Are You An Investor?

In the world of cryptocurrency I hear the words investor and investing tossed around quite a bit. And without a doubt there are indeed investors investing in coins and tokens throughout the cryptoverse.

I do find, however, that the words are often misconstrued and misused. Or perhaps the real meaning of the words are simply misunderstood. I am not sure which it is. But it is common in the cryptoverse, and even in the stock market.

The thing is, what does it mean to be an investor? It is not simply putting money down on something that you think has future value. You may be putting some skin the game, so to speak, when you trade $10 of fiat for $10 of Bitcoin or some other crypto coin or token. But that does not automatically constitute investing.

Investing is knowing something about the investment, and having done one's due diligence to know many things about it, which is what determines whether the investment is a good one or a bad one.

In other words—if you invest in a Dogecoin, let's say—you should be able to easily explain why Dogecoin is a good and solid investment. You should be able to answer a few basic questions about it. What is it? What does it do? What does it offer? How does it get its value? What determines its potential future value? How does it fit in among its peers? Who are its peers?

There are other questions, and it does depend on the coin or token. But the underlying point is simple. An investor knows these things. It does not mean the investor has the right answers, or that the investment is good. It just means that an investor has taken the time to understand the fundamental rationale behind why they should feel good about putting their hard earned money into it.

Otherwise it is simple gambling. And there is a fundamental difference between gambling and investing. Both things have very different potential outcomes. The gambler will more often than not lose his money. The investor will more often than not keep his money, and even reap rewards from the investment.

Both things have elements of hope and guessing. But, while a gambler relies on luck, an investor relies on the calculation of his educated guess and the hope that his research has pointed him in the right direction.

At the same time, both in the cryptoverse and in the stock market, there is something called speculation. It is not quite the same thing as gambling. But it is more akin to it. Yet at the same time, even speculation and those who speculate, have at least some idea why the gamble on the speculative investment might present a payoff.

I bring all of this up not to diss anyone who might call themselves an investor, or call their ownership of a coin or a token an investment. I bring it up to provide some insight into the difference between gambling and investing, and to offer some advice to those who really do have a genuine interest in being successful with their investments to take a little bit more time with them so that you can achieve the success that you want.

Some people do get rich by accident. But most people do not. Gaining wealth comes from time, patience, due diligence, and knowledge. Even many people who get lucky typically wind up losing it all eventually, because luck is not often something repeatable.

For example, a guy might decide to go to the local convenience store and plunk down $100 for a stack of lottery scratch-off tickets. He gets home and scratches all the tickets and doubles his money. "Wow, that was easy," he says to himself. "What if I go back and buy $200 worth next time?" The truth is he got lucky. And when he goes back to buy the $200 worth, this time he only wins $50 back and he's actually down $150 when all is said and done.

The luck was not repeatable. What he thought was a good investment turned out to be a worthless gamble.

Whenever you are trying to decide if a coin or token, or even a stock, is a good place to potentially enjoy a return from, it is important to enter the position with a very strong sense of how and why it will make money for you. You may still get it wrong. But the odds are more in your favor to get it right if you come at the investment armed with knowledge about it.

At the end of the day which one do you want to be? An investor, or a gambler? If you really want to make money, then the answer should be the former rather than the latter. But you also have to be of the understanding that being the former will take more time, and no matter what you think of the potential of the investment, the former will be more able and willing to walk away if his due diligence signals his money might be better invested somewhere else.

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