Why I ignored Warren Buffett’s advice and invested in cryptocurrencies

Why I ignored Warren Buffett's advice and invested in cryptocurrencies

I’m what you call a fixed, forgetful type of investor, someone who’s influenced by people like the legendary multi-billionaire Warren Buffett, who once said, “If you’re not ready to own a stock for 10 years, don’t do it.” I don’t even think about owning it for 10 minutes.

It’s valuable advice that I’ve taken to heart over the years – I transfer a certain amount of money each month into my low-fee exchange-traded funds and that’s about the only interaction I have. have with my investments.

While set and forget may be my mantra, I sometimes find it hard to ignore the volatility in the stock markets – which has (understandably) increased lately thanks to soaring inflation and the invasion of Ukraine. by Russia.

But I managed to stay the course thanks to Mr. Buffett, the sixth richest person in the world with a net worth of $115 billion, and his wise advice.

However, I took a leap into the unknown about six months ago, going against the advice of my 91-year-old investment mentor (feeling guilty), and jumped into the world of mountains Russian cryptocurrencies.

I still hear Mr. Buffett’s comments about cryptocurrencies resonating in my living room during a 2018 interview with US news channel CNBC: “When it comes to cryptocurrencies in general, I can say almost with certainty that they will end badly.”

Ouch. Maybe he was right when you consider that Bitcoin hit an all-time high of $68,000 in November last year and then suffered a powerful crash in January to settle just above $35,000, leading all other digital parts with him in the process.

Although the year got off to a bad start, Bitcoin started another rally this week and was trading above $44,000 at the time of writing. But who knows what tomorrow will bring – or if Elon Musk will start tweeting about Dogecoin again, which usually leads to massive increases in cryptocurrency prices.

It’s not that I decided to ignore Mr. Buffett, who is a well-known critic of cryptocurrencies.

My decision to dive into cryptocurrencies wasn’t so much a fear of missing out, or Fomo as my daughter calls it. It was, in my opinion, a learning experience: if I write about cryptocurrencies as part of my job as personal finance editor at The Nationalso i need to know how to invest in digital currencies.

And what a learning experience it has been. First was researching and deciding what cryptocurrencies I wanted to invest in and what platform I would use. During my research, I came across some “inspiring” stories of people who became multi-millionaires overnight.

One guy, apparently, invested just £100 ($132.70) in the same Shiba Inu coin when he first started out and had made millions. Today, Shib, as it is known, is trading at around $0.000026. I can’t imagine how low it was when he bought it.

But it’s easy to see how people can get carried away with these kinds of stories. Who doesn’t want to quit their job and be a millionaire on the back of a £100 lark?

Which reminds me. An acronym I learned during my time in the cryptocurrency world is Fobo – fear of better options.

To avoid Fobo, I learned not to get carried away with the clickbait headlines: why buy Solana (which is currently trading in the $103 range) or why Cardano ($0.96) has a better future than Ethereum ($2,988) because of its proof-of-stake blockchain platform, but has yet to prove itself.

Or even that Shib will one day climb to the height of a penny. It’s only 0.999974 cents left, which doesn’t seem like a lot, but in the world of cryptocurrency, that could be the equivalent of a mountain. Although I like to imagine all those new millionaires and billionaires it would create if it happened.

The golden rule of investing is never to invest what you can’t afford to lose – and that applies to cryptocurrencies too. Advisors recommend 5-10% exposure and this is a wise rule to follow.

I also apply my set-and-forget mantra to cryptocurrencies – but with a caveat. If I wake up one day to find that I have become a millionaire overnight, I will have no qualms about cashing in.

Until then, however, I must take Mr. Buffett’s advice and remember to keep my emotions in check.

As he once said, “The most important quality for an investor is temperament, not intellect.”

Updated: March 04, 2022, 04:05