‘This is how much you would have made if you invested $1000 in [X] 10 years ago.’
If you’ve spent enough time browsing through financial media, you’ve probably seen variations of this headline. It goes on to compare the performance of some high-growth stock (usually) or other asset classes against other investments, like the S&P 500 or gold. The comparison is usually comical, like 500% return on investment versus… 6% or something.
These kinds of articles offer no value. At best, it’s filler content for slow news days. At worst, it activates your FOMO, making you think you ‘missed out’ on an opportunity of a lifetime and causes you to act irrationally at the next hyped-up investment making its rounds in social media.
Which is strange and hypocritical of me to say, because… I’m one of those lucky people who caught one of those opportunities of a lifetime and acted against my rational thought process and yes, profited a lot from it. As mentioned in my Breakdown of My (SUPER HIGH RISK) Investment Portfolio article, I am overallocated in a single asset class – over 50% of my net worth was in cryptocurrencies.
It’s a risky strategy and I don’t recommend it… but it paid off. When I wrote that article on 22 July 2020, 1 bitcoin was $9,384. As I write this, 1 bitcoin just broke $49,000. (Before you ask – I have enough to choose my clients, but not enough to retire)
In short, I got lucky. Crazy lucky. So here’s me trying to wrap my head around this.
Obligatory disclaimer: nothing in here is financial advice, I’m just a poyo personal finance blogger.
#1 – I maintain I am lucky more than I am skilled
Let’s get one thing out of the way. I *am* knowledgable on personal finance – it’s been my obsession for the past decade, even before I became Suraya the personal finance blogger.
The reason for that is I view money as the ultimate security against a world that is so obsessed with controlling women’s behavio- Suraya this is not the time nor place for this argument later later
Yet luck played a bigger role here. More than my skills and knowledge.
As Morgan Housel wrote in The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness,
Luck and risk are siblings. They are both the reality that every outcome in life is guided by, other than individual effort.
I knew I was taking a big (and calculated) risk. I could have lost it all if it ended the other way, but it didn’t. While I can contribute part of the outcome to my ability to research and hodl, it wouldn’t feel right to give myself the full credit when ultimately I simply got lucky.
#2 – Dissecting my luck
Luck comes in many forms.
First, there’s all the privilege-type stuff: I came from an upper-middle-class family, had my tertiary education covered by FAMA and PTPTN, fluent in English, am Bumi. Without all of these, I doubt I could save up enough money to invest in the first place.
(Side note: fluency in English is probably the reason why I was making RM3k per month when I was 18. That soul-crushing but temporary gig as a telemarketer allowed me to save up a lot of money when I was young and forever changed my life)
Second type of luck is the timing of it all. The situation was just right. It just so happen I stumbled on bitcoin in a Reddit forum. It just so happen I had a lot of time to make the research. It just so happen I got jobs which paid me in bitcoin.
While all of this was happening, I was also lucky to have savings, which means I didn’t have to convert bitcoin to fiat (often) to pay for my bills and daily necessities. So mostly, I just held on to my crypto stash and pretended it wasn’t there. Again, because this part is important: I used excess savings, not emergency savings.
Of course, I had bad luck here and there too. I tried to time the market and got burned. I tried a copy-trade platform and lost all my money there. I also forgot at least one of my crypto account’s seed passwords (trying not to remember how much I had in there..)
#3 – Don’t mistake luck for skill
Now that we’ve established that luck played a bigger role than skill in high-risk-high-reward investments, can we talk about the people who brag about their crazy gains as if they had this magic ability to see the future?
You can see this play out when they say stuff like:
- Price sure go up one!
- It will go to [10x the amount] by the end of the year!
- Just buy when it’s low and sell when it’s high and repeat! (my personal pet peeve)
- I made [amount] so easily. You should have listened to me
This doesn’t just happen in crypto space, but also in other fields, such as the stocks and property space as well. There are people who are rich now because they followed the great glove rally of 2020 (still ongoing). There are people who made a fortune buying and selling houses during Malaysia’s property boom between 2005-2015 (admittedly property people are much quieter nowadays since the boom is over).
All I’m saying is, before you follow any advice they might give, ask yourself if luck has anything to do with their brilliant investment decisions. Some people reached out to me asking if they should buy Gamestop stocks and Dogecoin because their friends recommended to them and I’m just… woah.
Making your own luck by diversification
As much as I love crypto, it is not my only investment. I’m not and will never be ‘all-in’. The only thing I understand about the economy is it has too many moving parts and no one can predict what will happen, just what *may* happen. Therefore, diversification plus risk reduction is my strategy of choice.
I’m not the only one who uses this strategy. VC funds (the people who invest in startups hoping they will become big, profitable companies) invest in tens of startups. Professional art collectors buy tens and hundreds of art pieces. Most of the investments will have modest or even negative return on investment, but a couple of those will outperform the rest and provide most of the profits.
So by now it might cross your mind: oh hey, I need to diversify too.
Anyway, here’s where I’ll end this. Idk la. I see so many FOMO in the investment space right now, I had to write this article. I’m not saying don’t try risky investments, I’m saying… at the very least, don’t use survival money for it and certainly don’t get financial advice from overconfident lucky people, because luck is not an investment strategy.
(Note: Having said that. I do think owning crypto is an *excellent* gateway to learn about blockchain, the underlying technology and subsequently DeFi. There are so much earning opportunities in this space! Worth exploring if you have some budget for education)