One of the distinctive characteristics of Warren Buffett and many other long-term investment legends, is their ability to build a position in an asset class, which doesn’t pay a dividend, nor produces cash flow. It doesn’t earn anything. In fact, it will surely cost them money to hold it.

Rick Rule, who I have the utmost respect for, was bold enough to pick this asset class as his top idea in 2012 – he doesn’t know it, but I researched his call right after he had made it, and it saved me 7-figures in 2012 and 2013 alone.

It took me several years to realize just how valuable this concept is, but I’ll never lose sight of it again.

Millions of traders, though, simply will not study it or implement it. That decision will continue to hurt them badly.

I just spoke to a Bitcoin Millionaire in December 2017, who is now worth less than $100,000.

He has allowed more than $2.1M to evaporate in a matter of 4 months.

His strategy consisted of taking profits in BTC and spreading it across 18 “promising ICO’s,” as he called them when I met him in December.

Losing that sum of money in such a short period of time causes much more severe damage than the financial loss – it reduces your confidence to rubble.

One of the earliest Special Reports I published on the newsletter was called Avoiding Catastrophic Loss, while another was titled Activity Disease.

I sent my friend both of these, but he had tunnel vision in December, and it cost him close to $20,000 a day in 2018.

Avoiding Catastrophic Loss

When you begin to build your portfolio, the 1^st question to ask is how much, percentage-wise, do you risk with any asset class.

In my 2018 Portfolio Overview, that’s the main message – intelligent asset allocation is one of the primary ways to make sure you aren’t crushed to pieces by greed, fear, and the unpredictable manner of markets.

A blow, such as the one my friend took, puts you out of the game, mentally.

That’s the worst thing that can hamper you and take you back – staying in the game is paramount, since, as you can see, Bitcoin knows how to handle punches to the face and get up like nothing happened.

Be disciplined, and make sure you risk only 5%-10% on asset classes, which are highly speculative.

Then, a 70% drop would equate to only 7% of your portfolio.

Activity Disease

Warren Buffett now has $70B invested into the asset class I mentioned above.He knows he is losing 2%-3% a year on it, but he is willing to take the hit.

Cash is what Rick Rule advised on the podium, when everyone else was buying gold at $1,900 and silver at $49. Cash is what allowed Buffett to hold all the cards in 2008, when even the U.S. government asked him to loan money to financial institutions.

He butchered them on terms – $15 per second from preferred bank shares, for example.

Cash is an asset class.

Cash is power because while inflation erodes it at 2%-3% a year, investors lose much less than they would by betting on Facebook or Bitcoin in a concentrated fashion.

Investors have an Activity Disease, as a group. They can’t stand seeing cash parked, not yielding them a profit, but for liquidity purposes, it is a top priority.

Holding 15%-25% in cash at all times guarantees, absolutely and without a doubt, that you’ll be able to capitalize on buying-opportunities without having to sell other positions that you don’t really want to exit.

It is true that the USD has lost 97% of its purchasing power since 1913, which is why saving cash instead of investing is a complete mistake.

Because of that, I normally keep 90 days of spending cash in my debit account, and that’s it.

At all times, the majority of my money is working, except for roughly 20% of my investible funds, which are lurking like a tiger, waiting for juicy prey, parked in cash.

Bitcoin has flat-lined. Blockchain companies are incapable of raising money. This is what a bottom feels like. It could take a few months, but blockchain tech, along with the best cryptocurrencies, will head higher again.

My friend will not be in the right state of mind to make smart decisions and take advantage, though. He is down and out, but you can be as sharp as Warren Buffett is, now 87, and still a world-class decision maker.

Learn the art of sitting on cash, like the Anaconda waits all day at the riverbank, disregarding many opportunities for a nice little meal because it only wants the mother lode.