Be ready to lose all of your invested money

This is the  headline news someone forwarded: Bitcoin buyers should be prepared to lose all their money, top UK regulator warns,  sounding a pretty dire and scary warning, isn’t! Looks like this is very timing warning as bitcoin and virtually all the altcoins have lost 30-50% of their values as I'm writing. As you may already know, I’m a bigger believer for bitcoin and its underlying technology, blockchain (BC) and I have no doubt in my mind it is the future of our daily life! But regardless how much I believe it, as it is such a new innovation and no one has a crystal ball for future, I will never say there is no risk for it. I have actually warned several times here that the recent moonshot of bitcoin was too frothy short term and would be subject to sharp correction any time.  More strongly, I will also acknowledge the possibility that it may be totally a failed innovation and bitcoin may be wiped out to zero. Enough for the downside risk warning for bitcoin/BC?

 

Now getting back to this guy’s warning, it sounds like a specific warning for bitcoin but if you think about it more deeply, is there anything new and specific? You basically can change bitcoin with anything and you can issue such a warning for any types of investment/trading, correct? Tell me which investment has no such a risk that you may lose all your money, especially when you chase highs for something that is already very expensive? And this is especially true for something very new and innovative but not many people could understand yet at its early stage. I happened to see the following information a friend forwarded to me, summarizing very well the risk and reward for great companies during their life time.  I think bitcoin may very likely go through a similar rollercoaster type of path. Yes, it may drop 80% as it has already experienced several times. Who said it cannot happen again but anything surprising? Not a bit to me!!  

 

But the lessons of history are not all doom and gloom. For long-term investors, history provides a much more hopeful and optimistic lesson: Time covers a multitude of investment sins, like the "sin" of buying richly valued stocks just before a major market top.

For example, even if you had purchased a stock like Wal-Mart or McDonald's exactly one day before the crash of 1987, your investment would have soared more than 400% over the ensuing 10 years.

Or if you had purchased Amazon or Apple at the very peak of the dot-com mania of 2000, you still would have fared quite nicely over the next 10 years. Despite suffering immediate and enormous mark-to-market losses of more than 80% on both stocks, your investment in Amazon would have doubled over the next 10 years, while your investment in Apple would have soared more than 800%!

If you still held those positions today, you'd be sitting on a 1,500% gain on your Amazon stock and a gain of more than 3,700% on your Apple stock. And remember, those are the results you would have achieved from investing at these stocks at the very top of the dot-com mania.