Learning from legends - controlling our emotions in bull-bear markets - Benjamin Graham

Ben Graham on Self Control and Investing… Learning from Legends

400 300 Charles Weeks

You may or may not have heard of Bitcoin, at this point I think it is more likely you would fall into the former category not the latter. For those that don’t know, Bitcoin is a digital currency coming into existence around 2009, also sometimes called a cryptocurrency.

The creator believed that nobody should control the value of money, therefore create something that humans can’t revalue or devalue like they can with paper money.

The value of Bitcoin has gone parabolic recently, hitting record highs. One chart sent out this week shows $1,000 invested in July 2010 would be worth more than $35,000,000 today!

Now that kind of return sounds great, but there are couple things to keep in mind. If you tried to sell $35,000,000 of Bitcoin so you could go buy a mansion in U.S. dollars, would you be able to without crushing the value of Bitcoin? Would you have been able to hold onto Bitcoin in 2011 when your almost $900,000 worth of Bitcoin lost most of its value, leaving you with around $70,000? I think the answer to both is likely no.

With that being said you just can’t help yourself, you are yearning to own some Bitcoin because you know it is going to $10,000 then to $100,000 then to $1,000,000. Just remember what Ben Graham tells us, we must control ourselves.

“By controlling our enthusiasm in bull markets and our distress in bear markets, we minimize the odds of suffering irreversible losses and maximize the chances of achieving sustainable gains resulting in the greatest opportunity for investors to accumulate wealth and protect their principal.”

If you have to own some, even after a huge run-up like this, limit yourself to only a tiny percentage of your overall invested assets, maybe .5% to 1%.

Charles Weeks
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Charles Weeks

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