Investor Cat: What is my "Compelling Reason" to Support This Investment?
There are a lot of investments that ”look good,” on paper. Indeed, many of the projects offered actually have some pretty great bones and some pretty good ideas.
Being the skeptic that I am, I always find myself asking the same question ”Looks good, but what is my 'compelling reason' to buy into this?”
What I really mean by the preceding question is ”what is my compelling reason to buy into this ASIDE from the obvious ‘because I want to make money’ reason?”
And that's where a lot of things often fall apart.
The problem a lot of investment schemes — and that includes those in the cryptosphere — run into is the fundamental problem that potential investors look at something, say to themselves ”yes, this looks like a good opportunity to double my money and when I reach that point, then I can sell at a profit,” and then that's exactly what they set out to do.
See the problem?
In case you don't, the ”problem” is that the primary compelling reason to buy into the investment is to sell the investment at a profit. In other words, the investment doesn't have any legs of its own to walk on, apart from its potential to make money.
In case you still haven't spotted the problem, that problem is called ”relentless sell pressure.” Meaning, that once people realize the initial gains and sell to take their profit there is no compelling reason for investors to buy into the project anymore (except for short term/day traders) and so we watch what once was a $10 per unit asset slowly become $2 per unit then $1 per unit then $0.50 per unit then $0.10 per unit while a handful of stalwart ”cheerleaders” cling to it while repeating the mantra ”oh, just wait, it's going to turn around any day now” in desperate — and typically futile — attempts to persuade both themselves and the rest of the world that that's really something that could happen.
The failed underlying dynamic tends to be an excess reliance on the investment being ”a hot property,” but you can only get so much mileage out of that… there comes a point where you have to ”show up and do the work.” And if you didn't really take the time to make up a rock solid plan for doing that work the House of Cards tends to just slowly collapse.
Hype can be great in the short run, but if you hope to stick around for any period of time and build long term success what really matters is just a good story and amazing plans... but execution of those plans.
Execution tends to be that uncomfortable grind where you have to show up every day and do the same boring thing over and over and over again, and ”lather, rinse, repeat.”
Curator Cat says: "Do your investing homework! It'll help you sleep better at night!"
Some of the greatest investments I have personally had I've been those that steadily and slowly built over a period of many years without any great story about having ”reinvented the wheel.”
Of course I should add here that everybody has their own investment style! And I'm certainly not writing this as a criticism of those whose strategy is a perpetual chase of quick profits. Rather, I'm pointing out the importance of being fully aware of exactly what you get into when you see a marquee with big promises of something ”amazing” ahead!
Make sure your investment style and objectives are in alignment with the time horizon your investment seems to have a plan for.
Usual Disclaimer: This is not investment advice, and always do your own research!
I'm attempting to be a little more active on LeoFinance these coming weeks as part of Khal’s challenge to the community to increase community engagement. You can read more about that in this introductory post, and I encourage anyone who reads this to join me and many others in being active participants!
Thanks for reading, and have a great week!
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