In addition to regular investment and steady holding, will you use part of your positions to buy low and sell high for BTC, ETH or other altcoins? Or will you wait until the bull market is at its peak before selling all your positions in batches?
When I saw this reader’s message, I remembered the experience of Li Lu, a very successful senior Chinese investor whom I read about some time ago.
Before introducing Li Lu, let me first respond to this reader's question.
I regard fixed investment and steady holding and buying high and selling low as two operations: one is medium and long-term, and the other is short-term.
As for my own practice, basically since I entered the crypto ecosystem, I have never invested in part of my investments and then sold high and bought low.
I hold on to it for most of my operations.
Therefore, my investment method is medium- and long-term (steady holding), rather than short-term (selling high and buying low).
For the stocks I hold, if I find that there are problems with the team or the project itself, I will sell them all without hesitation.
If I thought the price was too outrageous I would also sell it all.
There is another situation: I am not sure how the project will develop, but I haven’t found any serious problems with the project, so I will reduce my position.
In the past, I did not have any strong ideological support when I did this. Perhaps this motivation only came from my previous failed short-term trading experiences.
But a while ago, when I read an autobiography by Li Lu, I found a resonance in my way of operating.
We all know Mr. Buffett and Mr. Munger. Li Lu can be regarded as Mr. Munger's long-term partner and friend. Many of his insights and experiences in investment are deeply influenced by Munger. If you read more news or books about Mr. Munger, you will definitely see Li Lu's name.
Li Lu’s autobiography mentioned his experience in short-term operations.
There was a time when Li Lu thought that the long-term holding method was too inefficient. One wave and price difference after another slipped away right under his nose, but he remained indifferent.
Ignoring these opportunities not only wastes time but also greatly reduces the efficiency of capital utilization.
So Li Lu began to let go and try more flexible operating methods: part of the funds were kept to continue operating in the long-term holding method he was familiar with; the other part of the funds was focused on short-term operations, and various financial tools (long, short, etc.) were also used. In short, the purpose was to make the use of this part of short-term funds as efficient as possible.
This way of operating without interfering with each other and achieving the best of both worlds seems fantastic.
After a while, Li Lu conducted a thorough review of his operations during this period and found the following problems:
- These short-term operations did make money, and the returns were pretty good;
- However, because he inevitably had to divert part of his time and energy to short-term operations, he missed out on several good projects that he was very optimistic about but did not continue to study and track due to lack of time;
- The profits from the good projects that he could have bought earlier would have been much greater than the profits he could have gotten from short-term trading;
- His concentration and depth of thinking are not as good as before he started short-term trading.
To sum up, he felt that the losses from this short-term trading experience outweighed the gains.
From then on, he completely abandoned short-term operations and focused on the long-term holding method that he recognized.
The same is true of his requirement for his fund investors: if you do not agree with his long-term investment approach, do not invest in him.
I completely agree with what Li Lu feels, but my results are not as good as those of my predecessors - in fact, they are very bad.
I have had the experience of swing trading and buying high and selling low, and I cannot bear to look back on it. Although I have enjoyed the fruits of victory from time to time in the process, when I finally took stock, the total returns were appalling.
So later on, I was completely isolated from short-term operations. I would rather spend the time and energy on reading various materials, reading various reports, and gaining a deeper understanding of the projects that interest me.
