Section 1.1: The Importance of Research

Before diving into investments, always conduct thorough research.

Statistics can be manipulated to tell any story. For instance, there’s a well-known book called How to Lie with Statistics that highlights this very issue. Those who promote volatile assets often excel at cherry-picking data to create a false narrative.

It’s worth noting that crypto experienced a meteoric rise early in the pandemic, leading to numerous "if only" scenarios—if you had invested $X back in Y year, you’d be wealthy now. However, this applies to many successful ventures across different eras.

The key takeaway is that the past cannot be changed. Investors must focus on current performance rather than chasing after missed opportunities. While investing generally yields better outcomes than letting money sit idle, not every hyped asset outperforms the broader market.

To further clarify this point, I randomly selected several investments to compare their performance over various timeframes.

Keep in mind that the market is constantly fluctuating, leading to different results based on when you enter. For instance, crypto tends to correlate closely with the NASDAQ, and its recent performance may surprise those who assume it is always on the rise.

It's crucial to remember that volatility is inherent in certain investments. The dot-com bubble serves as a reminder that many hyped companies never recover. In contrast, index funds and the market, in general, have shown resilience over time.

If you’ve researched an investment thoroughly and believe in its potential while being able to absorb the associated risks, then proceed. Each investor has a unique risk tolerance, and understanding your own is vital.

Section 1.2: Invest Wisely

It may seem obvious, but always invest only what you can afford. Financial advisors frequently urge individuals to save more, which can inadvertently pressure some to invest aggressively or use funds they need for essential expenses.

This pressure can lead to financial strain, negatively impacting daily obligations like bills and credit scores. If overextending your budget results in missed payments or other financial issues, the consequences can be severe.

This principle becomes even more critical when considering riskier assets. Investors should resist the notion that they "must" engage in certain investments. Instead, they should proceed only when the investment aligns with their financial strategy and demonstrates a logical potential for long-term gains. For high-risk investments, only use funds you can afford to lose.

Investors in stable assets, such as blue-chip companies or index funds, can generally expect their investments to remain relatively intact. In contrast, more volatile options—like crypto or leveraged purchases—can lead to significant losses in a short span of time.

Unfortunately, those most susceptible to hype often lack the financial cushion to endure such volatility. Individuals with limited savings should not chase after extraordinary returns promised by others.

The gambler's fallacy also plays a role here; just because an asset has previously soared does not guarantee it will do so again. If you hit the jackpot once, it doesn’t mean you will again.