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2. Lesson: Never Lose Money

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One of the most critical factors for gaining wealth and reach financial freedom is to never lose money. It is far easier to lose money than to gain money. Whether you are an investor, a 9-5 employee, an entrepreneur or freelancer, you have either lost money on investments or spent money on useless products. You have to protect your money far better than you are currently doing. You might think that you are already protecting it, but my guess is that you can do an even better job.

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As Warren Buffet says:

“Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1.”

I have risked a lot of money to gain more rapidly. That worked initially, AS I GOT LUCKY, but luck runs out. And let’s face it, unless you have extensive and unique knowledge of a certain market, you are bound to luck to outperform the market. Since I made some large sums of money with lucky investments, I got far too confident in my own skills. And I continued with investing in different stocks and commodities, I even used CFD (Contracts for Difference) to speed up the process.

With CFD you can trade and “bet” on different stocks, indexes and commodities with far more money than you hold on your account. That’s called margin trading. You can earn far more money, but you can also lose more money than you currently have. The risk is dramatically increased. I highly recommend you to not trade on margins unless you know exactly what you do and have a clear stop-loss strategy.

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In 2016 I lost a substantial amount of the money I earned the previous years on trading. I should have been more careful and taken Warren Buffet’s advice. However, I’ve learned the hard way and now I’m more careful with my bankroll. That is why the advice is so important to remember and to accept. Never lose money.

What does this mean?

If you are looking to invest your money in stocks or commodities, you have to be sure that you won’t lose your money. This is nearly impossible to know, but there are some steps you can take. If you look at the historical trends, the one investment strategy that never have failed is to invest in index funds. Indexes follow the market, and even with some major financial crashes like the one in 2008, you would still have earned more than you invested pre 2008 if you had invested the same amount on a yearly basis. There are some exceptions like the Japanese index Nikkei 225:

As you can see from the graph above, if you started investing in Nikkei 225 from 1989 with the same amount on a yearly basis, you would have suffered a quite substantial loss. But still, the Nikkei Index is currently above all other periods before 1985, and my guess is that we will see Nikkei 225 above 40 000 within the next 20 years unless the entire economy goes under (which is an unlikely but possible scenario).

Investing smart is not the only solution

The entire idea is to never lose money. If you are not currently investing because you have too little money to play with (yes I say play), then you still have a lot of options to secure your money. My golden rules are the following:

  1. Cut your monthly expenditure
    • Do not use credit cards, if you have a credit card debt: pay it as fast as possible.
    • If you are able to; pay e.g. 20% more on your mortgage where the end goal is to become debt free as fast as possible.
    • Buy fewer products. I’m sure you can cut down your consumption with at least 25% per month. I urge you to set up a spreadsheet with all your monthly costs and go through everything you spend money on. If you go clubbing every weekend, could you reduce it to twice a month? If you smoke 6 packages a week, could you reduce it to 3 packages? I’m not saying that you should stop smoking or stop clubbing, as that might be too hard to do, but I’m sure you are able to reduce your consumption quite drastically.
  2. Focus on the money
    • I am not a greedy bastard, but I’m aware of what I’m spending my money on. The money you spend is money you won’t see again. You should not be obsessed with money, but you should still focus on it if you want to become financially independent.
  3. Don’t risk your money
    • If you are looking to invest your money, I would say in 9 out of 10 cases, never invest in anything other than index funds or assets that have shown a steady rising trend over the past 50 years. If you invest in a specific stock, or cryptocurrency, you are actually betting against the market. You then believe you can outperform the market, which in 50% of the cases, you really can’t.
  4. Ensure cashflow
    • If you have a cashflow, either from a job or your own business, focus on that and make sure that you won’t lose it. The best way to increase your wealth is to earn more money. If you got a 9-5 job, you are stuck to your monthly salary but you can still find other ways of increasing your monthly cashflow. What if you can do a side gig? What if you can offer your services on your spare time and try to build a small client base after your normal working hours? Maybe that can help you, in the end, quit your job and run your own business?

What are your thoughts? Leave a comment below and let me known.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.2 stars on average, based on 52 rated postsFounder of Hacked.com and CryptoCoinsNews




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5 Comments

5 Comments

  1. Fishytackle

    June 16, 2017 at 5:55 pm

    Hi, I wouldn’t say not to use credit cards. If you manage them correctly they can be great. They are giving you 60 days money credit for nothing. ALWAYS pay back in full. If you can’t do this don’t touch them. Just my opinion.

  2. NoHomeJerome

    August 15, 2017 at 11:30 am

    Theory question about index funds:

    Let’s take S&P 500 as an example. Suppose you are able to identify some of the worst performing companies in the fund. Let’s say even a small number like 10 companies. Wouldn’t you then be left with an index fund of 490 stocks (instead of 500) and shouldn’t this fund of 490 companies outperform the other?

    Or do you suggest it is virtually impossible to identify some “bad” companies at all?

  3. nsmith

    August 23, 2017 at 8:32 am

    Credit cards can build credit score if have lousy credit which is the vast majority of Americans. I learned to be be cheapskate never buying anything at market value. But I disagree that hard baselines is indices and crypto is betting against.. Crypto is betting against fractional lending which is a way elites rob valentine from all fist based currency. Anything listed in USD has to fight fractional reserve, modern asset forfeiture.

  4. nsmith

    August 23, 2017 at 8:38 am

    Terrible typo. Elites rob from all fiat by constantly devaluation.. The rates just vary. It’s like entropy.. Everyone is predicting sovereign debt crisis very soon.. Like years.. The only way I see Btc going to a million real fast is every time USD, YUAN, EURO start to tank. A country like Greece can devalue and entirely euro denominated economy right?

  5. Acewriter

    September 11, 2017 at 11:24 am

    I have a question. Back in 2008 when everything crashed, cash was king. Margin calls, plummeting housing prices, falling stock prices…suddenly everyone needed cash. People were forced to sell good assets along with the bad to pay their margin calls, mortgages, buy food, etc. Even my much-loved physical gold went down, for about six months, before starting a three-year uptrend that culminated in $1,910 gold.
    And finally, my question — do you see a high probability for a similar reaction by BTC/alt coins in the next crash? This might make a good subject for a full article.

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Analysis

Crypto Capitulation Is Upon Us

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Capitulation: kuh-pich-uh-LEY-shuhn (noun) the action of surrendering or ceasing to resist.

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From their December peak, cryptocurrency assets have given back over $400 billion. This amounts to more than the GDP of many countries.  If this were values lost in the stock market whose worth is in the trillions, it would be called a minor correction. In crypto terms there is only one word to describe the carnage: capitulation.

As painful as it is, the point to be made here is the capitulation is a good thing.  Read on and I will share some thoughts for you to consider.

Mass Media Mania

First let’s take a look at some of the news that is causing such despair. Most recently the selling mania has been in response first to Facebook and more recently to Google.  Both of these mass social media giants have ban cryptocurrency advertising. Read closely and you won’t be shocked to realize that the target of their ire are the many ICOs.

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The problem is not that Facebook and Google are the only advertising platforms.  The problem is that they are considered mainstream media and without these two, the trend of cryptocurrencies gaining legitimacy is delayed.  That is right, I said delayed not blocked or prevented.

The World Has Changed

Five years ago, when bitcoin was unknown to most people, this might have been a fatal move. Today is a different story. I recently traveled to a remote mountain town in the interior of Mexico.  Everyone I met had heard about Bitcoin and eyes lit up with excitement when I ask if I could pay for lunch with bitcoin.  

Today are dozens of websites dedicated to cryptocurrencies, either holding them, exchanging them or just writing about them.  Probably the most effective advertising remains on Google, it is called Google Search and it is free.

If someone wants to learn about owning bitcoin or any other currency, there is a ton of educational information.

Of course it would be far better all around if Mark Zuckerberg and Eric Schmidt had taken a different approach such as banning only advertisements for ICOs, but that didn’t happen so supporters of crypto aren’t comforted in their beliefs that bitcoin is going mainstream in 2018.

The Flipside Is Being Ignored

Every argument has a flip side.  If the removal of ads contributes to cleaning up ICO scams, that is a good thing.  We can all agree on that point. And let’s be honest there is more than one problem the crypto community needs to clean up.

This adds to the ongoing regulatory news including March 7th ruling in US Federal District Court that cryptocurrencies are commodities.  As such they can be regulated by the Commodity Futures Trading Commission (CTFC).

On the same day the Securities & Exchange Commission issued the following order:

“If a platform offers trading of digital assets that are securities and operates as an ‘exchange,’ as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration,” the commission said in its “Statement on Potentially Unlawful Online Platforms for Trading Digital Assets.”

Not All Regulation Is Inherently Bad

The mere hint of added government regulation typically sends stock market investors heading for the exits and the same holds for investors in crypto.  But this raises the question, is some regulation of crypto a good thing?

If we examine the full spectrum of regulation to this point on a global scale there is one common target most everywhere.  That is the practice of exchanges. So far there has been little or not regulation, threatened or enacted, to protect investors from loss of funds due to security breaches.  

The question that needs to be ask is this.  Will SEC regulation result in better pricing and lower trading costs; if So, then this would provide a desirable outcome.  It is understandable if you laugh at the prospect of any government regulation having a beneficial outcome, but if you look at past SEC practices, you would come away with different conclusion.

So when the next regulation catches the headlines will it be to ban the existence of bitcoin, Ethereum, Ripple, Litecoin and others or to protect the investor from scams and excess costs?

Capitulation Is A Good Sign

Over the course of a pretty long investment experience, I have witnessed true misery on more than one occasion.  The pain is unbelievable, there is no perspective on the future and all you want is to take action to end the misery.  That is when you know the worst is happening and nothing is ever going to make it better. That is when major stock market bottoms are formed. It surely is painful these days for crypto investors. This is a good sign.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 76 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Altcoins

What’s Behind Cardano’s Rising Popularity in South Korea?

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Cardano, better known as ADA in South Korea, pronounced as “aeda” in the local market, is growing at an exponential rate due to UpBit.

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UpBit, South Korea’s second largest cryptocurrency exchange behind Bithumb, is operated by Dunamu, a subsidiary company of Kakao, the operating company of KakaoTalk and KakaoPay. The two mobile applications, KakaoTalk and KakaoPay, have a market penetration rate of over 90 percent in their respective markets–financial technology (fintech) and messaging.

Although UpBit remains as the only cryptocurrency exchange that has integrated Cardano within the local South Korean cryptocurrency exchange market as of date, the popularity of Cardano on UpBit is increasing rapidly. According to CoinMarketCap, 75 percent of Cardano’s daily trading volume is processed in South Korea, by UpBit.

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Within its debut month, more than 3 million South Korean users signed up to use KakaoPay, the country’s most widely utilized fintech app. KakaoPay operates as a mobile bank, allowing users to send and receive money, obtain loans, and conduct financial activities. KakaoPay supports UpBit because a subsidiary company of Kakao in Dunamu operates UpBit.

Given that Cardano is one of the most popular cryptocurrencies on UpBit in terms of daily trading volume, naturally, as general consumers in the traditional finance market using KakaoTalk and KakaoPay move to the cryptocurrency market, the first few cryptocurrencies they are introduced to are bitcoin, Ethereum, and Cardano.

Cardano is also receiving significantly more mainstream and local media coverage than other alternative cryptocurrencies, specifically because the South Korean media has portrayed Cardano as a direct competition to Ethereum. Because Cardano is a smart contracts protocol, it is structurally similar to Ethereum.

The two key differences between Cardano and Ethereum are that Cardano uses a proof-of-stake (PoS) consensus algorithm and it also has two layers that are used for smart contracts processing and payment settlement.

In South Korea, cryptocurrency mania has swept across most major industries. 5 out of 10 people on the streets, in subways, buses, and cafes talk about bitcoin, cryptocurrency, and blockchain technology on a regular basis. As such, the majority of investors are more technical than other regions.

Most investors of Ethereum in South Korea understand that the Ethereum Foundation and its open-source development team has been planning a PoS update via Casper. When Cardano debuted with a PoS protocol, it led South Korean investors to believe Cardano is a more innovative platform and has a technical edge over Ethereum.

January 31

For cryptocurrencies with strong followers in the South Korean market, January 31 is an important date to keep track. On January 31, local cryptocurrency exchanges are expected to open account registrations to new users and six major local banks are set to provide banking services to cryptocurrency exchanges.

Consequently, on January 31, it is likely that a massive amount of Korean won will flow into the local cryptocurrency exchange market. The recent cryptocurrency exchange ban fiasco, which turned out to be false, further increased the presence and popularity of cryptocurrencies in South Korea.

Cryptocurrencies like Cardano, EOS, Qtum, and Ethereum that have strong bases in South Korea will likely increase in value throughout late January and early February.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.4 stars on average, based on 3 rated postsJoseph Young is a finance and tech journalist based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.




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Fidelity Investments is Mining Cryptocurrency

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Fidelity Investments is a multi-billion dollar brokerage  that just so happens to be mining cryptocurrency. In fact, it has been at it for three years, using its own computers to harvest bitcoin and Ethereum.

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Profitable Experiment

CEO Abby Johnson recently told Fortune that its U.S.-based mining operation is “making a lot of money.” This comes despite running a relatively modest operation.

Hadley Stern, Senior VP of Fidelity Labs, described his company’s venture as an “experiment.”

The real reason we began mining, and still do, is to learn how the network works, how consensus works, how difficulty levels work,” he said in reference to the mining process.

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The key to profitability has been the dramatic rise in cryptocurrency over the past year. Bitcoin and Ethereum are the world’s No. 1 and 2 cryptocurrencies by market capitalization, and no-one else comes close.

Well Ahead of the Pack

The fact that Fidelity has been at this for three years speaks volumes about the company. Other, much bigger players are still dipping their toes in the market, but are unsure about how to proceed. Goldman Sachs is reportedly on the fence about starting a cryptocurrency trading operation, while J.P. Morgan has already begun handling customer orders for bitcoin-based instruments.

Fidelity is doing a lot more than just mining tokens. Earlier this year, it reached an agreement with Coinbase to let customers view cryptocurrency prices alongside other assets on their Fidelity homepage.

Coinbase is the world’s most funded cryptocurrency exchange with more than 7.4 million users.

Cryptocurrency Prices

The cryptocurrency market ended the week on a firm note, with bitcoin (BTC/USD) reaching a session high of $4,425.00. At press time, the index was up 1.6% at $4,368.

Ether is also trading higher against the dollar, with the ETH/USD rallying more than 3% to $305.

Ripple (XRP) lost momentum on Friday, but still managed a weekly gain of 21%.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 415 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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