After 20 years in finance, here's my advice to all the young bankers investing in crypto

You're an analyst or associate in an investment bank, so have you bought crypto assets yet?

Maybe you should've: there are a lot of young traders and investors out there.

However, as a banking MD with two decades' experience, I'd like to repeat to you what Warren Buffett has to say:

Rule number 1: Don't lose money.

Rule number 2: Don't forget rule number 1.

Seriously every decade every generation has it bubbles, has its excitement. When I was 22 in 1999 it was tech stocks that were booming. Stuff was going up and down 5-10% a day, and you felt you needed to get involved. I remember opening a Charles Schwab trading account age 20 in University to start trading AOL and Yahoo shares. It went on like that for a while, and then it ended.

A few years later, I saw the same cycle in 2006 and 2007. Capitalism creates new ideas, those new ideas create excitement and a ‘gold rush’. That leads to prices up moving up. That leads to capital flowing in.

It's a timeless cycle.

It's not the only one though. There's another cycle on Wall Street and that is fear and greed. Greed and fear. Rinse and repeat.

The beauty of being in finance for almost two decades is that you start seeing human nature everywhere. You start seeing the way people think, the way they behave. Yes, the technologies, the acronyms, the companies change, but human behavior stays the same and that is the beauty of markets.

My advice to you before investing or trading - either in crypto or anything else, is therefore to study human nature. Study human behavior. Study yourself: what's making you invest in crypto? What's got you so excited? Is it FOMO - fear of missing it out?

If it is, watch yourself. The beautiful thing I've learnt about FOMO is that markets always go up and down you are never going to miss out. If you find something really attractive now, follow it, understand it, track it, trust me you'll get a good time to buy it soon.

The times when I've seen people really mess themselves up financially is when they've moved based on FOMO and made decisions based on envy and what they see other people doing. Forget about how much money other people are making. STOP think rationally. THINK honestly about what the right thing to do is right now. Ignore the herd.

If - after doing the work, using your best judgment and thinking rationally -  you still decide that you want to invest in crypto or anything else, then go for it.

A simple trick for slowing down your reptile, fear and greed-based brain and switching on your rational Buffett brain is to just write down your decisions. For example, I am buying Bitcoin now because….I expect this to happen, for this reason. I will get out if this happens, I will add if something else happens. A simple trading plan.

This is what the best traders and investors do. Outline their investment thesis and then test their predictions versus what actually happened. This is my advice to you.

The author is one of a group of senior bankers who blog at the site What I Learned on Wall Street (WilowWallStreet.com).

Have a confidential story, tip, or comment you’d like to share? Contact: sbutcher@efinancialcareers.com

Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libelous (in which case it won’t.)