Konstantinos Kousouris
United Kingdom
2m
How to Choose a Popular Investor to Copy on eToro (The Smart Way) Copying a Popular Investor is easy. Choosing the right one is not. Most people look mostly at one thing : 👉 Return (%) But here’s the real question: How much risk did it cost to achieve that return? Because 30% with controlled risk is VERY different from 30% with extreme volatility. Let’s break this down simply 👇 1️⃣ Don’t Look Only at Performance Yes, returns matter. But you should always ask: • How volatile is the portfolio? • How deep were the drawdowns? • How consistent are the results? • How does performance compare to the market? A Popular Investor who beats the market with lower or controlled risk is very different from someone who simply takes huge bets. 2️⃣ Compare Them to the Market If someone makes 20% in a year when the market made 18%, did they really outperform? Now imagine someone makes 15% while the market makes 5%. That’s much more impressive. This is where we introduce something more advanced 👇 3️⃣ What Is Jensen’s Alpha? (Explained Simply) Jensen’s Alpha measures how much return an investor generates above what would be expected for the level of risk they take. In simple words: 👉 Did they outperform the market 👉 AFTER adjusting for risk? If Alpha is: • Positive → They added value beyond market risk • Around 0 → Performance matches risk taken • Negative → They underperformed relative to risk 🔎 What Is Considered Good? There’s no “perfect” number, but generally: • 0 to 5 → Modest added value • 5 to 15 → Strong performance relative to risk • 15+ → Exceptional (if consistent) For context, my Jensen Alpha over the last 2 years is 25. That means performance wasn’t just high — it significantly exceeded what would normally be expected for the risk taken. And THAT’S what really matters. 4️⃣ Why Jensen Alpha Is Important Because it answers the real question: “Was the return worth the risk?” High returns with low alpha often mean: ⚠️ Excessive volatility ⚠️ Aggressive leverage ⚠️ Luck rather than skill Sustainable investors tend to show consistent positive alpha. 5️⃣ But It’s Not Perfect Like every metric, Jensen Alpha has limitations: • It depends on the benchmark used • It assumes market efficiency • It doesn’t capture every type of risk That’s why we don’t rely on ONE metric only. In future posts, I’ll explain: Sharpe Ratio, Sortino Ratio & Risk Score — and how to combine them properly. 🎯 Final Thought When choosing who to copy on eToro: Don’t chase returns. Chase risk-adjusted performance. Because in investing, it’s not just how much you make. It’s how much risk you needed to take to make it. If you found this helpful, let me know what topic you’d like next 👇
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