Time in the Autopilot and Returns

DateJuly 26, 2021
Reading Time7 min
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Mathieu Hardy
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
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 balance for 600 days would on average have made a return of 744.06% and even when buying and exiting the Autopilot at the very worst two days 600 days apart, they would still have enjoyed a return of 189.23% . Those who stayed for 30 days would on average have made a return of 8.92%, but if they bought and exited at the very worst point they would have seen negative returns of -59.66%. Historically, time increases your chances of better average returns & reduces the likelihood of seeing negative ones.

Introduction

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

Time reduces risk: What the distribution of returns looks like

Average (x̅), minimum and maximum returns (%) when investing in the OSOM Crypto Autopilot between Sept 26 2019 and June 30 2022 (1009 days in total), depending on the time horizon of the investment, excluding fees and in EUR.

We have now run this exercise at 3 different times and you will find the old charts at the bottom of the article if you are interested.

Sept 2019 - June 2022
Those who held their balance for 600 days would on average have made a return of 744.06% and even when buying and exiting the Autopilot at the very worst two days 600 days apart, they would still have enjoyed a return of 189.23% .

What the chart shows is that those who held their investment for 600 consecutive days at any time in the 1009 days would on average have made a return of 744.06%. Even when entering and exiting at the very two worst points in time they would still have enjoyed a return of 189.23%. At the very best two days, they would have enjoyed returns of 2421.06%.

On the other hand, those who stayed for 30 days would on average have made a return of 8.92%, but if they bought and exited at the very worst point they would have seen losses of -59.66%!

Over 2 days, it's pretty much a coin toss.

Using the Autopilot for 2 days is a gamble

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).

Historically it's only by holding for a longer period of time 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.

[PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RETURNS]



Should I get in and out often to try and beat the odds?

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.

source:Morningstar . for the period 1998– 2017, the average active investor had an annualised 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%

Image: source:Morningstar. For the period 1998– 2017, the average active investor had an annualised 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%

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.

Time reduces risk - March 26 2021

Data from March 2021

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.

Chart from March 2021
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.
Time reduces risk - September 26 2021

Data from September 2021

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.

Chart from Sept 2021
Returns by days invested graph

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.


OSOM is the all-in-one Crypto Wealth Manager. With wallets, exchange, Crypto Roboadvisor, DeFi Earn to lend stablecoins in DeFi, and Crypto Strategie, it is all you need in a Crypto Asset Manager.

Our computers do the heavy lifting for you with a long-term perspective so you don't have to. From crypto on-and-off ramps to passive income and diversified portfolios, OSOM has you covered.

If you are wondering how the Autopilot Works, read this. The live performance is here If you want to know why you might want to use DeFi Earn, read this.

The guide to getting started is here.


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Mathieu Hardy
Chief Development Officer

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