A New Paradigm?

Greed is a very powerful motivator. OK so is fear. But greed may be the most dangerous, in my opinion. Right now, many are talking about Bitcoin. I have been told it is a paradigm shift to a new economy. I have been told you will become rich by investing in Bitcoin.

Even though there has been a huge return already realized. I have been told it is only the beginning. I have been told all your money should be ‘invested’ in Bitcoin. I have been told you will be rich if you put all your money in Bitcoin.

After some research I still do not understand what it is and how it works. Is it possible that it could continue its run up? Yes, it is possible. However, putting your money into Bitcoin is pure speculation.

If an investment strategy is on the cover of every magazine, and all of your friends and associates are doing it, it’s reckless to follow suit.  Only hot, sexy, and speculative techniques make the cover.  Don’t follow your friends!

Remember the dotcom period of the 1990s? It was also called the new paradigm. The results were not that good. If Nasdaq is considered the technology sector or dotcom. It took 15 years to recover all the losses. While all the other equity markets, including the S&P 500, recovered very quickly.

The most successful businesses have one proven strategy and they stick to it. Such as McDonald’s, if you visit a McDonald’s anywhere in the country they are all set up the same. They know there may be a better way to run a restaurant but their systems works.

Warren Buffet is another example, he has one way of investing and it has made him the most successful investor of our time. There are times when he loses more money than most but over the long term he wins. He does not fall for the latest fad.

As an investor you may be tempted to change your investment mix to accommodate current events. This is call market timing and it has been proven not to work. You may get lucky in the short-term but you will eventually fail.

Short term gain…long term pain.

To succeed in investing for the long term you should own equities….globally diversify….rebalance.

The key is to remain disciplined to this strategy.

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