Imagine that you could assemble a team of eToro’s most elite traders, and have this team of experts trade around the clock for you.
You could take advantage of the countless opportunities the world’s financial markets have to offer, without having to lift a finger.
This sounds like a strategy that only ultra-high-net-worth investors might employ.
However, believe it or not, it is now actually possible for anyone to invest this way, thanks to advances in financial technology.
eToro’s GainersQTR Smart Portfolio: The world’s top traders working for you
GainersQTR is a revolutionary investment strategy developed by eToro that seeks to identify the traders on the eToro platform that are statistically most likely to outperform the market in the months ahead. It then copies these traders so that others can benefit from their skill and expertise. The aim of GainersQTR is to provide investors with an investment strategy that has the potential to outperform the market over time while maintaining a low risk profile.
How the GainersQTR Smart Portfolio works
GainersQTR monitors millions of traders from all over the world and then uses advanced technology such as Machine Learning — to select the traders who are likely to generate profits over the next quarter without taking excessive risks. Machine Learning aims to spot patterns in historical data and make future predictions based on those patterns while constantly learning from experience.
Specifically, the GainersQTR algorithm selects traders who:
- Have generated strong returns over a range of previous time intervals (i.e., the previous quarter, the previous 12 months)
- Have maintained an adequate risk profile over a range of previous time intervals
- Demonstrate superior trading ratios (i.e., gain-to-loss ratio, average gain per trade to average loss per trade ratio)
- Are reasonably active on the eToro platform but do not overtrade
- Use leverage sensibly
Most of the traders who are selected by the algorithm are part of eToro’s Popular Investor program, meaning that they are skilled traders who meet the program’s high standards. However, every quarter, the algorithm identifies highly successful traders who have been flying under the radar and are not part of the Popular Investor program.
Once the algorithm has identified a number of top traders, a portfolio based on these top traders is constructed.
Strong risk-adjusted returns
The performance of the GainersQTR Smart Portfolio has been impressive since its launch in 2016.
Between April 11th, 2016 and May 11th, 2020, the strategy generated a return of 64%, outperforming both the S&P 500 and the MSCI World indices, which generated returns of 39% and 19% respectively. That is a significant level of outperformance.
What is even more impressive about the performance of the GainersQTR strategy, however, is that during periods of financial market volatility, when stocks and other assets were falling, the portfolio declined far less than major global equity indices, providing investors with a high level of protection.
Since the portfolio’s launch, we have experienced two major periods of financial market volatility. The first was in late 2018 and the second was in early 2020. During these periods of volatility, the maximum drawdown of the GainersQTR portfolio was 8%. In contrast, both the S&P 500 and the MSCI Global indices registered drawdowns of 34%.
Charts: GainersQTR performance
Past performance is not a reliable indicator of future results
Protection from market volatility
The reason that the GainersQTR Smart Portfolio has outperformed during periods of volatility is that the strategy has a strong focus on risk management.
For a start, the strategy is highly diversified. GainersQTR allocates a wide variety of asset classes, including stocks, indices, ETFs, commodities, and cryptoassets, meaning that the portfolio can withstand high levels of volatility in specific asset classes. Traders are also based all over the world, meaning that they have expertise in different areas of the markets, which further reduces risk.
Secondly, each trader selected by the algorithm has a 5% stop-loss placed on them. If this stop-loss is triggered, the trader’s position is closed and the remaining capital is kept in cash until the next portfolio rebalance. The fact that each individual trader has their own stop-loss means that, even if a handful of traders underperform and are stopped out, the strategy can continue to take advantage of other investment opportunities.
Finally, the portfolio is rebalanced on a quarterly basis to ensure adherence to its predetermined strategy (i.e., to choose those traders who are most likely to outperform over the coming quarter). The quarterly rebalancing frequency gives traders time to outperform while ensuring that the strategy is aligned to market trends.
Why the GainersQTR Smart Portfolio is unique
eToro’s GainersQTR Smart Portfolio offers investors a very unique approach to investment management.
In the same way that institutional investors and hedge funds around the world are using advanced data analysis technologies such as Machine Learning —– which processes an enormous amount of data —– to get an edge on other traders, GainersQTR uses advanced technology to identify the traders on the eToro platform who have the best chance of outperforming the market in the near future.
With millions of registered traders and investors generating billions of financial metrics every day, eToro is literally the perfect environment for advanced data analysis technologies. Using cutting-edge technology, eToro can leverage the data sets it has access to, in order to create a next-level, data-driven investment strategy.
Ultimately, GainersQTR is like having your own team of top traders working for you. No longer is this form of investment management the preserve of the wealthy elite — it is now available to anyone who wants to take advantage of it.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Smart Portfolios is an investment management service provided by eToro Europe Ltd., which is authorised and regulated by the Cyprus Securities and Exchange Commission.