Federico Sellitti @federicosellitti: "Market and Portfolio Update –..."

United Kingdom

Market and Portfolio Update – 05/02/2026 Dear Investors, The last few days marked a fast change in market sentiment compared to late January. Today is no different. At the moment of writing, the market is already down 1.26% before opening, and our portfolio is following with a -1.05%. $GOLD and $SILVER dropped sharply in a single day. Cryptocurrencies are in a strong and almost vertical sell-off. Many AI-related stocks are falling hard, despite reporting very good earnings. Uncertainty is clearly back in the market, and for good reasons. 🟢 What is happening in the market? 🟢 One key point stands out is AI expectations that are being repriced. Recent earnings highlighted two important themes: stronger competition between AI platforms and products, and very large investments in AI infrastructure, which increase costs in the short term. Because of this, the $NSDQ100 is currently the weakest US index, as investors rotate away from long-duration AI winners. Even a giant like $MSFT (Microsoft) is now down about 26% from its highs. 🟢 Portfolio update 🟢 Microsoft is a good example of what we are experiencing. At the beginning of the year, Microsoft was contributing with a profit of +1.85% to our portfolio. After this sell-off, its performance on our portfolio is -0.35%. Looking at our current -6.15% drawdown in 2026, Microsoft alone explains roughly one third of it. Painful, but not unusual, and not necessarily bad. Since its IPO in 1986, Microsoft has dropped 25–30% from its highs exactly 10 times (an average of once every 4 years). Historically, after these phases, it did not fall much further before resuming long-term growth, making new highs. We kept cash reserves on purpose, waiting for an opportunity like this. I am not backing down now when probabilities are in our favor. We also increased our exposure to cryptocurrencies. $BTC is now about 10.3% of the portfolio, $ETH is about 5.6%. Our approach here is to add exposure when prices reach new lows, but reducing small parts of the position when prices rebound. Recently, crypto markets have fallen almost without pauses, so rebounds have been limited. It must be noted that, while our portfolio is down -1.77% on this investment, our average entry prices are $77,985 for Bitcoin (already discounted 38% from its top), and $2,265 for Ethereum (already discounted 55% from its top). This makes the period emotionally difficult, but also interesting from a risk-to-reward point of view. We will only hold these two cryptocurrencies, and our maximum exposure to them will be capped at 30% (combined) of the value of the portfolio. This is a scenario that can materialize in case Bitcoin goes below $50K and Ethereum goes below $1,400, both without retracements. Unlikely, but better to be ready for any scenario. We still hold 18% in cash. This gives us flexibility to manage existing positions, and to add at better prices if markets continue lower. It is unlikely that we will add any new stocks in this phase, unless we see very large, high-quality names such as $GOOG (Alphabet) or $AAPL (Apple) at clearly distressed prices. I consider the existential risk of the portfolio close to zero (existential risk = losing most or all of the capital). However, situations like this create comfort risk. People feel uncomfortable during drawdowns and make bad emotional decisions. Honestly, this is one of the first times since I joined eToro that I truly feel paid for my role: being able to stay rational and disciplined during uncertainty that many people cannot tolerate. Two important questions 1. Is this a good time to add funds? Drawdown periods are usually the best moments to add funds. That said, our drawdown is still within normal market noise, and we still have cash reserves ready if markets go lower. So yes, adding funds now can make sense, but I would not call it a “once-in-a-lifetime opportunity”. I would rate the timing 7 out of 10. 2. Where should I place the stop loss for the copy? For long-term investing, I do not use stop losses. I would place the stop loss for a copy as far as possible, or not at all. Selling during sharp drawdowns is often the worst decision, unless you are copying a strategy that is clearly at risk of blowing up. Ultimately, it's about what you feel comfortable with. Thank you for reading, and good luck to everyone.