Benjamin Graham Strikes Again
Dec 06, 2024The crypto bull market and timeless investment wisdom
We're in the middle of a crypto bull market that could be just getting started. Even the OGs are strategizing on the best way to profit so it's a good time to lean on the wisdom of TradFi legends. Investing wisdom is asset agnostic even though crypto requires a new breed of wherewithal. That's why I dial up lessons from Benjamin Graham, Warren Buffett, Peter Lynch, Jesse Livermore and so on.
Benjamin Graham's timeless wisdom
Benjamin Graham, the godfather of value investing and Warren Buffett's mentor, famously said, "The essence of investment management is the management of risk NOT the management of returns."
Application to crypto markets
Boy is that an understatement when it comes to crypto, but it's also a phrase that embodies what Crypto Bullseye Zone™ is all about (the place to learn mistake-free crypto). I've posted that quote many times over the past year and I just can't get enough of it. I got super excited when I found out the 75th anniversary special edition of Benjamin Graham's, The Intelligent Investor, was just published.
The intelligent investor legacy
Warren Buffett says this is the best investing book ever written. I stumbled on a Wealth Track podcast with Jason Zweig, author of the Wall Street Journal Intelligent Investor Column. Jason is the closest you'll get to an interview with Benjamin Graham (except Warren Buffett of course)
Check out the podcast here:
Key insights for investors
Key Takeaway
Benjamin Graham's definition of intelligent investor is someone with good old fashioned common sense applied to investing. It does NOT mean the "Smart Money" people. Anyone can be an Intelligent Investor.
Breaking the cycle
The same investor behavior in crypto like FUD, FOMO, aping in and out and getting rekt is the same stuff that happens outside of crypto. This is the behavior of 90% of retail investors since the beginning of time. Just do the opposite and you'll be in the winning 10%. Most people can't break the cycle.
Graham's principles in crypto
The beauty of Graham's principles is that they transcend markets and time periods. Whether you're trading stocks in the 1930s or cryptocurrencies in 2024, the fundamental principles of risk management and emotional control remain the same.
Key lessons for today's market
- Focus on long-term intrinsic value rather than market speculation (think Bitcoin)
- Look for projects with strong fundamentals and real utility
- Don't chase pumps or fall for hype without substance
- Maintain a margin of safety
- Never invest more than you can afford to lose
- Keep some dry powder for opportunities during market downturns
Remember, successful investing isn't about finding the next 100x gem or timing the market perfectly. It's about consistent application of sound principles, managing risk effectively, and staying rational when others are driven by emotion.
Creating your investment policy
Create a crypto investment policy document to remove emotional trading and prevent impulsive decisions. While most retail crypto traders skip this crucial step, investment advisors, professional funds and institutions require this type of documentation like a client playbook.
A few essential policy elements
- Portfolio Strategy and Risk Tolerance
- Bitcoin/Ethereum allocation vs altcoin exposure
- Maximum allocation to DeFi, GameFi, or other crypto sectors
- Risk Management Framework
- Position sizing rules (e.g., no single altcoin > 5% of portfolio)
- Stop-loss levels and handling of extreme volatility
- Security Protocol
- Cold storage vs hot wallet allocation rules
- Multi-signature requirements for large transactions
- Market Cycle Strategy
- DCA plans during bear markets
- Profit-taking targets during bull runs
As we navigate this crypto bull market, let's keep Graham's wisdom close: focus on protecting your downside, and the upside will take care of itself.
