By Zach Scheidt
This post My Bad Bitcoin Advice appeared first on Daily Reckoning.
“Thanks a lot for your advice on bitcoin. Have you invested anything in cryptocurrencies?”
The text was from an old friend Natalie. And she was ticked off.
Just a few weeks ago, Natalie reached out to me and asked for my thoughts on bitcoin. Without giving her any personalized financial advice, I simply explained how cryptocurrencies carried plenty of risk and were speculative investments at best.
Of course you already know what happened.
As bitcoin soared to a price of nearly $12,000, Natalie sat on the sidelines. And then blamed me for missing out on the profits she could have made from bitcoin.
My decision to warn her of the risks of bitcoin — and her decision to stay on the sidelines — ultimately cost her money. But does that necessarily mean they were bad decisions?
Today, I want to chat a bit about the difference between good and bad investment decisions, and how they relate to good and bad outcomes. Hopefully, the discussion will help you become a wiser and more profitable long-term investor.
The Difference Between Good Decisions and Good Outcomes
If you buy a car insurance policy and then never have a wreck, did you make a bad investment?
Of course not.
Life is full of decisions that we make based on incomplete information. We don’t know for sure whether we will get in an accident or not. So we make wise decisions to protect our interest by buying insurance policies.
Regardless of whether the policies pay us money (a financial win for the investment), or expire with no payment (a financial loss for the investment), the decision was still a good one.
That’s how I look at investment decisions too.
Whenever I choose to recommend a dividend stock or growth opportunity… or when I choose to warn you about particular risks… my goal is to help you make a wise decision with your investment money.
And because we’re dealing with a market full of uncertainty, the end result of those decisions will not always pan out the way we expected.
Take a look at the graph below:
In the table above, you can see four different ways that our investment opportunities can turn out.
These four categories are the intersections between the type of decisions we make, and the eventual outcomes for our investments.
Four Types of Investments
As an investor and your Daily Edge editor, I try to make the best decisions possible when it comes to the opportunities we’re tracking.
I have a system for screening through different stocks and other investment securities. I have a research process I go through each day. I have credible sources that I follow, and I’ve developed a network of experts — all with one thing in mind:
Making the best investment decisions I possibly can.
But with that said, even the best decisions don’t always work out. No matter how much research I do, sometimes our investments won’t work out as well as we expect. Sometimes they’ll even trade lower and cause us to lose …read more
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