policy of central banks and governments.

2. A good investor must know the top and bottom of an asset.

It’s impossible to know the top and bottom of an asset. The price of an asset can go lower even if you think it is already too low. In other words, “don’t try to catch a falling knife.” The price of an asset can go higher even if you think it is already too high. Rules such as “never buy at a historic high” don’t reflect the nature of stock exchanges. Buying at historic highs worked well in many cases.

3. A good investor must make a lot of profitable trades.

It’s impossible to know which assets are going to appreciate or depreciate. It’s impossible to know how much an asset is going to appreciate or depreciate. As a result, the more we trade, the more mistakes we are going to make, and the more money we are going to lose.

I made the most profits from buy and hold positions. I missed the most profits from selling too early. Therefore, my motto for investing is “buy and forget,” until I need the money or until my investment hypothesis doesn’t hold anymore. For example, when I buy a stock because it’s a value stock and it’s already overpriced according to the metrics I follow, it might be the time to sell it.

4. Markets are rational and they price all assets correctly.

Markets are made by humans. Humans are not rational all the time. Therefore, markets are not rational all the time. In the short term, markets can behave irrationally, just like the crypto-bubble we have been experiencing lately. In the long term, markets are forced to behave rationally, because there aren’t infinite resources to feed the irrationality. This happens through corrections and crashes. Don’t bet on it that the markets will correct themselves quickly. This can take a lot of time, more than you can endure. For that reason, it’s wise to avoid betting against the markets and taking short positions.

5. One can make profitable trades based on news and opinions.

Most of the news are already expected and factored in the prices. Therefore, they don’t move the prices that much. The news that move the prices move them so fast that it’s impossible for you and me to take advantage of them.

If you have an opinion about an asset and you’re right, there are probably a lot of others having the same opinion and your opinion is already factored in the prices. If you’re wrong, your opinion is going to lose you money. In both cases, your opinion won’t make much money.

The only exception to that is when you make a thorough research on stocks that are out of the radar. For me, those are the small cap value stocks. They require a lot of research to find. Once I find them, I formulate an investment hypothesis and hold on to them until I need money or the hypothesis doesn’t hold anymore.

6. Buy stocks of good companies to make profits.

I don’t aim to buy the stocks of good companies. I can’t make any money buying the stock of a good company if the stock is already overpriced. I aim to buy underpriced assets. I can make money buying the stock of a mediocre company, if the stock is underpriced.

7. You can predict the future by looking at price charts and technical indicators.

I don’t believe in technical analysis. It’s a fallacy of our brains to look at price charts and see patterns. It’s a greater fallacy that the same patterns are going to repeat themselves in the future. This is actually an extension of the irrational assumption #5, “one can make profitable trades based on news.”

Price charts are public news. Everybody knows them. If they were useful, everybody would use them. If everybody tried to use them, they would be useless. As a result, technical analysis is useless. You’re better off investing in an index fund every month than wasting your time with technical analysis.


You might think that these assumptions being irrational is bad news. You might think that these assumptions are your only way to make money investing. You might think that I’m pessimistic for calling these assumptions irrational. On the contrary.

These assumptions being irrational is good news for us. It takes a lot of stress away from investing. We know that we can’t predict the most profitable asset. We can’t predict the most profitable time to buy and sell. We can’t make money from the news, technical analysis, our opinions, or picking stocks. At the same time, we know that our savings in fiat currency are going to lose their value over time. The best strategy to act on these assumptions is to build a diversified portfolio over time. That also saves us a lot of time to follow the news, thinking about the markets, and doing technical analysis.

If you want to invest actively and if you have the time and willingness to do your homework, we also know that small cap value stocks have a higher probability to beat the market.


This post is for information purposes only and not intended to be investment advice.

My Investment Mistakes in 2017

One of the beginner’s mistakes in investing is to go all-in on a single asset, in a single transaction. The assumption behind this practice is that “an investor must be able to predict which asset will bring the most profits.” Millions of investors experience over and over that this is not the case.

The best way to invest for the average investor like you and me is to diversify our investments among different assets and to invest gradually over time. At the moment of writing this post, my investments include Bitcoin, Silver ETF’s, and individual stocks. I have even some put options, which will bring me profits if the underlying ETF loses value.

My investment portfolio is far from perfect.

That is one of the reasons I am writing these investment series. I’m just writing down everything I know, so that I can apply my knowledge in real life. My biggest mistake at this moment is that the portion of my cash saving is greater than optimal. Some cash is necessary for emergency situations as well as to reduce the volatility of the portfolio in case of a market crash. However, the portion of cash in my portfolio is greater than necessary. That’s because I wasn’t focused on investing last year. However, this year, I’m going to do the work and get a good portion of that cash into the market.

I Sold Too Early.

So far, I’m happy with the investments I made. I’m disappointed with the investments I haven’t made or sold too early. I have sold Ripple (XRP) too early, before it started its tenfold appreciation. I have sold 2/3’s of my Bitcoin holdings when it broke through $10K. Both mistakes point to one of my basic investment rules: “the more you trade, the more you lose.”

ETF’s and Index Funds

As a retail investor with a limited time and budget, you might find it difficult to research, invest in, and follow multiple assets. ETF’s are a great solution to that problem. ETF’s are exchange traded funds. You can buy and sell them like a stock in the stock market. However, they can combine multiple assets in a single instrument. If you buy an etf that tracks the S&P500 index, you are immediately exposed to 500 largest companies in the US stock exchanges. Another ETF I like is the one that tracks the price of gold. Instead of buying, storing, and selling physical gold, I just buy the ETF of it. It’s much more practical.

If you don’t have the time to do your research, it’s better to invest in ETF’s than keeping all of your savings in cash.

Unfortunately, I didn’t invest in S&P500 or gold ETF’s last year. That would be the perfect way to invest my excess cash. My underlying assumption was that I needed to make my research and buy individual stocks. That is not necessarily a bad assumption, because I made some profits doing that. However, if you don’t have the time to do your research, it’s just better to invest in ETF’s than keeping all of your savings in cash, which is going to lose some of its value over time for sure.

Individual Stocks

If you have the time and if you are willing to do your research, you might want to consider small cap value stocks. They require a lot of research and they involve higher risk, but the rewards can justify the work and risk.

Small cap value stocks have performed better than the market in the past.

Small cap stocks are the ones that have a smaller total market value. Value stocks are the ones that are valued lower relative to their fundamentals, such as price to earnings ratio. The definitions of both terms vary among different resources, so please do your own research and come up with your own definitions.

It requires a lot of research to find small cap value stocks. When you find those stocks, you need to read their quarterly and yearly reports thoroughly. Once you have done that, it’s up to you to decide whether you want to invest in that stock or not. Even if you decide to invest in that stock, it’s important to allocate a small portion of your portfolio to them. My rule for such cases is to not exceed 5% of my portfolio.

Cutting the Trees and Watering the Bushes

If things go according to plan and the stock or another asset appreciates, I don’t trim my position to keep the allocation of that stock below 5%. I believe in the rule, “you can’t get rich cutting the trees and watering the bushes.” Cutting the trees and watering the bushes refers to the practice of trimming your winners and investing more into your losing positions to maintain the balance of your portfolio.


Here are the rules that I have mentioned in this post.

  • Keeping a portion of your savings in cash is good for emergency situations and to manage the effects of a possible market crash.
  • It’s better to decide on an optimal ratio of cash to complete portfolio. If the cash exceeds that level, it’s better to invest it.
  • If you don’t have the time to research individual stocks, it’s better to invest in ETF’s than to not invest at all.
  • If you have the time to research individual stocks, considering small cap value stocks is a good idea, because they outperformed the market in the past.
  • Diversification of a portfolio doesn’t mean to trim the winning positions and investing more into the losing positions. Consider diversification when investing, not when liquidating. In other words, avoid cutting the trees and watering the bushes.

My goal in these series of investment related posts is to point you to a direction. As you can imagine, there’s a lot more to learn about investing. I want to recommend a book and an audiobook related to the topics in this post.

  • One Up On Wall Street by Peter Lynch
  • The Art of Investing: Lessons from History’s Greatest Traders by Professor John M. Longo (can be found in


This post is for information purposes only and not intended to be investment advice.

The Best Time to Invest

It’s impossible to find the perfect time to buy or sell an asset. You might think that the price of an asset is already too low, but it can always go lower. The same is true for the opposite direction. When should we invest then?

When we start investing for the first time, we look at the price charts and see the perfect price patterns of tops and bottoms. When we look at the historical price series, we see which asset has returned the most profits. Then we think that it is possible to predict the asset that returns the most profits and the tops and bottoms in the future. This is an example of hindsight bias. In reality, most people can’t predict those facts in the future. So, it doesn’t make any sense to try that.

Not being able to predict those price patterns doesn’t make you a bad investor.

Let’s formulate what we know for sure.

  1. We can’t predict which asset will bring the most profits in the future.
  2. We can’t predict which price levels are the top and bottom of a certain asset.
  3. Your savings in fiat currency like USD and euro will lose their value over time.

The third assumption might strike you. How do I know that for sure, when I can’t be sure about the first two assumptions? I can be sure about the third assumption, because it’s the official policy of central banks and governments to stimulate the economy. It’s not a secret. They say it officially.

What’s the best investment strategy based on these assumptions?

  1. Build a diversified portfolio that includes stocks, commodities, fixed income assets such as bonds, and even some cash.
  2. Hold your assets as long as your investment hypotheses holds and you don’t need the money. The more you trade, the more you lose.
  3. Don’t try to time the market. Average your purchase price over time.

As I have already written two blog posts about the first two parts of the strategy, I will not go into detail of them again. This post is about the third part.

Dollar Cost Averaging

The best strategy to invest your savings in a market is to divide it over time. This strategy comes natural to people who are saving and investing from their monthly paychecks. However, if you already have savings and you want to invest them, dividing them into several installments and investing them over several months can be the better strategy. This is called dollar cost averaging. That way you might avoid losses in case the market goes against you. At the same time, you will be losing some profits in case the market goes in your direction. However, since you know that no one can time the market, you will be fine with whatever direction the market goes.


Let’s summarize all the investment lessons that we have learned so far.

  • We know for sure that the savings in fiat currency, USD, euro, and so on, will lose value over time.
  • We can’t predict which asset will appreciate the most.
  • We can’t predict the bottom and top levels of an asset.
  • We can’t time the market, i.e. predict the best time to buy or sell an asset.

Based on those assumptions, the best way to save and invest is the following.

  • Start as soon as possible and as small as possible. Learn as much as possible and experiment with free, virtual stock exchanges to gain experience. This is easily one of the top three topics you need to educate yourself in.
  • Invest your savings gradually over time, i.e. use the dollar cost averaging method.
  • Build a diversified portfolio of various assets, including stocks, index funds, etfs, commodities, fixed income assets, even some cryptocurrencies if you want to take that risk.
  • Hold your assets as long as your investment hypothesis holds and you don’t need money. The more you trade, the more you lose.


This post is published for information purposes only and not meant to be investment advice.

The More You Trade, the More You Lose

Beginners are prone to the hindsight bias when it comes to investing. They look at historical price charts and they think that they can spot which asset will move the most. As a result, they believe that the best strategy is to go all-in on an asset. Experience shows us that this is not the case. The best approach is to hold a diversified portfolio.

Another result of the hindsight bias is that you can know the tops and bottoms of an asset. As a result, the more you trade those tops and bottoms, the more money you are going to make. This is another fallacy that the beginners are prone to.

Our psychology is our biggest enemy when it comes to trading stocks and commodities.

Our psychology makes us stick to losing positions until we can’t take it anymore which is usually the turning point. That means we buy and sell at the worse moments. Does that mean we shouldn’t invest at all? Not at all.

The central banks are aiming for a slight inflation in their currencies. That means your savings lose their value slowly over time. That is official government policy. To offset that loss, we need to invest. At the same time, we need to avoid trading frequently. We need to find the sweet spot between not investing at all and day trading.

The best strategy in transaction frequency is the following.

  1. Determine the investment hypothesis.
  2. Hold the investment as long as the hypothesis holds and you don’t need money.

My Experience: A Value Stock

I have spotted a stock with a price to earnings ratio significantly lower than the S&P 500 average. When I read the reports of the company, I couldn’t find any reason to justify the underpricing of that stock. The reasons for that underpricing might be that the company was around for a long time but still remained a small cap stock. It didn’t promise a huge growth or a technological breakthrough. It didn’t make any headlines in the news. It wasn’t in the S&P 500 index. It wasn’t sexy enough to get investor attention.

My investment hypothesis was the following. If the company kept its current profit levels, it would be a better investment than the S&P 500 index fund. I invested into the stock and started to wait. The price of the stock didn’t increase for a long time. On the contrary, it decreased to some extent for a few months. There wasn’t any news to justify the decrease in the price. I kept holding to the investment, because my hypothesis wasn’t disproved yet. I was able to stay calm, because my portfolio was diversified enough. This stock didn’t represent a significant portion of my portfolio.

The stock kept posting steady profits and reported to be included in the Russell 3000 Index after a few quarters. That bumped the stock prices. Holding on to the stock as long as it kept satisfying my investment hypothesis paid off for me. I still hold the stock, as it keeps satisfying my investment hypothesis.

Ripple (XRP)

I bought some Ripple (XRP), a cryptocurrency, because of its deflationary policy. After a while, I changed my mind and sold my holdings. The price wasn’t moving anywhere. I thought its main use case, being an interbank currency, meant that its price should stay stable. Within a month after I sold my Ripple holdings, its price increased tenfold. I wrote a detailed post about my experience.


I started investing in Bitcoin when it was around $5000. My last investment was around $7500. When Bitcoin broke through $10K, I sold 2/3’s of my holding. Its price increased until $20K and it’s still above $15K at the time of writing this post. Had I stuck with my initial holding, I’d be better off with my investment. However, I let my emotions dictate what to do with my savings and I missed some profits.

I don’t mind too much missing out on some potential profits in Ripple and Bitcoin, because my investments in both of them weren’t more than 5% of my portfolio. I also didn’t panic when the price of the first stock decreased, because my investment was less than 5% of my portfolio. As you see, maintaining a diversified portfolio helps with staying calm when the price doesn’t move in your favor. That is one of the many benefits of diversification.


I know that three examples are not enough to prove a point, but they all point to a conclusion. The more you trade, the more you lose. The best strategy for an individual investor is to stick with an investment as long as the investment hypothesis holds or money is needed.

Disclosure and Disclaimer

This post is for information purposes only and not intended to be investment advice. At the time of writing, 4% of my savings were in Bitcoin.

The Best Investment Strategy for Retirement

If you plan to retire sometime in the future, you must start saving and investing as soon as possible. The first few years in investing is spent with learning and gaining experience. That means, you will make some mistakes and lose money.

The best way to minimize losses is to start small and start virtual. By virtual, I mean practicing in virtual exchanges with real world, real time stock exchange data. That way you avoid losing money while you are gaining experience.

Hindsight Bias

When you first start investing, you look at the price charts and you think that you can buy at the lows, sell at the highs, and make a living doing that. What is the best investment strategy based on that assumption? Find an instrument that will make the greatest price move in your favor and go all in on that.

Nothing can be further from the truth. This is a perfect example of hindsight bias. Trying to call the tops and bottoms of a market is a typical novice mistake.

In real time, it’s impossible to correctly predict which assets are going to increase or decrease in value, and which levels are the top and bottom. The prices might seem to be too high and they can go higher. They may seem to be too low and they can go lower.

Now, stop reading and think about the sentence above and the following question.

What is the best investment strategy based on that fact?

You might come up with the following answer. “If it’s impossible to know which asset will appreciate or depreciate in value, then it’s better to not invest at all.” That answer would be correct, if your base currency, USD or euro, would retain its value over time. It doesn’t. Inflation is the official policy.

If you keep all of your savings in USD or euro, you are guaranteed to lose value over time.

Let’s go over our assumptions again.

  1. Savings in USD or euro will lose some of their value over time.
  2. We can’t know which asset will appreciate or depreciate in value.
  3. We can’t know which levels are the tops and which levels the bottoms.

What is the best investment strategy based on those assumptions?

The best strategy based on those assumptions that I came so far is to hold a diversified portfolio. That includes index etfs, individual stocks, commodity etfs, some cash, and so on. I hold even some bitcoin in my portfolio. My current bitcoin holding is 4-5% of my savings.

My goal is to be never satisfied with the performance of my portfolio but also never be disappointed with it. I don’t try to be the investor that makes the most money from their investments. My aim is to be the investor that retains the value of their investments and make some profits on top of that. This might not be the sexiest investment strategy. However, it’s a realistic one.

I’m never 100% in a single asset, including cash. That would mean I have some superhuman intuition to see the future and predict the asset that would increase the most in value. I don’t have that kind of intuition. I don’t know any other person that has that kind of intuition.

Sure, there would be people who are 100% in a single asset that would increase at least tenfold in value. They will look like geniuses after that price increase. That’s again another example of hindsight bias. Every few weeks, there’s a person who wins the jackpot in the lottery. Does that mean that the person had the best strategy to spot the correct numbers in lottery?


Savings in USD and euro will lose some of their value over time. The retail investor can’t spot the tops and bottoms of the market. The best investment strategy based on those facts is to build a diversified portfolio over years.


This post is for information purposes only and not intended to be investment advice.

Investing: Start Early, Start Small, Start Virtual

When I was in college, I lost a lot of money in stocks. Luckily all of it was in stock exchange simulations.

Saving and investing is a crucial life skill, if you are expected to reach the age of retirement. Retirement might seem far away, but the earlier you start to save and invest, the less you need to save, the earlier you can retire, and the more you’re going to have in your retirement. Therefore, it’s never too early to start saving and investing.

Investing is a skill you need to master. You need to learn as much as possible from credible resources. You also need to gather experience. Managing your money is a very emotional subject. That’s why knowledge is not sufficient, experience is also needed.

Beginners are prone to make mistakes in their first few years of investing. For that reason, starting small and starting virtual is a good idea. When I was in college, I lost a lot of money in stocks. Luckily all of it was in stock exchange simulations. These losses were on a website where I could invest with play money. The stocks that I invested were real life stocks. So, I was able to test my investing skills on real life stocks without losing any real money. Those trades taught me a lot of lessons about investing.

If you don’t have access to an online stock market simulation, you can invest on paper. You can write down your investments in a diary and follow the prices over time. Don’t expect to make a lot of money investing in stocks, especially in the first few years. Devote the first few years to learning as much as possible and gather as much experience as possible.

“You don’t have the option to not invest your money.”

If you feel like investing real money, keep the amount small. That way, your losses will be small as well. Don’t get discouraged, if you lose money. You don’t have the option to not invest your money, because the governments are officially aiming for 2% inflation each year. That means your savings will lose at least 2% of their value every year. You need to invest your savings wisely to offset at least that amount each year.

There are three books that I’d like to recommend to people who just start saving and investing. I recommend reading them in the order that I present below.

  1. Rich Dad, Poor Dad by Robert Kiyosaki
  2. One Up On Wall Street by Peter Lynch
  3. The Little Book of Behavioral Investing by James Montier


This post is for information purposes only and not intended to be investment advice.

I Sold Ripple Then its Price Quadrupled

I learned about Ripple (XRP) for the first time in November 2017. After a short research, I was convinced that it had some real world use. I invested 1% of my savings and followed the market for a week. After further reflection on it, I decided to close my position.

I sold Ripple, because of two reasons.

  • 100 billion Ripples were minted on day 1 and most of it was waiting in some private accounts to enter the market.
  • The success of Ripple as an interbank currency depends on its price stability, which contradicts with my investment objective. I don’t want stability. I want steady increase.

A few weeks after I sold my Ripple, its price quadrupled. Am I upset? Not really, because as far as I’m concerned this price move is irrational. It contradicts with the reason of existence of Ripple.

“If Ripple becomes volatile, it will be useless as a medium of exchange or an interbank currency. If it is useless as a medium of exchange, it won’t have any value at all.”

The sentence above applies to all cryptocurrencies that don’t have any use case other than being a medium of exchange. That includes our good old friend Bitcoin. If a cryptocurrency is backed by another asset such as gold, oil, or a company’s stocks, then it’s a different story and volatility is acceptable.

How Did I Learn About Ripple?

An old friend of mine told me to check out Ripple, because they had a deal with American Express. He told me that Ripple was in an early stage. Like Bitcoin, it could boom some time later. It was still trading around $0.20. What if it boomed like Bitcoin to thousands of dollars? He literally saw Ripple as a lottery ticket and admitted that himself.

Now, it was up to me to do my homework and to research Ripple. I read that Ripple provided the infrastructure for financial organizations to settle their transactions. They were validated by Massachusetts Institute of Technology and used by companies such as American Express, UniCredit, and UBS. Ripple’s infrastructure was faster and cheaper to use than Bitcoin. Organizations could use any currency on the Ripple, including USD or the ones they issued themselves.

So far, it made sense and sounded like it was a good platform to realize the cryptocurrency vision I explained in a previous post. Next to all of that, Ripple had a cryptocurrency, native to their platform, called XRP. At the launch of the Ripple system, the developers issued 100 billion XRP coins. They took 20% of the issued coins and kept the remainder in their organization.

Any Investment Value?

I thought that Ripple was a great idea for a platform, great use cases, but what would be the motivation to invest in XRP, the currency? XRP sounded more like a test currency to test their system instead of a real investment opportunity, until I read about their anti-spam policy.

Ripple’s anti-spam policy includes 20 XRP’s being blocked in each account and 0.00001 XRP being forfeited for each transaction. If someone executes repeated transactions quickly, the transaction cost could get higher to avoid attacks on the system. When I read that, I was amazed. What a brilliant way to finance your startup and your ongoing operations. Do you get why XRP had some upside potential?

The founders collected startup capital by selling their coins. In order for them to have a successful exit, the initial 20% of the XRP’s they reserved for themselves have to be worth something. The only way that would be worth something is that they have to work very hard to make sure that the platform worked well and is actually used by as many people and organizations as possible.

As more and more people and organizations start to use the Ripple platform, more and more of those 20 XRP’s would be locked in accounts. As more and more transactions happen on the platform, more and more of those 0.00001 XRP transaction fees would be spent and disappear forever. That means we start with 100 billion XRP’s and that number will keep shrinking as the system is used.

As the supply of an asset decreases, its price increases. So, unlike fiat currencies such as USD and euro where the money supply increases as time passes, the supply of XRP will decrease as time passes by. That means, if things go according to plan while the supply of the fiat currencies increase, the supply of XRP will decrease. While the value of fiat currencies will decrease, the value of XRP will increase. Of course there are some conditions to that.

Ripple needs to be a useful, reliable, scalable platform that is used by many people and organizations. The more the platform is used and the more accounts are created on the platform, the more the XRP supply will diminish, and the more its value will increase.

Sure, other organizations could start trust accounts for XRP’s. Those organizations could hold the XRP’s for their clients to circumvent the 20 XRP lock-up per account. However, that would mean that the clients of those organizations would take the risk of those organizations. They would not have the security of an account on the Ripple platform, which will require a 20 XRP lock-up per account.

Open Questions

How fast is the adoption of the Ripple platform going to grow? How fast will the total base of the initial 100 billion XRP’s diminish with each 0.00001 transaction fee? Will the Ripple founders ever add new coins to the system? Will they reduce the 0.00001 XRP transaction fee? At a certain moment they might have to do that when that 100 billion figure approaches zero and the transaction fees become so high that it wouldn’t make sense to use the system. Just like the oil problem. At a certain moment, oil will be so scarce that we will probably not be able to afford it and look for another solution. Can the administrators of Ripple decide to lower the account lock-up and system use fees?

Will the platform stay reliable, fast, scalable, and safe over time? One of the main uses of XRP is to be a bridge between two fiat currencies. Suppose that I have 100 euros that I want to deposit to a USD account over the Ripple system. In order to do that, first, I have to convert the euros to XRP at the entry point of the system and then the XRP’s to USD in the exit point. There is nothing wrong with that, but what if there are huge price swings in XRP during the transaction, as it is the case with other cryptocurrencies? What if the value of my funds doubles or halves down between the time they exit my euro account and enter the counter-party’s USD account? This is something the users of the system would want to avoid. So, it is in the Ripple administrators’ best interest to keep the price of XRP stable. I read that in order to do that they are providing hedge funds with discounted XRP’s so that those hedge funds can act as market makers.

On the one hand, the administrators of the Ripple system are incentivized by higher XRP prices and on the other hand, their system would suffer from huge price swings. The best way to ensure that is through active market making by putting those 100 billion XRP’s into use. If they did that, we wouldn’t expect huge price swings and upside movements like in Bitcoin. It would be more of a mean-reverting asset. That is the price will stay around the averages even if the trend is upwards. That would mean that XRP is more of a trader’s asset than a buy-and-hold asset. In my experience, buy-and-hold assets are more profitable for the average investor than assets that require active trading, especially when you consider the commissions and time investment needed. If you like trading and it’s like a hobby for you that is something else. So, I don’t expect the price of XRP to explode like Bitcoin did, at least in the near future, but still it can be an asset to hold for diversification purposes.

Does all of this justify the current $1.00 USD per XRP price? These and potentially other questions need to be asked answered before investing in XRP, but at the end of the day, I find it a smart idea and a clever way to finance the idea.

I don’t know how the execution will turn out, but the idea matches my cryptocurrency vision, and has benefits for its users and society in general.


Markets might behave irrationally on the short term, but they behave rationally on the long term. That explains the rally, correction, bubble, crash cycles.

Adjust and diversify your positions so that you’re neither completely satisfied, nor completely upset about your portfolio whatever happens with the markets.

Disclaimer and Disclosure

At the time of writing this post, I have no investments in XRP and 2% of my savings are in Bitcoin. This post is published for information purposes only and not meant to be investment advice.