Konstantinos Kousouris @Le_kousou: "How to Choose a Popular..."

United Kingdom

How to Choose a Popular Investor – Part 4 𝘼 𝙢𝙚𝙩𝙧𝙞𝙘 𝙩𝙝𝙖𝙩 𝙗𝙚𝙘𝙤𝙢𝙚𝙨 𝙚𝙨𝙥𝙚𝙘𝙞𝙖𝙡𝙡𝙮 𝙞𝙢𝙥𝙤𝙧𝙩𝙖𝙣𝙩 𝙬𝙝𝙚𝙣 𝙢𝙖𝙧𝙠𝙚𝙩𝙨 𝙜𝙚𝙩 𝙫𝙤𝙡𝙖𝙩𝙞𝙡𝙚 𝙡𝙞𝙠𝙚 𝙩𝙤𝙙𝙖𝙮. ⚠️ Everyone talks about returns when markets go up. 📈 But very few talk about what happens when volatility hits… and portfolios start dropping. 🔴 And here’s the truth: Two investors can have the same return… but one can feel way more stressful to copy than the other. 😅 So the real question is: 👉 Who manages downside risk better? This is exactly what the Sortino Ratio helps you understand. And in today’s volatile market, it’s more relevant than ever. ⚠️ 1️⃣ What Is the Sortino Ratio? The Sortino Ratio measures how much return an investor generates relative only to the bad volatility (downside risk). In simple terms: 👉 It focuses ONLY on the “painful” movements 👉 Not all volatility Conceptually: (Portfolio Return – Target Return) ÷ Downside Deviation But here’s what really matters: It ignores upside volatility and penalizes only the downside. 2️⃣ Why It Matters More Than Other Metrics Most traditional metrics (like Sharpe Ratio) treat all volatility the same. But let’s be real: 👉 No one complains about upside volatility. 😄 👉 Everyone cares about losses. That’s why the Sortino Ratio is powerful: It tells you how efficiently an investor generates returns without exposing you to unnecessary downside risk. Especially in periods like now, this becomes a critical factor. 3️⃣ How to Interpret the Sortino Ratio General guidelines: • Below 1 → Weak • 1 – 2 → Acceptable • 2 – 3 → Good • 3 – 5 → Strong • 5+ → Excellent • 8–10+ → Exceptional (if consistent) A high Sortino Ratio means: ✔ Strong returns ✔ Limited downside volatility ✔ Smoother investing experience 𝗙𝗼𝗿 𝘁𝗿𝗮𝗻𝘀𝗽𝗮𝗿𝗲𝗻𝗰𝘆, 𝗺𝘆 𝗦𝗼𝗿𝘁𝗶𝗻𝗼 𝗥𝗮𝘁𝗶𝗼 𝗼𝘃𝗲𝗿 𝘁𝗵𝗲 𝗹𝗮𝘀𝘁 𝟮 𝘆𝗲𝗮𝗿𝘀 𝗶𝘀 𝟭𝟬 according to Bullaware. Which indicates very strong performance with controlled downside risk. 4️⃣ What the Sortino Ratio Does NOT Tell You Like every metric, it has limitations: • It doesn’t show maximum drawdowns • It depends on the target return used • It doesn’t capture full volatility behavior • It doesn’t explain strategy consistency That’s why it should be used together with: ✔ Jensen’s Alpha ✔ Calmar Ratio ✔ Treynor Ratio ✔ Risk Score Each one adds a different layer of understanding. Final Thought In volatile markets, downside protection is everything. Because long-term success is not just about making money… It’s about: • Avoiding large losses • Staying invested during uncertainty • Compounding with stability over time The smoother the journey, the easier it is to stay consistent. 🎯 And consistency is what builds long-term results. If you found this helpful, let me know what topic you’d like next 👇 And if you have questions, drop them in the comments. $OIL $GOLD $BTC $SPX500 $TEP.PA (Teleperformance SE) $MSFT (Microsoft)

Not investment advice. The author may have financial interests in the mentioned instruments.