What to do when you get smashed

My last blog post was more than a month ago and I honestly couldn’t think of a more polite way to word the title of my latest blog post. The biggest news is that my wife is pregnant with another boy and gynae visits and expenses started to pile up. My wife and I got busier with work, our boy started falling sick more frequently and is in the process of transitioning from half-day to full-day preschool. Which also means schools fees went up. We started going back into the office even more so transport and time costs increased too.

Right when I’m trying to manage all these family, personal and professional matters, the stock and crypto markets tanked. Much worse and looking like it will be more prolonged than what I have gone through before so my averaging down investment strategy didn’t work well at all. The tech stock market took the brunt of it and the fall was brutal across the board so all of my positions got battered. The crypto market was just as bad and the same thing happened. In fact, a certain crypto position got wiped out and will most probably never recover. Just because everyone is talking about it online, I’m going to name it – LUNA.

I didn’t have a big LUNA crypto position but what I saw in those few days this week made me re-evaluate my entire crypto investment strategy. That’s how much fear it put in me. Not because of the losses I made on my LUNA crypto position but because of how little I could do and how slow i was to respond. I was shell-shocked, reverted to my averaging down investment strategy because that’s what I know before realising the entire thing is about to blow up. By then, I was too late to react and got stuck with the losses. It was incredibly unsettling and really made me think about what I was doing.

It’s not the same with tech stock market. At least I know and understand the reason for why they are going down. I will probably take bigger losses from my positions there despite averaging down but I’m prepared for it because I knew what I was getting into. Besides, there’s a business underlying the stock to analyse and I can still see whether the conditions are deteriorating or improving. Meaning I have time to think, wait, decide to enter or exit. With crypto, your decision making window is much smaller and it could mean the difference between wiping out the position or a subsequent recovery that could multiple your gains even more. The stakes are high either way but the investment risk management framework is totally different between the tech stock and crypto markets.

While my overall portfolio risk management framework still worked in that losses from the tanking tech stocks and crypto positions did not cause an unrecoverable hit to my investments, I have to assess what I did wrong and learn from it. This is going to be even tougher now as I deal with ever increasing family, person and professional matters especially with another boy on the way. I better get my act together now while my wife and I are still in our 30s. As we go into our 40s, I’m hoping for an improved approach to this as I gain more investing experience. Now I get why they say bull and bear market cycles shape the investor. Surviving and thriving each cycle means you live to fight another day.