I have been here before in 2021 during the last equities and cryptos markets ATHs. Prices and unrealised profits keep going up and you start thinking this will go on for a long time. FOMO kicks in and you throw more cash into the markets to catch the melt up. Even when the markets start to dip, you throw even more cash into the markets thinking it will just be bought up and markets will resume their march upwards. Until the crash happened in 2022 and you are left wondering why you have no more cash to invest. And when unrealised profits become unrealised and permanent losses, you retreat into yourself and stop investing. Right when it’s actually a good time to invest especially as the markets languish at their lows.
I can still remember vividly what it felt like to watch your positions crash and go through the pain of waiting for recovery. Without enough cashflow and courage to invest more during the market lows. 3 long years and here I am again in the next equities and cryptos markets ATHs. Wondering just how high they can go in this up cycle. And yes, you better believe it’s a cycle. Because it’s just a matter of time before we hit the down cycle. How well you ride the cycles depends on your circumstances and state of mind when it hits.
During the 2020 crash, I was well prepared financially and mentally. I just had a kid, but housing loan and living expenses were much lower, and I didn’t lose my stable job that I had been in for a few years. My asset allocation then was overweight cash and underweight equities heavily. So I had quite a bit of cash to pour into the markets and because the crash & subsequent recovery was so quick. Averaging down quickly worked in my favour. No permanent losses and not being in much pain and panic for a short period of time so it didn’t affect my decision-making much. Having a newborn baby was a big adjustment but it was full-time WFH then so I could still work out an investment strategy.
During the 2022 crash, I was not well prepared financially and mentally. I just had another kid, housing loan and living expenses were spiking and I was in the midst of changing my job. My asset allocation then was overweight equities & cryptos and underweight cash heavily after overextending myself to chase the ATHs without taking profits. I had also drained my cash buying a bigger property and didn’t have much cash to average down. This time around, the crash was more drawn out and the subsequent recovery took even longer. Averaging down quickly worked against me as I ran out of cash and couldn’t continue to invest during the market lows. Permanent losses and being in a lot more pain and panic for a longer period of time affected my decision-making significantly. Not to mention dealing with a newborn baby and toddler at the same time while juggling WFO and WFH made it more difficult for me to work out an investment strategy.
In hindsight, while you can see the market cycles, how well you enter and exit each one depends on your level of preparation financially and mentally. In 2020, I was waiting patiently to deploy my cash and take big equities positions without worrying about where the markets were headed next. I was already happy with my significant unrealised profits and never had to deal with much unrealised losses with no permanent losses. In 2022, I was desperate to deploy my cash thinking markets were going back up and was trying to hang on to my unrealised profits that were quickly disappearing. Hanging on to my significant unrealised losses and taking permanent losses felt like deadweight that kept me from thinking clearly.
For this 2025 bull market ATHs up cycle, I’m applying the lessons I have learnt to prepare myself financially and mentally. My housing loan and living expenses have plateaued at a high level and should start to come down slowly over time as I make structural changes. There shouldn’t be any sudden spike for now and I have kept a cash buffer in case I lose my job, which is more stable now that I have been in it for a few years. While I’m still overweight on equities and cryptos, I’m not as underweight on cash as before and I have taken measures to ensure a slower averaging down approach. Still calibrating this as it was too slow during the Apr 2025 market crash. I have taken some profits off the table for reallocation purpose. Still tempted to chase the market highs in case it does go up for a longer period of time so I have to continue taking some profits as a hedge. But I have built in cash restraints to avoid overextending myself. So I’m slowly getting there in terms of the level of preparation. And I do wonder what’s going to happen next.