Review of 6 years of Popular Investor on eToro
I've just completed my 6th full year on eToro as a popular investor, and I thought I would use my monthly post of January to make a brief standstill and retrospect on the adventure and the performance.
In those 6 years, I have been a Cadet, Champion, Elite (very briefly), went back to Champion with the heavy market correction that happened in 2018 and remained on that level ever since. I have maintained the same base-strategy which is purely based on risk/return optimisation and calculated according to well-known, academic models. This means that in some cases, I am not familiar with the assets I am investing in, as long as the stats tell a positive story.
Overall, I have gained by factor (1,4316 * 0,9064 * 1,2533 * 1,6041 * 1,1469 * 0,8576) = 2,5658 in those 6 years, resulting in an annualised return of 17%. Compared to the SP500, which increased from 2275 to 3824 (or factor 1,68), representing an annualised return of approximately 9%. Of course there are years where I performed less than the index, and there are others where I performed better.
The real question is about how much you really gained in wealth. In order to calculate this final number, which I will give the example for my Belgian copiers, you need to take into account the currency exchange benefit/loss and the inflation. In terms of currency impact, the EUR/USD stood at 1,0531 on January 1st 2017 and stood at 1,0703 on January 1st 2023, meaning we gained an additional 1,6% over those 6 years. Adversely, the (Belgian) consumer price index, which is the measure for inflation, rose by 23,35% over those 6 years.
Taking all of this into account, this means that a Belgian investor who had invested six years ago in my portfolio, would have been (2,56 * (1 - 0,2335) * (1 + 0,016)) = 1,9988 times more wealthy in real effective terms, or 12,23% annualised return. To express in Belgian: He/she would have been able to purchase twice as much beer, chocolate or waffles than he was 6 years ago.
Long story short: Stay invested for the long term.
More on the power of compound interest on https://www.investmenttales.com/the-power-of-exponentials