Can't afford not to win

With the dips be dipping, it is a good time to talk about the "don't invest what you can't afford to lose" motto, which is simple, but it is a little more complicated than that perhaps. Sure, it is definitely good to only invest what we are able to lose, but it is also good to recognize that likely or not, it should really be lose completely.

But, it is also good to not that, this is impossible for most people because we are all affected by the sense of loss, it isn't just the money involved. On top of this, we have to think about our position, as it could be, that while we can't afford to lose what we invest, we might also not be able to afford not to invest. This means that regardless of whether we can afford to lose or not, we might have to invest.

Well, no one really "has to do" anything in this world, as there is always some kind of option, but the alternatives might be less attractive than the prospect of losing the investment capital. It could also be that the future cost of not investing is far greater than the cost of investing now, which is kind of where I am at the moment.

What I mean by this is that while I can't afford to really lose anything, not investing now will likely leave me struggling in future years, as I was far less than wise when it came to putting away for my retirement for example. This means that while the capital now could be spent on something needed, that something is is less valuable than a secure future. In order to have a chance to secure that future however, it takes investment.

What this means for me is that not only do I have to invest what I can't really afford to lose (that much of at least), I also have to invest with a long-term position in mind, which means opening myself up to risk of loss and, exposing that capital for a period of time, making the investment riskier.

Time is a massive factor in investing and while people love to make a quick buck, generally the greatest amount of value is generated over time. This can mean that what is invested is essentially "lost" as it is no longer available, no longer liquid. Most compulsory retirement funds work like this where once the money has gone in, it is no longer accessible until a future point in time, which is after retirement or close to.

We saw in Australia that when people were able to access a percentage of their retirement fund, many did and then they spent what they withdrew on consumables, like TVs and Playstations. While some did use it to invest into property or stocks, most didn't buy anything that has the chance to generate income. This is what the average person is like and as averages go - you and I are probably average too.

Startup investors also expose themselves to risks like this, where they put their money into a project understanding that for some period of time, even if the company does well, they will have their capital unavailable to them. It is a risk in the hope for an inflated return if things turn out well. Most venture capitalist investors of this kind aren't putting their lifestyle on the line however, they are putting available resources that if lost, can be written off.

However, an entrepreneur founder could be very different, possibly putting in everything they own on their idea, believing that it is worth the risk. They are of course biased in their chances, as they believe in what they are doing and back themselves. But they often have to invest what they technically can't afford to lose now, because if they don't they will lose the potential to get their business off of the ground completely. This leaves them with three options. Invest and lose. Invest and win. Don't invest and lose. So really - they are left with one choice.

When it comes to crypto, I believe the biggest risk to investment is when people do not well predict the time it takes for return. This means that they can invest into projects that take a long time to see gains (long being relative) like Bitcoin is at the moment or, invest into high risk projects in the hope for very fast gains. This means that they expose themselves to time risk or scam risk - and when they are playing with money they need now or in the near future, both can hurt a lot.

However, throwing a fraction of unneeded value into some high-risk tokens isn't bad, as long as there isn't the requirement for return, where the loss can be written off. Also, putting some into the long-term investments isn't bad, as long as that capital isn't needed for a while. For example, what I have in Bitcoin I don't need anytime soon (I hope), which means that while it might not feel good to watch value decline, these 20% dips and the like have no affect on my daily life, since I am not going to sell it anywhere near this price anyway.

In the past, I used to be more affected by them because I would have the thought that "if only I'd sold, I could have picked up more..." but the fact is, it wasn't high enough for me to sell before the dip, otherwise I would have sold before the dip. If I had just bought before the dip - I don't think I would be willing to take the immediate loss and risk it bouncing and having to get in higher again, taking a double loss on it - so, why get upset? The dip dips, nothing changes for me.

Over the years, I have had to learn to become more bold with my investing, as by my nature (genetic or conditioned) I do not have the risk-taking mindset. This means that I always feel that I can't afford to lose, which meant that I never invested anything. However, what I have found is that I can afford to lose, if I believe that the value of the future is worth more than the cost in the present.

With my beliefs on the future of crypto, currently the value in the future has a massive asymmetrical upside based on the current costs, meaning that the small amount of risk exposure and potential loss, provides the potential of a heavily inflated ROI, but it might not be tomorrow, next month or even next year that the return will be realized. It might be ten years down the track.

If I have to wait ten years to retire on crypto, that will 15 years earlier than I am scheduled to retire without crypto - which is not a bad deal, is it? Especially considering the low buy-in. What this means is that even if I lose everything I have up until today, along that line and as upset as I might be, the access to the potential upside is worth more than the downside of the loss.

But, none of this means that anyone has to mortgage their house, bet the farm or turn tricks down at the docks when navy boats come in, to get funds to invest. People do not have to ape in, it is possible to do a bit at a time and while some big gains will be missed along the way, if the trend continues on the same trajectory, pretty much everyone will be guaranteed gains, in time. And those gains might be significant.

There is a lot of impatience in some people's investment mindsets and as a result, a lot of people end up taking an all or nothing approach. Some get lucky and get everything, some end up getting liquidated to nothing. It is much like the polarized internet - people these days tend to be on and off, with no middle position.

However, because many options are available, we can choose to take a superposition in the markets, which is accomplished through diversification of risk levels and security steps. Rather than put everything in, hold some back - rather than playing all safe, put 5% into risk, rather than too much in risk, most can go in low yield, rather than wanting it all today, spread the expectation of return out across the next decade or two.

Sometimes, rather than looking at whether we can't afford to lose something, we might want to also consider if we can't afford not to win. We can protect ourselves from losing what we have by not venturing it into the game, but in order to get those gains, we are going to have to expose ourselves to the potential to win.

Some things have no room for failure.
Most things give a second chance at least.

Taraz [ Gen1: Hive ]