How to Choose a Popular Investor (The Smart Way)– Part 2
What is the Calmar Ratio and Why it Matters
What separates good investors from great ones?
Not how they perform when markets are green. 📈
But how they react when markets turn red. 🔴
Because investing is not just math.
Psychology and experience matter just as much. 🧠
Anyone can look confident in a bull market.
Very few stay disciplined during a crisis. ⚖️
That’s why today we focus on something powerful 👇
1️⃣ Big Returns Mean Nothing Without Drawdown Control
An investor can make 40%.
But if they experienced a -35% drawdown…
Would you realistically stay invested?
Most investors panic near the bottom. 😅
This is where the Calmar Ratio becomes extremely useful.
2️⃣ What Is the Calmar Ratio? (Simple Explanation)
The Calmar Ratio measures:
👉 Annual Return
DIVIDED BY
👉 Maximum Drawdown
In simple terms:
How much return did the investor generate
for every unit of downside pain?
Conceptually:
Annual Return ÷ Max Drawdown
The higher the ratio,
the more efficiently risk is being managed.
3️⃣ How to Interpret It
General guidelines:
• Below 1 → Weak (too much drawdown for the return)
• 1–3 → Decent
• 3–5 → Strong
• 5+ → Excellent
• 8–10+ → Exceptional
A high Calmar Ratio suggests:
✔ Strong performance
✔ Controlled downside
✔ Emotional stability during volatility
✔ Efficient capital management
For transparency, my current Calmar Ratio is 10 the last 2 years.
That means returns have been achieved with relatively contained drawdowns —
which is exactly what long-term capital preservation requires.
4️⃣ Why It Matters on eToro
When you copy a Popular Investor,
you also copy their worst periods.
Maximum drawdown shows:
“How bad did it get?”
Calmar Ratio answers:
“Was the reward worth that crisis?”
And that’s what separates strategy from luck.
5️⃣ Not a Perfect Metric
Like every indicator:
• It focuses on the single worst drawdown
• It ignores volatility outside that period
• It depends on the timeframe measured
That’s why smart investors combine:
✔ Calmar Ratio
✔ Jensen’s Alpha
✔ Sharpe / Sortino
✔ Risk Score
✔ Strategy consistency
(We will analyze them all in later posts)
No single number tells the full story.
🎯 Final Thought
Long-term investing isn’t about chasing explosive returns.
It’s about surviving downturns.
Managing crises.
Protecting capital when uncertainty rises.
Great investors aren’t defined in bull markets.
They’re defined during corrections and crashes.
Focus on investors who can navigate both.
Because in investing, survival comes first.
Returns come second.
If you found this helpful,
let me know what topic you’d like next 👇
Part 3 soon 👀
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