Document Investment Thesis

A discussion about how documenting investment thesis and risks before investing helps maintain perspective during market volatility, illustrated through the Terra/LUNA crash experience.

Investment Documentation Strategy

• Write down investment thesis and potential risks before investing
• Document specific scenarios that could go wrong
• Helps maintain perspective when investments go south
• Prevents emotional decision-making during market crashes
• Allows for rational evaluation of investment outcomes

Terra/LUNA Case Study

• Initial Investment Approach:

  • Put in $250K total ($25K initial + $200K at discount)
  • Investment grew to ~$750K at peak
  • Eventually lost entire investment when LUNA crashed

• Risk Documentation Benefits:

  • Had documented the exact death spiral scenario that occurred
  • Helped maintain composure during crash
  • Prevented emotional trauma because risks were understood upfront
  • Enabled rational processing of losses

Risk Management Rules

• Never put more than 15% in any one project
• Account for black swan risks in crypto projects
• Maintain diversification across investments
• Accept that documented risks may materialize
• Compare actual outcomes to documented scenarios

Mental Framework for Losses

• View losses as expected possibilities rather than surprises
• Compare to poker analogies - sometimes you lose even with good odds
• Focus on making new money rather than dwelling on losses
• Use market downturns as motivation to work harder
• Don't constantly calculate net worth during major drawdowns

Recovery Strategy

• Focus on earning rather than trading during downturns
• Accept losses as part of investing
• Use losses as motivation to create new opportunities
• Maintain perspective by remembering documented risks
• Keep working on revenue-generating activities