Major index futures are plunging.
The Dow Jones is down more than 450 points. All as trade war fears grip the market. This will easily push the Dow below its 200-day moving average, and potentially another 1,400 points lower to the next support line.
Fear of collapse is spilling over to cryptocurrencies. However, now is not the time to panic. Any time the market goes haywire, remember these key rules from Warren Buffett.
Rule No. 1 — Have Cash on Hand
“Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent,” Buffett says.
Rule No. 2 — Don’t Follow the Herd says Buffett
One of the key reasons that many investors under-perform in the market is because they move in and out of assets at the wrong time. Therefore, an investor sees everyone else making money from rising markets. This is when they tend to throw every spare dollar into their investments. Unfortunately, when that same investor sees a group of other investors selling, that investor sells too.
According to Buffett, they are influenced by the herd mentality, which can be extremely damaging to a trading portfolio.
The rationale is simple.
It’s unlikely that such a large group of people can be so wrong.
Rule No. 3 — Be in a Strong Position to Capitalize
Furthermore, with cash on hand, Buffett has the financial flexibility to take advantage of any opportunity that presents itself. As the billionaire often points out, keeping some cash on hand allows you to benefit from corrections without having to sell other investments from your portfolio.
Rule 4 – Stay Committed to Your Idea to Benefit Your Portfolio
Moreover, Buffett states that you should remember why you invested in cryptocurrencies in the first place. Additionally, remember that others are just starting to enter the market. Banks such as Goldman Sachs and Citigroup are in the process of offering cryptocurrency products.
The NASDAQ is about to hand institutional investors analytical tools for trading hundreds of crypto assets that will benefit any portfolio. Furthermore, the Intercontinental Exchange (ICE) is launching a new platform, called Bakkt. Its intention is to create an “open and regulated, global ecosystem for digital assets.”
Additionally, Allianz Chief Economic Advisor, Mohamed El-Erian is bullish on cryptocurrency.
“Crypto isn’t dead, and, certainly, the underlying technology is not dead. We’re going to see more widespread adoption, by both the private and public sector, of the blockchain technology and related technologies,” he says, as quoted by Oracle Times.
Tim Draper is bullish, too.
He predicts the market cap of cryptocurrencies will increase 400 times over the next 15 years to $80 trillion. “The internet started in the same way, it came in big waves and then it kind of came crashing down, and then the next wave comes concentrated but much bigger, and I suspect the same thing will go on here,” he says.
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