How to confront the most toxic emotion in investment

It’s easy to beat yourself up about missed investment opportunities that made fortunes for those who bought in early. But it does nobody any good, says Dominic Frisby.

170927-MM-b

Let's say someone told you about an investment opportunity with which you could turn a small outlay a few hundred pounds, or a few hours' work into tens of millions. But you were too busy to take a proper look, or you weren't interested, or thought the idea was rubbish, and you let it pass.

It turned out to be a thousand-bagger an investment opportunity the like of which you are not likely to ever see again in your lifetime. It was an opportunity that would have seen you and your heirs in luxury for many generations to come.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

How would you feel?

Probably not far off how many are feeling now. Because one such opportunity has just passed before our eyes...

Advertisement
Advertisement - Article continues below

"Regrets, I've had a few, but then again" oh wait, there's bitcoin

Over the weekend I did a search in my email account for the word, "bitcoin". I wanted to see the first time it appeared in my inbox, as that would probably be the first or close to the first time I had heard of it.

It turns out it was in December 2010. A newsletter I signed up for once upon a time posted a link to an article at, of all things, PC World's website, by Keir Thomas.

I gave it a cursory read, thought it sounded like a good idea, but, so wrapped up was I in whatever else I was doing at the time, I didn't pursue it any further.

The price of bitcoin then was 23 cents. It is now something like 17,000 times higher (as I write a bitcoin is $3,925).

A £100 bet would now be worth £1.7m.

A £1,000 bet would be £17m.

Advertisement
Advertisement - Article continues below

A £10,000 bet £170m!

And so on.

Right there in that PC World article was the greatest investment opportunity any of us will ever see in our lifetime.

Now it would be easy to start beating myself up and, believe me, I have for not paying as much attention as I should. But it is just not possible to read, fully digest and then act upon the plethora of information that passes across our desks each day.

Within a year or so, I was a bit more up to speed, but I was heavily into gold at the time, so I never went into bitcoin as fully as I now wish I had. What's more, it kept doubling in price from $1 to $2. From $2 to $4. From $10 to $20.

I'd seen so many smallcaps double and triple, and then lose 95% of their value, that I was instinctively reluctant to chase a market that had moved so much. I think they call it, "keeping your discipline".

Advertisement
Advertisement - Article continues below

If only I knew then what I know now. It was still the opportunity of a lifetime, even at $100!

Indeed, one of the reasons I wrote my book on bitcoin was that I was cross with myself for not having invested as much as I should have. The book was a kind of catch-up trade.

I've used my own story here, but the world is full of such stories. Every day I get an email or a message saying, "if only I'd bought bitcoin".

And what of all those people who did see the light, took the plunge and got in early, but kept their coins with MtGox? That dreadful saga saw 900,000 coins (today's value $3.5bn) stolen in what was the greatest heist in history. How must they be feeling?

What about the people, who bought at 50c and sold at $5, thinking they were geniuses because they made ten times their money? What about the hard drives that have been lost, and the keys that have been mislaid?

A few months after that first article we're talking spring 2011 now one of my podcast listeners emailed me saying that I should check out bitcoin. At this point it was 75c. He and I happened to speak yesterday. I reminded him of that email and asked him how heavily he went in back then.

Advertisement
Advertisement - Article continues below

He told me a story that obliterated any regret I might be feeling. He used to mine bitcoins on his work laptop. When he left the office for the day, he would leave his computer running and mine coins overnight. He built up quite a sum.

But when he left his job, his company took back the computer and wiped the hard drive. All those coins! Gone.

And Bully's special prize a lifetime of bitter regret (and a speedboat)

Because it has gone up like nothing else, bitcoin has done it like no other market but all bull markets do it: they create regret at not having invested enough.

When you're constantly looking at prices, you're constantly reminded of the prices you could have bought or sold at. In other words, you're constantly reminded of your mistakes.

It's a bit like a never-ending re-run of the game show Bullseye, when the host, Jim Bowen, showed contestants, in the moments after they'd lost, the prizes they might have won had they played the game a little better. "Have a look at what you could have won," he used to say to the deflated players, before showing them cars, Kenyan safaris and other such goodies.

Like FOMO (fear of missing out), there ought to be some kind of acronym for this. So let's invent one. RANHIE (regret at not having invested enough) doesn't really roll off the tongue, so let's go with SWC (shoulda woulda coulda).

Advertisement
Advertisement - Article continues below

SWC is not a constructive emotion. It creates bitterness. It creates bores. It creates a victim mentality. As the standard sports psychology goes, "only worry about what you can affect" or, as my agent is forever telling me, "control the controllables". The only thing you can affect now is the present and the future not the past. So you've got to get over it.

But even so, humans being what we are, we continue to beat ourselves up about our mistakes.

The reality is, if I had bought £1,000 of coins at 23c, I would have sold them too soon, I would have had them stolen (indeed I did have a batch of coins stolen that's a story for another day) there are any number of mistakes I would have subsequently made.

The chances of me having held on to every single one right up the present day is extremely slim. The same goes for anyone else looking at the bitcoin price and feeling SWC. There are umpteen things that could have gone wrong, even if the original purchase was good.

So I guess there's a simple investment message to today's Money Morning. Look around you, look forward, look at the now and, yes, look at the past.

But when you do, realize that, even if you had got that bit right, it would only have opened up the door for a million other things to go wrong. Ideal SWC could never have happened. So exercise some rational self-compassion.

Advertisement
Advertisement - Article continues below

Do not indulge the SWC.

And, hey, were it not for SWC, I'd've never written that book!

Advertisement

Recommended

Visit/515579/bitcoin-has-just-crashed-hard-where-will-it-go-next
Currencies

Bitcoin has just crashed hard – where will it go next?

The bitcoin price has taken a beating, down by 15% in one day. Dominic Frisby looks at what’s behind the crash, and where the cryptocurrency might go …
25 Sep 2019
Visit/510743/another-bubble-in-bitcoin
Spread betting

Another bubble in bitcoin for traders to short

This surge in the bitcoin price seems no more likely to endure than the last one, says Matthew Partridge.
16 Jul 2019
Visit/510053/bitcoin-bear-market-but-dont-sell-now
Currencies

Bitcoin is back in a bear market – but don’t sell now

After its recent spectacular rise, bitcoin suffered a whopping great selloff that, technically, put it back in a bear market. But that doesn’t mean yo…
3 Jul 2019
Visit/506814/the-bitcoin-rollercoaster-has-started-up-again-hang-on-tight
Currencies

The bitcoin rollercoaster has started up again – hang on tight!

Sentiment on bitcoin has made an about turn and the cryptocurrency is back on the rise. Dominic Frisby explains why, and whether it's time to buy bitc…
15 May 2019

Most Popular

Visit/investments/property/601081/three-things-matter-for-the-uk-housing-market-now-and
Property

Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020
Visit/investments/stockmarkets/601101/has-the-stockmarket-hit-rock-bottom-yet
Stockmarkets

Has the stockmarket hit rock bottom yet?

The world's stockmarkets continue on their wild and disorientating rollercoaster ride. Investors are still gripped by fear. So, asks John Stepek, have…
2 Apr 2020
Visit/investments/property/601065/what-does-the-coronavirus-crisis-mean-for-uk-house-prices
Property

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020
Visit/investments/commodities/energy/oil/601107/oil-shoots-higher-have-we-seen-the-bottom-for-the-big-oil
Oil

Oil shoots higher – have we seen the bottom for the big oil companies?

Just a few days ago everyone was worried about negative oil prices. Now, the market has turned upwards. John Stepek explains what’s behind the rise an…
3 Apr 2020