It is true that sometimes it is better to invest into bitcoin a little bit less aggressively rather than making the mistake of not having enough money to cover your various expenses, and surely sometimes there are surprise expenses that might have had been difficult to detect in advance, yet if we are failing/refusing to make adequate preparations, we likely end up contributing to our own emergencies, since we likely need to have some cushion in our budget, especially if we are trying to be more aggressive in our bitcoin investing, we are likely ONLY in a solid place to be aggressive with our bitcoin in terms of our having already created some budget cushion that not only accounts for emergencies but also accounts for mistakes that we might make.. .and to test our own boundaries and even to figure out how far we might be able to push ourselves without over doing it, we likely need to practice and pay attention and even attempt to be honest with ourselves in regards to some of the risks that we might sometimes be taking when we push aggressively, which might well be signs that we are actually overdoing it, even if the situation does not end up imploding upon us.
Right, Before investing in Bitcoin, you should take the time to understand and plan your investment by keeping at least a one-year breakup fund.
That is crazy to 1) potentially wait to invest into bitcoin based on the creation of a large back up funds, 2) there is no reason to have back up funds in advance since you can build your bitcoin investment and back up funds at the same time (of course, many folks naturally will already have some back up funds in their normal practices), 3) generally you can be disadvantaged if you keep too much value in cash since the more cash that you hold, the more it might be devaluing faster than you can build it up.. 4) Holding cash is a bad way to build wealth or even to overly prepare with your back up funds may well be self-defeating never causing you to invest in bitcoin and/or contributing to your bitcoin investment rather than being overallocated to cash, 5) many of us will recommend 3 months of your expenses in cash - like emergency funds, and sure you might have some extra cash of 1-2 months beyond that for various reasons that you are holding the cash, but if you are starting to get into larger amounts of value, you might not need to have the value so liquid, and you might consider ways to earn returns on your larger quantities of funds.. These are judgement calls that may well differ from area to area and differing kinds of currencies lose their value less rapidly than others.
It can take at least four to five years for an investment to be successful.
With bitcoin, we use a investment timeline of 4-10 years or more, just for a framework, and yeah it can take getting through a whole cycle to start to feel more comfortable. If you are referring to success as being in profits, then I agree with you that it can take a while for an investment to be "in profits," and being in profits is not guaranteed - even though surely none of us invest into bitcoin or anything else with an expectation that the investment will continue to lose value throughout the years.
Over time, the desires and aspirations of every person and their position keep changing and during this change, several decisions have to be made. not all decisions of every person are always successful, but this is not the case. Many things can be lost from life through some wrong decisions. not only an emergency fund, but also a backup fund should be kept because only wrong people exist.
I largely agree with these points except you are mixing up terms, and emergency funds is a kind of back up funds, and so with back up funds you have emergency funds, reserves and float. Emergency funds are likely the last funds that you have left before you have to dip into your BTC investment. Reserve funds have more purposes besides emergencies. Float is an amount of money that might be held based on not being sure about costs for certain expenses. Once the expenses are determined, then if the float did not get used then it would become available to go into discretionary funds, which means that it could be used for consumption or for investment.
Since Bitcoin is expensive and risky, it is possible to reduce the risk by planning an investment using the DCA method.
I don't know how you consider bitcoin to be expensive. Sure bitcoin costs more than it used to cost, yet it seems quite likely that in the future (such as 4-10 years or longer), today's prices are going to seem cheap as compared with where the BTC prices will be at in that future date.
DCA does not really reduce risk, but it allows a person to adjust the level of his investment to his discretionary income and/or other person factors including finances, beliefs and psychology.
Just as money is needed to invest, a person needs willpower. It is not possible to invest in the DCA method only if you have money or desire.
Of course, action is necessary rather than just theory, and sure if the motive to act is framed in terms of belief and positive attitude, then that is fine, yet of course, there may well need to be various preparations and investigations that are done too, sometimes referred to as "due diligence," yet many times, many of us, recommend getting started investing in bitcoin as soon as possible, and the details of the willpower and/or positive feelings (vibes) regarding bitcoin will likely work themselves out, yet surely if someone is more hesitant and/skeptical about bitcoin, then likely there would be a need to invest less while getting comfortable.
Anyone can invest in the DCA method, such as the upper class, lower class, and middle class. But for the lower and middle class, collecting Bitcoin using the DCA method is an easy way because you do not have to make big investment decisions, it becomes much easier to invest a certain amount of money every week or month, which reduces mental stress a lot. If a person follows the DCA and collects Bitcoin patiently four to five years, he can build strong financial security circle.
DCA tends to have a lot of flexibility, so you are correct it can be used by a lot of people who might not want to or be able to invest in a lump sum, so DCA allows the spreading of investments over time, including that some guys can choose to be as aggressive in their bitcoin investment as they are able to, and they use DCA since it would allow them to structure how much they invest and maybe even the maximum of their discretionary income as soon as they figure out that is it is available... Even Lump sum investment might end up turning into a form of DCA, since maybe a person has extra funds come available (or be available at the beginning of an investment), and so every once in a while more funds come available, and sure they might seem like lump sum, but employment of such practices starts to resemble DCA when it keeps being repeated.
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"Time" is very important for the effect of compounding. The price of Bitcoin can suddenly fall and then rise. By investing systematically, knowing the position of the financial market with certainty, you will have the ability to deal with market risks, even if it becomes difficult and challenging at times. When investing, it is important to consider personal financial situation, trends and long-term investment, but these are not evidence and evidence, and informed decisions are the foundation of a stable investment strategy.
Your ideas are all over the place, like a garbled mess.. or maybe like AI wrote it... .. but anyhow, if we just look at the idea of compounding, yes it can take a while for compounding to play out, and surely there are some guys who get into bitcoin and the the price just goes straight up.. .. but then maybe after a while the BTC price corrects back down, yet they might still have overall compounding in their investment if the BTC price did not drop below their original costs and the price may even have a bottom that ends up being several times higher than the person's initial costs. It can be tempting for a person to want to sell too many bitcoin too soon based on a lot of short-term value appreciation.. but yeah, frequently there can be up and down within one cycle and then even going into the next cycle and up and down within the next cycle and so if a person largely continues to invest, he may have a lot of his earlier purchased coins with way lower average costs as compared with his older purchased coins, so then he may also consider that his earlier purchased coins had compounded in value several times as a product of time as compared with the older purchased coins that did not yet experience very much passage of time and/or opportunities to compound in value.
Another way that compounding value can play out is even after a bitcoin accumulator might start to feel that he accumulated enough or more than enough bitcoin. He may well start to sell small portions of his bitcoin, maybe at first starting with price-based sales that might be 2-10% sales based on every time that the BTC price doubles, so then if he is shaving off 2-10%, he is still left with 90-98% of his stash at the end of the doubling, so then it could be considered that if the price keeps going up, then the 90-98% of his stash is compounding upon itself. so he continues to earn more value on the part that is carried over. For example, if a guy were to sell 50% of his stash every time the price doubled, then he would keep getting out the full value of his investment each time that the BTC price doubled, but he would not be experiencing any compounding, since there is no excessive BTC (beyond the 50%) that are carried over after the BTC had doubled. So these guys who are shaving off 50% of their stash every doubling, they are not getting the benefits of compounding.
I had created a chart about compounding to show that my own BTC stash (at least the part that I had since $250) had doubled right around 8 times since 2015, which would have been crossed when the BTC price crossed over $64k, which created around 256x of compounding effects at the time that the BTC price crossed over $64k, and then by the time the BTC price crosses over $128k, then the compounding effects of those coins will be 512x.. so the effects are quite exponential and outrageous.
Which method you will invest in is entirely up to you. Whether you will adopt the lump sum investment method or buy DIP or you will adopt the DCA method is entirely up to you. What is meant by Bitcoin lump sum is an investment method, it is not something of Bitcoin. You can buy Bitcoin through lump sum method.
DCA is an investment method, it is a very simple and very good investment method among all investment methods. You cannot reduce your risk by investing through the DCA method. By adopting the DCA method, you can buy at any price at any time. Continue to buy continuously by adopting the DCA method and hold Bitcoin for a long time
Yes, you have complete freedom to decide your investment strategy. But is it the right move for a new investor to adopt DIP and lump sum investment strategy? I doubt that a new investor will be able to survive in the long run by adopting DIP strategy and lump sum investment strategy.
I would never advise a new investor to invest in DIP strategy, even in lump sum investment strategy. The main reason for this is the possibility of not being able to keep calm during a market decline due to delay in investment. You have to wait to enter the market at a certain price which only wastes your time and delays in entering the investment. Even for a new investor, it is normal to panic during market volatility, especially when he has invested a lot of money.
Therefore, DCA strategy is the best for a new investor. To start investing in DCA strategy, you don't need deep knowledge, you don't have to wait for a specific period of time, you don't need a lot of money, the possibility of panicking due to small investments is very low and the DCA strategy reduces market volatility to some extent. Even as your portfolio grows larger, you will become an experienced investor where there is no possibility of panicking due to market volatility, because you will already be familiar with the market.
Anyone who has lump sum amounts of funds has the option to choose from 1) invest right away, 2) DCA and/or 3) buy on dips. A person with lump sum should at least consider all three of the strategies in regards to his lump sum amount, and surely he has to figure out his own balance in terms of how to treat such funds.
Many times people (including newbies) do not have have lump sum amounts available, so the most practical way to start it DCA... yet it may well not make sense to defer investment with DCA if the lump sum amount is already available... and so they should at least consider how or if to deploy the other two strategies. and they are ultimately the one responsible for their own choice whether they choose well or if they screw it up. there is probably no exact one best correct choice, even though it is likely bets to be tailored in accordance with the
person's personal factors.. which they have to figure out, in case they don't already know them at the time of starting out in their investing in bitcoin.