My biggest stock market regrets have come from selling too early…
Whether it was dumping Microsoft and Oracle in the early 1990s, or getting out of Apple far too early in the 2000s, I’ve literally left tens of millions of dollars on the table from selling too early.
I got into Oracle and Microsoft in 1990 and recommended Apple in 2003. Had I still held just a small $5,000 position in each of those stocks, I’d have about an extra $2.2 million today.
Why didn’t I stick around? In a word, volatility.
In the early days of a high-growth stock, there are doubts about whether the company will make it. Sometimes, those doubts get magnified by the market into huge bouts of volatility.
For instance, Oracle once dropped as much as 80% as doubts rose about its very survival during an accounting scandal. Microsoft would frequently see its stock swing about 30% or more.
And Apple was always being questioned by the market about its corporate direction as it transformed into the powerhouse it is today.
It bears repeating that the problem with stocks poised for massive growth is that in their early days, they are highly volatile.
And if you don’t understand that volatility is the admission price you pay to be able to turn $5,000 into as much as $2.2 million, then you will always be doomed to sell early.
So how exactly is one supposed to stay in a position in the face of gut-wrenching volatility?
My Two-Step Method for Making Life-Changing Money
The first step is to always position size wisely. Pick a dollar amount you are comfortable losing. That’s easy, right? For some, it’s $400, or maybe $1,000. Maybe they can lose $5,000, and it’s a non-event for them. Pick the number that is right for you.
The second step is to get 100% clarity on the story or narrative you expect will drive the stock higher. You see, I discovered from working on Wall Street that it is the narrative that drives much of the price action of a stock.
For example, the long-term driving narrative for Microsoft was the adoption of the desktop computer. That’s because Microsoft had a monopoly on desktop computer operating systems.
When I bought Microsoft in 1990, only 15% of homes had a computer. Today, 89% of homes have a desktop computer. To make money on Microsoft, all you had to know was they had a monopoly on desktop operating systems… and that desktop computers would soon be in every home.
I want you to remember there is always a short-term narrative, an interim-term narrative, and a long-term narrative at play. We get in trouble when we confuse negative short- and interim-narratives with the positive long-term narrative.
In the case of Microsoft, the short-term negative narrative was: Why would people want a “business machine” in their house? The interim-term negative narrative was that IBM would displace Microsoft with its own operating system.
From time to time, these short- and interim-term narratives would get magnified by the market and Microsoft’s stock would get bullied lower. But in hindsight, if you just knew what the outcome of the long-term narrative was, then all of Microsoft’s volatility was just a buying opportunity.
Here’s the Only Narrative That Matters in Crypto
I’ve shared this with you because if you missed out on Microsoft, Apple, and Oracle in their early days, it’s not too late to fix that mistake. The crypto market is the mirror image of the nascent tech market of the late 1980s and early 1990s.
I’ve used what I’ve learned from the ’90s to help my subscribers stay invested in crypto coins such as bitcoin and ether since they were $428 and $8, respectively. Today, bitcoin is over $11,000 and ether is around $367.
Since I started recommending cryptos in 2016, the short-term and interim-term narratives have generally been very negative. Over the short term, we were always afraid China would ban crypto mining. Over the interim term, we were afraid the U.S. government would ban cryptos.
What kept me in crypto and what still keeps me in crypto is the long-term narrative.
The long-term narrative is all about the mass adoption of crypto coins, like bitcoin and ether as a legitimate, investible asset class.
Today, the entire crypto market is only worth about $346 billion. And right now, 35–50 million people own crypto. That’s 0.6% of the world’s population. Imagine owning Microsoft when only 0.6% of households had a computer? That’s the opportunity in cryptos today.
Mass adoption of an asset or a product can only happen once. And if you miss it, the opportunity is over forever. That’s why when it comes to crypto, I don’t care about volatility.
Right now, bitcoin is trading around $11,000. By the time this essay publishes, maybe bitcoin will be at $8,000. Maybe it’ll shoot back up to $12,000. I don’t know… and the thing is, I don’t really care – and neither should you. These moves are inconsequential.
Look, I understand. These moves certainly don’t feel inconsequential when you’re going through them.
But if you pull back the camera, these moves − even if bitcoin drops 30%, 40%, or 50% − are a non-event compared to where bitcoin is headed in the long term. At a minimum, I expect bitcoin to hit a market cap of $2 trillion dollars. That would put its price at $100,000.
In view of that price target, why should I care if bitcoin were to suddenly drop from $10,000 to $4,000? That’s what happened in March of this year and I told all of my readers to buy bitcoin. Since the March lows, bitcoin has risen as much as 167%.
That was an easy call for me because we’re so early in the bitcoin adoption cycle… I knew the price had to fully recover.
Let me put it in perspective for you…
Imagine you bought a stock at $1 per share… and it goes to 60 cents. Sure, you’d feel that 40% loss.
Now, let’s say the same stock explodes from 60 cents to $200. On a stock chart, that 40% drop from $1 to 60 cents looks like a blip. But the move from 60 cents to $200 looks like a massive hockey stick going up.
That’s the opportunity that we have in front of us in crypto.
Always Verify Your Narrative
A long-term narrative only has value if there’s ongoing proof of the narrative taking hold. So in crypto, I’m always looking to see if the long-term adoption story is actually playing out in the marketplace or just in my imagination.
This is a critical step to making sure you are not deluding yourself.
The good news is we have and continue to see large-scale concrete steps being taken to bring crypto assets to the masses.
Take a company like electronic payments platform Square, for example.
In its latest earnings report, Square’s Cash App reported $875 million in bitcoin revenue – a 600% increase from the previous year.
Analysts believe that PayPal plans to roll out crypto trading to its 325 million users. Robinhood Crypto offers commission-free trades on seven cryptos to its 13 million users. Even Mastercard and Visa recently announced projects and collaborations involving crypto.
More importantly, regulatory changes are finally paving the way for traditional firms to offer crypto products to their clients.
Recently, the agency that governs banks, the Office of the Comptroller of the Currency (OCC), issued guidance that banks can now store and work with cryptocurrency. The OCC is one of the most powerful federal agencies in the country. This is a huge vote of confidence for crypto assets.
The U.S. banking system alone touches the lives of over 300 million Americans. And it holds north of $20 trillion in assets. If bank customers allocate just 1% of their accounts to bitcoin… bitcoin’s market cap would double.
So you can see for yourself we have government, regulatory, and industry support for bringing crypto assets mainstream. That means the long-term narrative is on track to take crypto asset ownership from 0.6% to something that closer resembles the stock market ownership rate of 55%.
That leap from 0.6% penetration to 55% will make you rich.
Here’s What to Do Next
If you don’t already own it, buy some bitcoin and ether. And when you begin to ask yourself a sea of questions about daily volatility… I want you to STOP. I want you to focus on the big picture. And that is: A half-billion people are coming into this asset class over the next few years.
When you go from 35–50 million users to 500 million users, you can’t help but make a fortune.
Now, fortunes don’t come for free. Remember, there is an admission price to making huge money from small investments. And that admission fee is volatility.
If you want to take a small amount of money and radically grow it into a multimillion-dollar fortune – which my subscribers and I have done in crypto – then you have to pay the price by dealing with the short-term and interim-term negative price action.
So we’ll have more volatility. I don’t know how much more. But again, it doesn’t matter. Just don’t draw long-term negative conclusions about crypto based on what happens over the short term.
Always remember the overriding driver that will turn crypto into a multitrillion-dollar asset class is the story of widespread adoption.
If you can stay true to that narrative, you’ll look back in the years ahead from a position of comfort and wealth instead of regret and recriminations.
Let the Game Come to You!
Editor, Palm Beach Daily
P.S. As I mentioned above, we’ll see bitcoin – and crypto – adoption skyrocket over the coming months. And I believe it’ll spark a once-in-a-lifetime opportunity…
But starting with its underlying blockchain technology, I believe we’re about to see the biggest wealth and power shift in U.S. history.
Those who take the right steps now could fantastically grow their wealth… Those who don’t will be left behind.