Are You Investing in Crypto Wrong? | by CryptoCookied | Aug, 2022

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A lot of people, both old and new to crypto had big losses in this bear market, but could those have been avoided and what are the best steps to take going forward? Lets dive into this topic and see if maybe we are investing in crypto the wrong way.

Disclaimer: I am not sponsored or affiliated with any of the projects/companies mentioned in this article. This is not financial advice, the information in this article is for educational purposes only. Never invest what you can’t afford to lose. I disclaim any liability or loss incurred by any person who acts on the information, ideas, or strategies discussed in my articles. Do Your Own Research.

The biggest mistakes Ive seen people fall into with losses that caused people to lose their homes, or affected their lives in major ways were these things:

Invested money that would draw them into debt to lose.Put all savings into crypto.Believed strongly that they could not lose and over-invested.Never took profits and assumed things would only go up.Did not involve spouse/family in their financial decisions .

First, we have to examine our frame of mind.

We live in a society that seems failure-phobic, and so it is seen as taboo to even entertain the idea that we might fail or lose.

Socially there are feelings of shame and embarrassment associated with what is perceived as failure. In order to avoid that shame, there seems to be a mental wall put up against it. There are many who strongly believe in the law of attraction and think that if they even give a moment to thinking a negative thought that it will draw that bad outcome towards them.

Children learn how to walk by falling. Teachers can best help a student when the student answers a question incorrectly as opposed to staying silent and not making a guess at all.

If we know a child could fall while learning to ride a bike, what do we do? We give them kneepads and a helmet. Why? Because we want them prepared to fall, fail and get back up again with minimal harm.

Why do we do this for children, but not for ourselves? Why do we not have metaphorical kneepads for investment losses?

While I believe positivity is important there is a difference between attracting good outcomes, and blindly choosing to ignore all possible outcomes.

The mindset I adopt is These funds I am investing I could lose, so I must be certain they are not funds that myself or my family needs.

The child might fall several times before they finally are able to ride their bike. Once they learn, they are likely to never forget how to ride again.

It is not negative to accept the reality of loss in smaller goals towards your bigger goal of gaining in the end.

We need to understand how to determine what part of our income should go towards investing. Investment funds should not come from:

Mandatory expenses such as mortgage or rent payments, utilities, health care, basic groceries, transportation costs, and child care costs. Savings towards paying off loans/debts. Emergency funds.

Personally, I use funds from extra or supplemental income. Ill use an example.

Small budget example: Imagine Maggie has paid all her bills/expenses for the month. She has been saving $50 a month extra for the past three months towards dollar-cost-averaging into crypto. She knows these investments may or may not work out, but she is excited about the future of blockchains and wants to take a chance on it.

In this example, if Maggie ends up losing her $150 dollars, it doesnt impact or affect her livelihood. It has an emotional impact to lose that money, but not a physical effect on her life.

And really that is the goal. We can control our emotions, but controlling the physical can be much more challenging and difficult.

Maggie can take profits when the market is doing well, or simply stay invested even when the market is down because it is not changing her life to wait and see. She has eliminated the feelings of FOMO (Feel of Missing Out).

Investment funds are best if they are from entertainment funds. This means extra income that would have been used on eating out or buying something that is not needed but is a luxury desire.

If a person’s lifestyle or spending leaves no room for extra funds or entertainment funds then they should be extremely careful if they try to invest with mandatory expenses funds or debt repayment funds, because the risk of loss is always present.

Consider using the 50/30/20 rule. Forbes offers a handy calculator to provide a rough idea of ​​how to split up income.

(example from Forbes Budget Calculator)

You can get the calculator below:

It amazed me how many people did not involve their families in their financial decisions to invest in crypto. Many believed they would make so much money that they would reveal what they did after making the profits.

That is a terrible idea. Spouses, partners, or individuals whose lives could be deeply and negatively impacted by financial loss should be consulted prior to making investment decisions. Its a courtesy so that they can be prepared for the outcome, whether good or bad. Their thoughts, feelings, and opinions do matter.

If it seems too good to be true, always question it. Even if there are short-term gains, they usually do not last for the long term.

Scammers have become experts at knowing what to say and do in order to entice people who are new in crypto to click malicious links or connect their wallets with questionable protocols.

Even here on Medium, be careful with tokens or links you see in the comment sections for crypto-based articles. They are usually bots or scams.

Fully research whatever blockchain, token, or protocol you plan to invest in. Influences often make mistakes and have found themselves even victims of scams. No one is fully immune and mistakes are always possible. Even without scams, there is the risk of hacks and locked withdrawals. These are all things to keep in mind when allocating funds to invest.

There is no change without risk. Everything outside of our usual safety net of life is a gamble. A new relationship is a risk, starting a family can be a risk, and even a new job might be a risk. We shouldnt be avoiding risks and change because without it, our lives stay the same.

We get out of life what we put into it. if we keep doing things to maintain our current trajectory nothing changes.

However, we can manage the risk levels. By properly delegating funds that will not impact our physical lives and learning how to control our emotions and change our mindsets. If we do this, then if we have big gains that change our lives we can thoroughly enjoy them, but if we lose that money, our lives stay the same.

I know it is rough out there, keep growing and keep learning.

Stay Safe and Stay Informed.

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