Topic: My bitcoin investment strategy - fixed allocation - listening to ALL your parts - page 4. (Read 5573 times)

i like your post. but i think the average guy here falls asleep if he has to read more than 3 sentences in row

Anyone willing to give me some truth why probably no one responded to my post?

Is it my doing? What could I improve?

I think I have developed a very good investment strategy that might help some here. I say some because there are many other investment strategies that will work. But in case you have been losing money, or you felt too much stress, you likely don't have a good one.

I allocate a fixed percentage of my capital to bitcoins. My target exposure is 40%. This way if the price goes up my exposure goes above 40% and I am forced to sell bitcoins, and if the price goes down and my exposure goes below 40% I am forced to buy more bitcoins. This goes against some strong emotions as the bull in you does not like to sell any coins when everyone is bullish and the price is going up. As everyday the bull is proven right that selling before was a mistake. Inversely, buying when the price goes down goes also against your emotions as the fear comes in and price will likely continue to fall so we should wait! But instead this system forces you to buy.

From a risk perspective this allocation strategy also makes sense because managing your risk means never bet too much of your capital on something, but also don't bet too little on something that has a big chance of making you a lot of money. Typically if you don't have a fixed allocation strategy what happens is that into rallies your allocation to bitcoins goes up way above what you would have chosen yourself if you were to make a fresh decision, and inversely into crashes your exposure becomes much lower than what you would have chosen yourself, if you were to make a fresh decision.


I'm not saying emotions are bad, they are not, they tell you something very important, to be fearful/chicken from something that goes down in value, and to be brave/greedy for something that goes up in value, makes good sense. However, letting these parts take you over in your decision making is not wise. Letting any parts/feelings that you have take you over is never wise. The key is to listen to your different parts and make a decision so that all your parts are satisfied. Because, very likely, when the market goes up and your greedy part says 'buy more', you also have a fearful part in you, saying 'no, this is too risky!'. And when market collapses and your fearful part says 'don't buy, too risky!' or even worse 'sell now!' you likely also have a brave part saying 'but now is the time to buy!'. Many people just ignore certain parts in them and let only one part take themselves over and act it out. This is a recipe for disaster.    


Ofcourse having allocated always 40% of my capital means that if bitcoin fails and goes down to zero, I will continue to buy and lose all my capital. So one thing that is very important for this strategy is to always check the fundamentals. If the fundamentals are broken this strategy should be halted and no more buying. I don't mean government intervention as this cannot destroy bitcoin, but technical issues, or a competing currency taking over bitcoin, may never be ignored, even if is just a thread on the horizon, it should be investigated in depth as failing to notice in time will be a disaster.

I executed this strategy myself since I started investing in bitcoins at the end of 2012 around $15. I did not stick to this strategy and made some serious mistakes. My initial allocation was way too small when I entered around $15 with only 7% of my capital because I applied the incorrect saying 'invest only what you can afford to lose'. As the rally progressed I also gradually let go of my allocation target more and more and when it counted most, around the high of $250, I was exposed way above my target and sold way too little that day. Still with bitcoin around $150 today my return on my - complete - capital is 45% today, which is very respectable to me. I sold into the rally, bought into the crash, and am selling again into the current rebound. I succeeded in buying low and selling high and always kept an exposure to bitcoin.


I have added some more tweaks to this strategy and will gladly share if I see that some here value my post.