Cryptocurrency fans refer to it as ‘diamond hands’: the ability to stay strong even if your investment portfolio takes a dip, holding onto your assets and trusting that they will eventually recover.
It’s no surprise that a market as volatile as crypto would have coined a phrase for this phenomenon. But in reality, it can happen to any investment – anyone who has been in the game for long enough will remember a time when the value of their portfolio sunk.
We all know that investing money always has a little bit of risk attached. But the truth is, there is usually a way to recover. The important thing is how you respond to the dip, rather than the dip itself.
Know when to hold and when to sell
If you’re sitting on a long-term investment, then it should be expected that the value will rise and fall over time. In this case, the important thing is not to let it take up too much of your attention. Yes, you need to have one eye on the value of your investments, but this doesn’t mean obsessively watching them every day. Instead, check in at key points to make sure things are looking healthy.
On the other hand, you may have invested in a stock for a company that is clearly crashing and burning. In these cases, sometimes it’s better to cut your losses and chalk it up to experience.
Not sure which type of situation you’re looking at? Market experts and investment gurus will typically share information about whether different stocks, shares, cryptos and other investment types are likely to recover.
Analyse the choices you’ve made
We can’t always plan for a dip, and it’s important not to beat yourself up. Instead, take the opportunity to refine your strategy for next time. Maybe you didn’t do enough research, or got into an investment at the wrong time due to fear of missing out. Think about what you could have done differently, and let this inform the choices that you make for your next investment.
Remember that losses are part of the game
As we said at the start, most people who invest for long enough will experience this feeling at some point. However, over time they’ll still almost certainly make a lot more money than those who don’t invest at all. It’s a cumulative process, and experiencing a loss does not define your investment career. This is also why it’s important to only invest with money that you don’t need to form part of your emergency fund.
Consider alternative options
Not all investors leave themselves at the whims of the market. You could also consider trading as an alternative – buying and selling smaller amounts more regularly with the intention of creating a passive income. Day trading through the stock market has been popular for years, but you can also trade with cryptocurrency, making the fluctuations in price work to your advantage. Apps such as bitcoin lifestyle make the process simple, even for beginners, by offering trading suggestions and the ability to automate your transactions.