Why do we struggle with long term investing, especially when it comes to cryptocurrency?
Investing for the long term is something that people struggle with, especially when it comes to the cryptocurrency, but why is this?
The reality is investing really shouldn't be that difficult, but it is often made out to be a lot harder than it need be; but why? Simply put it is because of the way we are as human beings. Firstly we have an innate tendency to rely on intuition.
As humans we naturally think, but we also lean heavily on intuition and instinct.
When we act intuitively or instinctively we are reacting without even questioning our decision; we simply know what we like or what we want. But when it comes to financial decisions this behaviour really doesn't help us. When making these types of decisions you need to be in a mode of being able to think and think rationally.
Also, when it comes to investing we need to have a long term time horizon in mind. Unfortunately many people ignore what might be in the distant future and place too much emphasis on the here and now.
In the field of behavioural finance this is known as “present bias." This is the tendency to rather settle for a smaller present reward than to wait for a larger future reward, in a trade-off situation. This describes the trend of giving too much meaning to immediate rewards, while putting less worth in long-term consequences.