Investing is Crazy

Investing in the stock market is crazy. The above photo is a screenshot from my Robinhood brokerage account. It covers the past day, and as you can see, it’s been a wild ride with really low lows and higher highs. As is evident from this chart, investing requires nerve of titanium.

With that, you can start the week with $10,000 and end it with less than $8,000. Many new investors really did lose 20% of their investments recently. By the end of the week last week, they sold everything at a loss or some stocks at a bare profit. It’s likely many of them won’t invest again. All they have done is fed the sharks. If you invest in the stock market, be ready to lose some money and make a ton more money. It has to happen in that order.

Number Go Down (With apologies to Zeke Faux’s book Number Go Up — because crashes are where the real opportunities hide.)

Bitcoin traded at over $120,000 a coin in July of this year, as shown in the below screenshot. It’s now down to $114,000 a coin. Every investor with an ounce of experience is buying now. Trend investors — people investing just because they heard others make money doing it — invested when they saw Bitcoin reach its peak. Now, they’re sore and complaining about “losing money on Bitcoin” because they sold when it started to slip. They were expecting an instant, extraordinary profit and for Bitcoin to not ever slip in price. It doesn’t work that way.

Right now, Bitcoin is down from its peak, and this is a good time to buy. As recently as September of 2024, Bitcoin traded at less than $54,000 coin. Today, it’s more than double that price. Before Bitcoin made it to $54,000 last year, it slipped in price. Savvy investors bought it up. Trend investors sold it a loss when the price dipped.

Prices in the stock market rise and fall. If you’re wondering if you’ll lose money in the stock market, yes. You will. You will also make an abundance of money buying with discipline. The average business owner considers a 5 — 20% net profit a good profit. So, if you made a 40% net profit, you would be doing better than the average business. You’d be doing better than Walmart which made a net profit of less than 3% in 2024.

Here is an example of how that could realistically look. You start with $500. You buy five stocks, and they perform the following way:

Stock 1: -$100

Stock 2: -$100

Stock 3: -$100

Stock 4: +$600

Stock 5: +$400

Total Return from Trade: $700

Net Profit: After subtracting the initial $500 investment, the net profit is $200 (40% return). In this example, the first three trades are losers, but the last two are winners. The winners not only covered your losses. They earned you a profit. The trend investor who panicked would have taken the loss without having a chance to see the profit. The savvy invested pocketed a profit.

It’s important to note, the average Wall Street broker is returning only about 10%. 40% is doable but uncommon. However, the best traders are seeing crazy returns over 1000%. It’s not extremely difficult to become one of the best.

With that, invest with a strategy. Don’t risk what you can’t afford to lose. When prices drop, remember: this is where the wealthy are made. Buy low, avoid chasing peaks, and let volatility work for you.

This article was written by Jermaine Reed, MFA, the Editor-in-Chief of The Reeders Block. Join the email list to get notifications on new blog posts and books. This article is 100% human-written. And remember, if you see an error, that’s what makes us human.