“Buy when blood is running the streets”
In the investment world, some phrases have stayed throughout time; for some, they might seem brutal and not understand, but for others, it is a must strategy when investing in different markets.
“Be fearful when others are greedy and be greedy when others are fearful" -Warren Buffett.
"The way to make money is to buy when blood is running in the streets" -John D. Rockefeller.
These Phrases seem brutal; then again, markets are brutal, especially if you don't understand them. The phrase stated by Rockefeller makes it seem out of a horror movie, but it’s not; it's merely a statement on how to act when markets crash or when there is a global recession, among others. When will there be blood running the streets? This refers to the economic crash, global recession, or most recently, the Covid pandemic; all these events had a dramatic and drastic impact on everything, businesses, workforce, exportations, among others. Many known companies suffered from this; people also sold and began spending money on other products and saved on others. Thus, this sense of panic ultimately provokes a massive sell of stocks because people fear losing everything.
In other words, when chaos stricks, it's the perfect moment to buy low because it’s the opposite of what people are doing and in hopes of a high sell moment, something that every person who is investing ultimately wants.
Nonetheless, buy low and selling high is not as easy as it seems. Sure, there might be a stock or a cryptocurrency that has maintained a value, and because of economic or global crises, it might have decreased significantly. Latter might be easier to identify, and as an investor, realize this is only for a while because the stock or coin will eventually rise or even rocket if we are lucky. This buy low and sell high technique becomes tricky to apply when there is a new asset on the market such as Inicial Public Offerings or Inicial Coin Offerings, these new or relatively new projects or businesses. As an investor, you have the opportunity to invest based on your analysis and hoping this new idea can become the next Microsoft, Google, or Amazon.
“The investor who takes an unbiased look at the market might be able to see the herd instinct at work and take advantage of the extreme ups and downs that it causes. That investor can buy low and sell high.”
“Unfortunately, it's easy to determine after the fact whether a price was too low or too high and even why. At the moment, it is monumentally difficult. Prices both affect and reflect the psychology and emotions of market participants.”
“For this reason, "buy low, sell high" can be challenging to implement consistently. Traders trying for a more objective view consider other factors to make a more informed decision. These factors include moving averages, the business cycle, and consumer sentiment.
When you are looking into investments, you ask yourself, Is this the moment to invest? Well, it will depend on the type of investment you are pointing at. For example, this past week, bitcoin hit its highest mark so far this year, and many say it's too late to jump on the bitcoin ride. Others such as Davincij15, a known crypto Youtuber says it's not late at all.
“Over the long term, the drivers of the market as a whole follow a consistent pattern, moving from fear to greed and back to fear. Times of maximum fear is the best time to buy stocks, while times of maximum greed are the best time to sell.”
“These extremes take place a couple of times every decade and have remarkable similarities. The emotional cycle follows the business cycle. When the economy is in a recession, fear predominates. This is the time to buy low. When the economy booms, prices go up like there's no tomorrow. This is the time to sell.”
I believe it's essential to have your strategy and goal in terms of losses and gains; following trends might not suit your expectations or investor skills. Regarding bitcoin, it is here for the long run. It's essential to understand it is more than a coin to invest in; it has multiple benefits and will change the financial system, and we are barely in the beginning.
By: Carolina Pérez