Mitchell Dong’s Advice for new investors during the Market Downturn
About the Interviewee:
Mitchell is an entrepreneur and currently serves as the CEO of Pythagoras Investment Management, the oldest and largest cryptocurrency trading fund in the world. Mitchell operates both a family office and invests in crypto quant funds.
We had the pleasure to interview Mitchell for one of LearnerYou’s events on the subject of personal finance. He shared with us three tips on staying afloat during the market downturn.
Q: Hi, Mitchell. The past few months haven’t the easiest for investors. What is your advice for new investors who are just starting?
Mitchell: My first advice is the ancient Greek maxim: “Know Yourself.” Many of us think we know ourselves, but we actually don’t. The current economic downturn reveals a lot about our personality that we normally don’t see under less stressful times. Do you panic when the market crashes? Or are you able to stay calm despite of the volatility? You have to be honest with yourself, because the answer to this question will determine what types of investment you should make. Bonds and fixed income instruments are historically low volatility investments. Stocks and derivatives are relatively high-risk investments. Crypto’s risk is even higher. This is something many people don’t consider before they go into crypto, because they hear that their friends made a lot of money in crypto, they haven’t considered that the chance of losing money is equally possible. The question you should ask yourself is: would I be ok emotionally and financially if I lose all the money that I put into crypto? Because this is a real risk, and if your answer is no, you should probably reconsider this decision, or at least reconsider the amount of money you put into the investment.
Q: That makes sense. My next question is: how can people keep learning about investing?
Mitchell: There is an old Confucius saying:” By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest.” In reality, I think few people are good at the first method. And among the other two, I think learning by experience is often the most effective way I have learned. I often joke that I have a PhD in making mistakes. This is not terrible if you are able to learn valuable lessons. You have to learn by doing and bouncing back.
Everyone should buy a tiny bit of bitcoin or other crypto, not to make money, but rather to learn. When you put your money down, you will check the price regularly and ask why the price is going up or down. You then read the news and learn. This process is a good way to learn about crypto. Then you can decide whether or not crypto is for you and how it might or might not fit into your investment portfolio.
Q: You are a veteran in the crypto space. What do you think is the biggest mis-conception about crypto investing that you’ve seen?
Mitchell: If you want to make steady streams of income, buying crypto currency is not the way to go. The reason why our crypto market neutral fund is able to make positive returns over our 8 year history is because we do arbitrage trading, e.g. buy low and sell high every second that the software detects an opportunity. This strategy requires significant computer engineering resources and is not something an average person can do. I encourage those who are new to crypto to proceed slowly and with lots of caution. If your goal is to generate steady incomes, there are other forms of investment that would serve your goal better.
