About regular investment for steady gains and high selling low buying

BTC, ETH, or other altcoins, besides dollar-cost averaging, do you also use a portion of your position for high selling and low buying? Or do you wait until you believe in a booming bull market to sell in batches with your entire position?

Seeing this reader’s comment reminded me of the experience of a very successful senior Chinese investor, Li Lu, that I read about some time ago.

Before introducing Li Lu, let me first respond to this reader’s question.

I view dollar-cost averaging and high selling/low buying as two different strategies: one is medium to long-term, and the other is short-term.

As for my own approach, ever since I entered the crypto ecosystem, I have never had a portion of my investments in dollar-cost averaging and another portion in high selling/low buying.

The vast majority of my operations have been to hold on continuously.

Therefore, my investment strategy is medium to long-term (holding steadily), without any short-term (high selling/low buying).

For the assets I hold, if I find that the team has issues or the project itself has problems, I will not hesitate to sell everything.

If I believe the price is outrageous, I will also sell everything.

There is another situation: if I am uncertain about the project’s development but have not found any serious issues, I will reduce my position a bit.

In the past, when I operated this way, I did not have a strong philosophy supporting it; perhaps this motivation simply came from my past failures in short-term trading.

However, recently, when I saw a statement from Li Lu, I found a resonance with my approach in my thoughts.

We all know Warren Buffett and Charlie Munger. Li Lu can be considered a long-term partner and friend of Mr. Munger, and many of his insights and experiences in investing are deeply influenced by Munger. If you read more news or books about Mr. Munger, you will definitely see Li Lu’s name.

Li Lu’s statement mentioned his experience with short-term trading.

There was a time when Li Lu believed that the long-term holding strategy was too inefficient, and one wave after another of price differences slipped away right under his nose while he remained indifferent.

Missing these opportunities not only wasted time but also greatly reduced the efficiency of capital use.

So, Li Lu began to loosen up and try a more flexible approach: keeping a portion of funds for long-term holding as he was familiar with, while focusing another portion on short-term trading, utilizing various financial tools (going long, going short, etc.), in short, trying to maximize the efficiency of this short-term capital.

This mutually non-influential, win-win approach seemed brilliant.

After a while, Li Lu conducted a thorough review of his operations during this period and discovered several issues:

• These short-term trades did indeed make money, and the returns were decent;

• However, because time and energy inevitably had to be diverted to short-term trading, he missed several good projects that he originally had high hopes for but could not continue to research and track due to lack of time;

• The returns from those good projects he could have bought into earlier far exceeded the profits he made from short-term trading;

• His attention and depth of thought were not as good as before he started short-term trading.

In summary, he felt that this experience with short-term trading was more of a loss than a gain.

From then on, he completely abandoned short-term trading and focused on the long-term holding strategy he believed in.

He also had the same requirement for his fund investors: if they did not agree with his long-term holding investment strategy, they should not invest with him.

I deeply resonate with Li Lu’s feelings, but my results are nowhere near those of my predecessor—actually, they are quite terrible.

My past experiences with swing trading and high selling/low buying are hard to look back on; although I occasionally enjoyed the fruits of victory during the process, the final tally showed a dismal overall return.

So later, I completely distanced myself from short-term trading; I would rather spend that time and energy looking at various materials, reading various reports, and gaining a deeper understanding of the projects I am interested in.