Dealing with Greed

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slowtraveler
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Dealing with Greed

Post by slowtraveler » Wed Dec 06, 2017 11:11 am

My pre-specified investment plan has been doing better than I had ever expected: 15% per annum.

This is a drop in the bucket compared to the current BTC, ETH, and other cryptocurrency gains.

How do I deal with the emotion of greed? Being okay with someone else getting rich faster than me.

Currently, I am considering putting in 500->1000 USD in the 2 main fiat cryptocurrencies in case they do end up being dominant forms of currency and skyrocketing in value. Enough to make a difference if they 100x but not enough for me to hurt if they go to 0. I remember seeing BTC at 200 something a while back and thinking, "no way, too expensive." Now, I'm on the flip side of buying much higher due to fear of missing out.

As currencies, they seem a pain in the ass to deal with at their current level of development compared to dollars based on my few hours of interacting with various wallets. Robbery seems common. A different currency that is not yet developed or still early and unknown may end up the dominant currency as the current main contenders get wiped out for various reasons. In spite of all these obstacles/risks, here I am, considering a purchase of something just because it went up so much in value relative to the dollar and may continue to do so.

ThisDinosaur
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Re: Dealing with Greed

Post by ThisDinosaur » Wed Dec 06, 2017 12:33 pm

For that situation, you should read anything you can find about asset bubbles. You may start to feel smugly superior to your friends with too much in BTC for being foolish simpletons.

If you know anyone who was investing in tech stocks in the late 90s, and forgot to harvest their profits before 2000, this will all seem very familiar to them.

batbatmanne
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Re: Dealing with Greed

Post by batbatmanne » Wed Dec 06, 2017 12:34 pm

There will always be people who make money on pyramid schemes, the greater fool theory will produce winners. The right attitude to take is to recognize that often times the people who are doing better than you are reckless gamblers who will get their karma: they're liable to go broke through gambling and being spendthrifts. The kind of person who idealizes generating income with the 3% rule, a 1 million dollar portfolio and a foundation of practical skills is generally not accustomed to engaging in high-risk high-reward behavior and vice versa. Most of the people involved in pyramid schemes lose, sometimes a lot, and the winners are usually some combination of malicious and lucky. Few winners of this game are truly intelligent or prophetic. Why risk everything when you can ERE in a decade almost guaranteed, and probably become a millionaire a decade after that?

I think one of the biggest mistakes people make is thinking of a buy and hold strategy with a speculative asset as one decision. You can't think to yourself, "jeez, if only I had bought $500 worth of bitcoin when it was $1 in 2011, I'd be a multi-millionaire today." It's not just a matter of making the decision to buy when it's cheap, it's also deciding not to sell at 10x return, 100x return, 1000x return, 10000x return, etc., and everywhere in between. I wouldn't bother buying into bitcoin now. Nobody who buys 4 figures or less is going to get rich from it unless you are picturing a bitcoin being worth a million bucks and them not selling at 5x, 10x, etc. Even if blockchain tech is the future of currency it's clear that the tech is underdeveloped and it's in a bubble right now. Who knows how long it might take for the tech to get up to snuff before it could and would actually function as a currency on a large scale, maybe it never will. Stick to investing in real value and only speculate on the side a minimal amount to satisfy your curiosity.

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Re: Dealing with Greed

Post by jacob » Wed Dec 06, 2017 3:32 pm

As your investment experience (and hopefully wisdom) grows, you'll accumulate a collection of "If only I had ... "-stories. If you're honest with yourself, you'll also collect some "I'm so glad I didn't..."-stories. Thing is, I bet those voices are mostly the emotional part of your brain speaking. And if an investment is emotionally driven like that, it's likely following the "greater fool"-trade in that it mainly works because other humans will feel the same way. The trading idea is that you can fade out the position at a higher price unhanding it to a greater fool (you acting as the lesser fool). Same idea works on the way down as a short.

Both of those, however, features the emotional experience of either loss or regret.

Currently, you're short on loss but long on regret, at least in your head. If you want to make it real [with real money], you must understand these emotions thoroughly, both in yourself and in others.

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Riggerjack
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Re: Dealing with Greed

Post by Riggerjack » Wed Dec 06, 2017 7:17 pm

Google
buying much higher due to fear of missing out.
and read the results until you feel better.

Then come up with a better plan. The deal of the century comes along about once a week. You just have to be able to recognize it, and jump on it when you do. Hint: it won't be advertised, it won't involve a salesman, and you won't hear about it from someone who heard about it from someone else, who doesn't have very specialized knowledge.

A good example: a friend just told me he bought some Marijuana stocks. Now, this business has been legal in my state for a few years now. Customer base is expanding, illegal competition is getting run out of business, there is real money to be made here. But he's in construction (no specialized knowledge) acting on a tip from a friend who also lacks any specialized knowledge, without knowing any other knowledge of the stock, the business, the industry. He is speculating that since Marijuana makes money, if he buys stock, he'll be rich. He's a great guy, and I trust his judgement in construction, but I didn't even look at the stocks. Not because he couldn't be right, but because I don't know enough to make that call in a short time frame. And great deals come with short time frames.

Know the move you want to make.
Wait for the opportunity to come along.
Pounce.
Wait for it to pay off, while watching for the unexpected.

It's that easy. In theory. :twisted:

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TopHatFox
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Re: Dealing with Greed

Post by TopHatFox » Wed Dec 06, 2017 9:13 pm

Realize that you and them are all dead anyway and the bits of currency will be distributed to your nearest Who Cares after you die.

There, now go and live your best life : )

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BRUTE
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Re: Dealing with Greed

Post by BRUTE » Wed Dec 06, 2017 10:15 pm

why not put $1,000 into crypto? if it goes to shit not that much lost, and it would likely take care of the FOMO. of course this should be a small % of total portfolio, because speculation.

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ebast
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Re: Dealing with Greed

Post by ebast » Wed Dec 06, 2017 11:52 pm

It's a trick question!

You're making 15% per annum! That is solid! Chase 15% out 20-30 years and see how it looks. (Hint: it looks ridiculous). I would think all financial strategering should be focused on doing whatever you can to keep anything remotely like that going for your overall portfolio.

Given those kind of numbers with a FU-ballpark nest-egg, a $1000 dink in crypto won't matter to you even if it does go to 100x. Or 0.

Buy it. Don't buy it. Do whatever gets it out of your head and back to the important numbers.

taemoo
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Re: Dealing with Greed

Post by taemoo » Thu Dec 07, 2017 11:12 am

BRUTE wrote:
Wed Dec 06, 2017 10:15 pm
why not put $1,000 into crypto? if it goes to shit not that much lost, and it would likely take care of the FOMO. of course this should be a small % of total portfolio, because speculation.
I'm definitely going through FOMO, obsessively following the news and prices. I don't know why I can blow 2 grand in Vegas (not having fun) over a weekend but have trouble putting 2 grand into this.

EDIT: So I decided to put a small position in but couldn't login into my gdax account because the exchange went down. Lol, I guess i'm the shoeshine boy

Jason
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Re: Dealing with Greed

Post by Jason » Thu Dec 07, 2017 12:28 pm

Greed and fear. I picture the emotions as that pair of Chinese Siamese twins In the Guinness book of world records who’s marital relations fascinated me even as a child.

You reach a point where it’s best to wet your whistle instead of stuffing it down and then finding yourself crawling butt naked crumb hunting after a month long bender.

suomalainen
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Re: Dealing with Greed

Post by suomalainen » Thu Dec 07, 2017 1:21 pm

Rule #1: As a general matter, there’s always another bus, so no need to chase the one you just missed.

As an exception to the rule, you can emotionally throw some money away to satisfy your psychology, with two caveats 1) you should be able to afford a total loss on what you’re chasing and 2) if you do this more than once, you’re a gambler and not an investor; get some help.

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BRUTE
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Re: Dealing with Greed

Post by BRUTE » Thu Dec 07, 2017 9:10 pm

ebast wrote:
Wed Dec 06, 2017 11:52 pm
You're making 15% per annum! That is solid! Chase 15% out 20-30 years and see how it looks. (Hint: it looks ridiculous).
bitcoin up more than 15% just today.

suomalainen
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Re: Dealing with Greed

Post by suomalainen » Thu Dec 07, 2017 9:54 pm

@brute you have a level at which you’ll reduce exposure? Or fully exit?

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SavingWithBabies
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Re: Dealing with Greed

Post by SavingWithBabies » Thu Dec 07, 2017 10:24 pm

Here is an "if only" story... I've thought about posting it often.

Flash back to VRX tanking due to all the stupidity around the young CEO. I tried to catch it and I took a small investment account from one of my first jobs from about 16,500 USD to about 5,000 USD. It's still in it. It's climbing back up. We're at maybe $8,300.

What did I sell to do this? Oh, I was all in on Netflix. It had soared up to $90/share and it seemed rich. So I sold it all.

What happened to Netflix? It soared up to $190+/share.

So today I have $8,300 and it could have been $34,800.

Such is life. I took a stupid gamble for no good reason. I don't do that anymore. I also think Bitcoin is a bubble but you can make money on it in the short term if you're lucky. The time to get in was way long ago. But the underlying tech is limited enough that it's going to be the beta of cryptocoins. It might never be worthless but it needs to work way better to scale up and it is fundamentally rate limited. At least that is what I concluded in my initial readings and I left it at that. Someone else will get rich or poor on it. Not me.

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BRUTE
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Re: Dealing with Greed

Post by BRUTE » Thu Dec 07, 2017 10:51 pm

suomalainen wrote:
Thu Dec 07, 2017 9:54 pm
@brute you have a level at which you’ll reduce exposure? Or fully exit?
brute plans to shave off portions to lock the gains in once he hits his first FI stage, then more once he hits further stages.

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ebast
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Re: Dealing with Greed

Post by ebast » Fri Dec 08, 2017 3:06 am

BRUTE wrote:
Thu Dec 07, 2017 9:10 pm
ebast wrote:
Wed Dec 06, 2017 11:52 pm
You're making 15% per annum! That is solid! Chase 15% out 20-30 years and see how it looks. (Hint: it looks ridiculous).
bitcoin up more than 15% just today.
ebast congratulates brute, if bitcoin 100% of brute port

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Sclass
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Re: Dealing with Greed

Post by Sclass » Fri Dec 08, 2017 11:00 pm

I wouldn’t worry too much. It doesn’t get you paid.

I have a lot of I should’ve would’ve could’ve stories. I try not to waste too much time on this line of thinking. You need to know the entry point. You need to enter. Then you need to exit at the right time. If I miss any of the three I don’t get too regretful about it. If I miss all three I don’t even blink. It’s a waste of time.

It’s like obsessing over that big fish you had on the line that just managed to hop off. What is more pathetic are the idiots who didn’t even have the fish on the hook and saw it swimming by and say “Sclass I could have had that fish in the pan”. Just stupid.

I looked at bitcoin in 2009 with a young protege. We toyed with buying some for grins. The trading looked too complex/primitive and I brushed it off. I don’t lose any sleep over it because it might as well never have happened. I suspect our stake would have been lost in one of the many heists that happened at Mt. Gox and elsewhere since.

Back in reality my young protege quit working for me and started a novel startup in 2011. He’s a multimillionaire from it now. We don’t look back.

I always get a kick out of friends who say stupid things like “if I only bought gold in 1998” or “if I only bought Apple in 1994”. Listen, I DID buy Apple in 1994 and I sold it in 1995. :lol: Not good enough by a long shot. I’ve got a long list of near misses to add. Don’t lose sleep. Look ahead.

Deals are flying by all the time. If you don’t believe me, just look in the rear view mirror. Just don’t look too long because you cannot see where you’re going while you’re doing it.

You just need to catch a few.

A mentor of mine told me “Sclass, why do you keep asking about making money? Hah, that’s the easiest part.” I’m only starting to understand it now. By the way he’s dead now.

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bryan
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Re: Dealing with Greed

Post by bryan » Fri Dec 08, 2017 11:29 pm

True. I could have bought a couple specific houses some years ago.. would have made 100s of thousands of dollars within a few years.

And in the "it's better to be lucky than good" category.. I diversified a few BTC into Litecoin (one of the few legitimate alt-coins), and since then the Litecoin value has jumped 50%.. Cool! I guess there were some people thinking along the same line as me?

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SavingWithBabies
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Re: Dealing with Greed

Post by SavingWithBabies » Fri Dec 08, 2017 11:38 pm

Sclass wrote:
Fri Dec 08, 2017 11:00 pm
Deals are flying by all the time. If you don’t believe me, just look in the rear view mirror. Just don’t look too long because you cannot see where you’re going while you’re doing it.
That right there is gold. Well said!

For my example above, I decided a time ago that it could have been a much more expensive lesson.

halfmoon
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Re: Dealing with Greed

Post by halfmoon » Sat Dec 09, 2017 12:04 am

Jason wrote:
Thu Dec 07, 2017 12:28 pm
Greed and fear. I picture the emotions as that pair of Chinese Siamese twins In the Guinness book of world records who’s marital relations fascinated me even as a child.
Chinese Siamese twins??

Oh, right: we were talking about fear and greed (sorry, Jason; I always think of them in that order). I've been thinking about these twins a lot lately as I watch our investment balance lurch upward. Having an ingrained distrust of easy riches, I've actually never yearned to win the lottery or buy some bitcoin-type investment to keep me up nights wishing I'd sold at that perfect apex. I just want a solid, sustainable yield.

More than a year ago, @almostthere recommended that I read Market Wizards. I actually read The New Market Wizards, and it was hugely helpful in identifying some of my mental investing traps. Since then, I've focused even more on a dividend/value stragegy because it makes sense to me at this stage of life. I have little difficulty rejecting investments that don't fit with the strategy; aggressive growth was more appropriate when DH and I were younger. My struggle is in rebalancing out of stocks that I still really like just because they concentrate our portfolio.

In short, my wish is to neither gain nor lose 15% in a day. There will always be something we can envy and something we can scorn. Neither one has much to do (in my mind) with the underlying goals of ERE.

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Sclass
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Re: Dealing with Greed

Post by Sclass » Sat Dec 09, 2017 12:41 am

bryan wrote:
Fri Dec 08, 2017 11:29 pm
True. I could have bought a couple specific houses some years ago.. would have made 100s of thousands of dollars within a few years.
Uh oh, there’s that could’ve would’ve talk again.

How close were you to this reality? You had the capital to secure loans on two Bay Area homes simultaneously and the time/cash flow to service the debt? If you did, that’s a good way there. But I’m trying to say it’s a big waste of time to look back like this...unless it is to temper your ability to pull the trigger on an upcoming deal.

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bryan
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Re: Dealing with Greed

Post by bryan » Sat Dec 09, 2017 1:27 am

Not Bay Area. One was in Dallas while I was living there, in an up and coming neighborhood that I thought was the best in the city. Didn't pursue that because I didn't want to deal with renting it out in the likelihood of me moving to CA. The other was in AL, my family home that my mother was selling. I told her I would buy it for sure if she seller financed it to me, but I would have to think about it a bit more if not. Well, she wanted a big check instead of many small checks.. after giving me fair warning, she sold it to a flipper, without even listing it on the market, instead (can't recall exact figures.. but something like $300k->$700k; was renovated and re-sold in less than 12 months). Clearly I was more angry about the later situation (the first was a more typical regret).. I posted about it here when it happened! Got some comfort from the replies..

I've never even considered buying a house in the Bay Area :lol:

Jason
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Re: Dealing with Greed

Post by Jason » Sat Dec 09, 2017 7:51 am

halfmoon wrote:
Sat Dec 09, 2017 12:04 am

Chinese Siamese twins??
Sorry. I should have said Thai Siamese Twins. As a 13 year old, I wasn't aware of the distinction. Now, I'm somewhat aware.

Anyways, Greed is the one to your left.

https://nypost.com/2014/11/01/the-sex-l ... ese-twins/

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Sclass
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Re: Dealing with Greed

Post by Sclass » Sat Dec 09, 2017 7:56 am

Sounds like you had those within grasp.

I made too many assumptions while reading your post and projected myself. While living in the Bay Area I passed up lots of RE due to high capital requirements and insufficient rents to cover interest. And I had too many friends pointing out the car window saying “I could have bought that for...,” when in reality they were maxed out on the house they lived in.

In your cases I would actually give things a second thought. Mostly I like to think about what led me down the path away from the payout. That way I can try to see if I have some built in mental blocks that will just keep letting them slip by. Like when you’re fishing and you lose fish while landing you might want to check the condition of the barb.

In 2000 at about 30yo I would lie on my bed dreaming about how I shoulud’ve put $30k into this dot com or that dot com stock and sold it to have my first million. I’d do this and just calculate the fantasy gains out while saying “if I bought it here, then sold it here I’d...”. It was pathetic. I was lying on a cheap futon bed in a basement I rented cheap. I had ants and rats as roommates. :lol: I’d wonder how I’d get outta there.

Somehow I outgrew that mindset. I had a lot of buddies playing the same game. One told me “if I just had bought JDS Uniphase” or another said “please God give us another dot com this time we won’t piss it away.” It was totally unproductive behavior. The guys who said that are financially messed up now. Fifty somethings working in Silicon Valley tech and totally reliant on salary. Geezers at hiding at Cisco, HP and Intel. Burned in the dot com, indebted in the 2006 real estate bubble.

I look back on those days and just laugh. What a waste of time. Glad it only consumed a few Saturday mornings. :lol: Yes, it took a lot longer to make that million but I wasn’t making too much progress back then dreaming of 20/20 hindsight.

Sitting around dreaming and regretting wasted more than time, it wasted opportunity. Don’t indulge yourself too long in self pity.

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bryan
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Re: Dealing with Greed

Post by bryan » Sat Dec 09, 2017 6:06 pm

Well, I (think, hope I) know myself fairly well. RTS videogames taught me at an early age that I am too conservative with my investments and fairly "risk-averse" (by some not-common connotation).. I like seeing the numbers rising as opposed to keeping the balance at zero via constantly re-investing a la Amazon. I am hesitant to use leverage. Watching STORAGE WAR$ grokked me that only making 20% on a big item 15k purchase is better than making 100% on a 2k purchase of various types of knick-knack goods (i.e. absolute gains vs. percentage profit and slightly hidden costs). I make sound bets (but maybe not Kelly Criterion optimal) based on my perception of the probabilities (e.g. Bitcoin), annoyingly so (i.e. diversification is a blessing and a curse..).

I'm not sure if I took anything away from the home purchase failures other than additional emphasis on getting over stuff (i.e. being at peace) quickly. I did learn a bit more about real estate and rentier behaviour, though. I don't tend towards self pitying, fortunately. I'm about quite certain that in ~5 years I will regret not having started specific business opportunities that I've identified.

Still struggling to internalize lessons about how one's personal situation (e.g. financial wealth) biases your investment/risk decision making (relates to all of the above).

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