Time in the Autopilot and Returns
Chief Development Officer
The Autopilot is for medium to long-term portfolios, which means 2.5 to 5 years. See the chart for an at-a-glance understanding of how time increases your chances for positive returns.
TL;DR: The Crypto Autopilot is for medium to long-term portfolios, which means 2.5 to 5 years. This article helps clarify the role that time plays. We might have not been clear enough so we wanted to rectify that.
See the chart for an at-a-glance understanding of how time increases your chances for positive returns. Those who held their investment for 300 days would on average have made a return of +161.95% and even when buying and exiting their investments at the very worst points in time they would still have enjoyed a return of +6.21%. Those who stayed for 30 days would on average have made a return of 16.31%, but if they bought and exited at the very worst point they would have seen negative returns of -58.48%. Time increases your chances of better average returns & reduces the likelihood of seeing negative ones.
The writing of this article was prompted by 3 recurring events which we noticed in our interactions with you:
1 - Questions we get through our support channels: you ask us “how long should I stay in the Autopilot”. We don’t advise on how long you should do anything, but we can tell you how we built it and what it’s intended for.
2- Withdrawals: we see some of you withdraw after 2 days, and amongst the ones whom we saw withdraw and never come back to the Autopilot [as of 25 March 2021], the biggest contingent ( 32% ) withdrew after 18.5 days, 45% withdrew under 37 days, and 72% under 93 days. 82.2% of those before 18 days do so with a loss. The good news is that an overwhelming majority of you do seem to get it and just stick with us 😃 .
3- Complaints: we get a couple of “your portfolio management algorithm sucks” comments from people who are withdrawing all of their assets a couple of days or weeks after having started with the Autopilot. This comes on our TrustPilot page (where you are still 82% to share positive reviews on March 26, 2021 🙏🏻), through support channels, and sometimes directly in our inboxes. We’re always saddened by the misunderstanding. And we hope this article will bring some clarity.
Time reduces risk: What the distribution of returns looks like
Here are the average, minimum, and maximum returns (%) when investing in the OSOM Crypto Autopilot between Sept 26, 2019, and March 23, 2021 (545 days in total), depending on the time horizon of the investment, excluding fees and in EUR.
UPDATE! Sept 26, 2021,
This was written in March 2021. But the autopilot turned 2 years old on Sept 2021, so we wanted to update it and look at longer time-frames. Using the Autopilot for 2 days is still a gamble and 300 days is still pretty much the shortest timeframe where historically you were guaranteed to make a profit. As time has passed, we look at what happens on 400, 500, and 600 days timeframes. Time in the autopilot increases the average likelihood of returns.
What the first chart shows is that those who held their investment for 300 consecutive days at any time in the 545 days would on average have made a return of 161.95%. Even when buying and exiting their investments at the very two worst points in time they would still have enjoyed a return of 6.21%. At the very best two days, they would have enjoyed returns of 660.49%.
On the other hand, those who stayed for 30 days would on average have made a return of 16.31%, but if they bought and exited at the very worst point they would have seen losses of -58.48%!
Over 2 days, the average gain is 1.04%, but it goes from minimum -44.03% to max 30.25%.
Someone who would have bought on day 1 (26 September 2019) and stayed in the Autopilot the whole time to 23 March 2021 would have seen 932% returns.
Using the Autopilot for 2 days is a gamble
The Autopilot isn’t doing anything with a 2-day timeframe in mind. So if you do, you are using it to gamble (and we don’t get why you would, because there are much cheaper alternatives).
Since 26 Sept 2019, when the Autopilot started in production, the returns for holding a balance any 2 consecutive days see returns of minimum -44.03% to max 30.25%, with the first quartile being -2.03% and the third 4.07%. It feels a bit like a coin toss.
The first quartile becomes positive (3.96%) at a minimum of 120 days of holdings. But if you entered and exited at the very worst time over 120 days in the past 545 days, you could still have seen negative returns of -41.94% (the minimum).
It’s only if you held for 300 days that you were guaranteed to see positive returns. We can’t promise it will repeat, as there are never any sure things in the markets, but it will give you an idea of what time in the Autopilot does to risk, much like we showed you what time does to the risk of holding stocks.
Should I get in and out often to try and beat the odds?
Far from us to tell you what you should do.
What we know is that in the traditional markets, according to a study by JPMorgan Asset Management, for the period 1998– 2017, the average active investor had an annualized total return (CAGR) of only 2.6%, whereas buying and holding the S&P500 index for the same period resulted in a CAGR of 7.2%. This significant underperformance is caused by bad market timing and panic selling, as visualized below. Excluding the ten best days for the S&P500 in terms of returns over the whole period results in a CAGR of ‘only’ 3.5%. Since recoveries from stock market declines often provide huge gains, the best days in terms of return often come straight after such a market decline. However, many investors panic during these severe market declines and sell some of their positions. Consequently, they are likely to miss out on huge potential gains during the recovery, meaning that the cost of this panic-selling tendency is significant.
So if you get out at just the wrong time and get back in a little too late, you’ll likely miss all the best performances. In traditional and less traditional markets alike. As you can see above, if you miss 0.95% of the days (50 days / 5217 trading days) your returns are negative. So even if you were “alert and ready” 99.05% of the time it wasn’t enough. Since the crypto markets trade 24/7/365 as opposed to 9 to 5 on weekdays, think how likely you are to spot the right time to get in and get out.
This is also why we don’t provide a stop-loss mechanism and why the Autopilot is always 100% invested and can’t “retreat” to stablecoins. We are of the opinion that “time in the market is better than timing the market”. Because timing the market is (really, really, really) hard. And if you do a quick Google search you will see that that is a popular opinion.
This is not investment advice, nor a solicitation. Crypto markets possess a high level of risk, including volatility and regulatory uncertainty. Past performance does not constitute a guarantee of future results in any way. You are solely responsible for doing your own financial, legal, tax, or investment research before taking any actions.
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Chief Development Officer
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