A little while ago, my favorite investing platform etoro, launched CopyPortfolios. I wanted to write a little post about my experiment with CopyPortfolios and whether or not it's a viable investment.
What is a CopyPortfolio?
The idea behind etoro's CopyPortfolios is simple. They group together the top performing traders on their platform and allow you to invest in them as a group.
This is a really cool concept because it removes some of the risk associated with social trading. I love to social trade, but you can't always avoid picking traders who will have a bad month or two. CopyPortfolios diversify your portfolio and spread the risk across lots and lots of traders instead of just one or two.
Furthermore it's all automated so that if a trader suddenly starts losing too much, they get booted out of the fund and everything is rebalanced.
Investing with CopyPortfolios
So the big question is, can you actually invest with CopyPortfolios. I decided to put them to the test with a $5000 virtual position. That's the minimum investment size for a CopyPortfolio which makes sense – you need enough capital to invest in lots of positions at once.
Remember all these positions are opened and closed automatically behind the scenes by the portfolio. You're just investing in the portfolio.
Here is how the portfolio has performed over the last month:
As you can see, it has gained around 1.5% or $75. This is a pretty good return and has easily beaten what my high interest savings account would have returned. Obviously I don't expect it will return this much every month but so far I'm seeing really positive signs.
Which CopyPortfolio to Choose?
For this experiment I used the ActiveTraders portfolio, but etoro also offers other CopyPortfolios to invest in. Some of them aren't just people based. For example, you can invest in the “big banks” or the top “tech stocks”.
It really depends on what you believe to be the least risky and will deliver the best return. As CopyPortfolios have only recently launched, it's hard to say how well each fund will perform. In my research I felt “ActiveTraders” would work best for me. But I want to also try out the others to see how they perform with an actual investment.
A real alternative Investment
CopyPortfolios look like a really good alternative investment. I love the fact the etoro is making good use of technology and automating something that would have been nearly impossible to do before. What I also love is everything is out in the open and you can clearly see where your money is being invested and you're free to close your position at any time and almost instantly.
This is the future of investing!