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Bought the dip at $50K
Bought the dip at $40K
Bought the dip at $30K
But it keeps dipping, WHY?
“Buy the F**king dip” is a common tagline of many retail investors during a Bear market, but does it really work?
Let us analyze how the big-shot investors like Warren Buffet invest during the bear markets and what advice they give to retail like you and me.
Manage the time period!
How long are the bear markets? If you just started investing in the last decade you will say 6 months but that is not true. Bear markets can range from anywhere from 9 months to 2 or even 3 years in extreme cases.
Uncertainty of the duration of the bear market makes buying the dip a risky strategy, it works really well in short-term downturns in a bull market but in a bear market when the end is not known, it can suck you dry.
Don’t believe in the media
DYOR or Do your own research is the only thing that will help you develop a focused bear market strategy, DO NOT believe in the media.
In the 2008 crash, we saw media downplaying the crash just 1 month before everything went to shit, some “TV analysts” even said to go all-in as it is just a temporary pullback. The same thing can be observed on the television nowadays adding social media sentiment to it and this creates a recipe for disaster.
Be paranoid
Being optimistic in life is a wonderful thing but in the markets it is deadly. Assume everything is going to fail and then find reasons why this particular asset will survive.
In bear markets, the goal is to survive making money part comes only if you survive.
What are you?
In the markets, only 2 kinds of people are panicking, either someone who is just starting out their investing journey or someone close to retirement, and you are probably the former.
People between these 2 age groups have been in the game long enough and have invested only what they don’t immediately need.
If you are just starting out, try to think long-term, and treat this as a learning opportunity as the amount you have invested is probably not that significant vs the knowledge you will gain.
But how to invest in a Bear market?
Here are some tips from seasoned investors-
Do not time the market
Diversify
Focus on long term
Don’t take risks.
These tips tie together into a strategy that can be summarized like this:
Do not try to time the bottom of the market, if the markets have fallen significantly they can fall significantly again (2007-2008 period showed us this). Budget your monthly investments and DCA what you can. You don’t know the bottom and frankly, nobody does and when the market turn bullish, frankly it will not matter.
Now DCAing alone is not full proof, what if you DCA into a dying asset like LUNA? That will be just a waste of your money. You need to Diversify your holdings try to cover sectors that bounce back faster, explore other asset classes don’t just invest in stocks or crypto, invest in bonds and gold, and decrease your risk to survive!
Focus on the long-term and benefits of surviving in the bear markets, market cycles are. inevitable and you are not the only one facing losses.