Wondering what it’s like to be a conservative investor and how your performance could look?
Conservative investor is an obsessive planner that hates any type of uncertainty and risk.
Let’s compare this risk profile with a Buy & Hold portfolio without a risk adjustment mechanism.
Both will start at $100k.
Imagine it’s Q1 2021. You are an investor with $100k worth of BTC.
You are a self-starter without deep knowledge of trading or investing. As you never received any paid advice on financial management, you stick with the buy-and-hold strategy. No matter what happens, you don’t sell and keep your Bitcoins for the long term.
Congrats! You will end the year with a 58% return or $158k in your wallet. Seems great, yet the result could have been much better, and here’s why.
Unlike stock exchanges with closing and opening hours, the crypto market never sleeps. Cryptos are traded 24/7, making market trends impossible to track constantly.
Consequently, no one has the power to foresee all the little details affecting crypto rise and fall.
That’s where the danger lies…
Uncontrollable trades can lead to sudden massive downfalls. Even if you made a 58% gain, you could have easily lost it while metaphorically or actually sleeping amidst the market volatility.
Hence, there’s roughly a 50/50 chance of ending the game with zero, even under the most favorable conditions. After all, we’ve seen wealth instantly evaporating numerous times before.
Another issue you as a crypto investor constantly face is an urge for situational decisions. “Shall I sell at a 40% loss or continue following the Buy and Hold strategy?” If you are comfortable with the loss, you will most likely keep things business as usual, a behavior known as inertia, a.k.a. status quo bias.
However, that’s exactly what pushes investors to eventually sell, too early or too late.
Under steep market downfall, as an investor with a strong belief in hodling, you might feel like you are making the right decision by keeping your assets.
Yet, your mind will be wobbling around in fear of financial ruin.
With a strong possibility, you will continue holding and hoping that one day your assets will reach their prime. But that’s blind betting in a nutshell.
Now let’s consider the conservative profile, a user portfolio utilizing Libertify’s risk adjustment mechanics.
You also begin your crypto journey in Q1 2021 with exactly the same $100k worth of BTC in your wallet. However, this time you rely on Libertify, the first performance-driven risk management solution for the crypto market.
After completing the risk assessment quiz, you are assigned a conservative risk profile, a risk-averse and risk-sensitive investor type.
By the end of the year, your return will hit 116%, delivering a total portfolio value of $216K. How is that possible?
Simple – you followed Libertify’s automatic and personalized investment guidelines by accepting recommendations sent directly to your smartphone.
These recommendations inform our users of current crypto market trends such as declines or surges and immediately advise on further required actions, e.g., exiting or entering the market, without the need for more complex short trading or leverage.
So far, we’ve briefly covered the difference in the performance of the Conservative profile and the regular Buy & Hold portfolio. Now, let’s take a look at the numbers.
If you have followed the crypto market from the beginning of 2021 onwards, you are aware of a massive dip in May. Then, investors lost $1 trillion, with coin prices falling by 53% on average.
Yet, if you were a Buy and Hold investor, you would be in luck and make profit
But at what risk?
As a non-Libertify user, you had no risk protection mechanism.
You saw your capital deteriorate from $100k to $47k, leaving you worried that the lost $53k may never return.
The volatility your portfolio endured amounted to a total of 81.2% over the year. If you managed to overcome stress and continued holding, you would have eventually made a $58k profit at risk of losing more than half of your capital and tons of gray hairs.
Compare that to the Conservative portfolio. Under very unfavorable market conditions, like in May 2021, the Conservative portfolio would be exposed to the risk of losing 18.8% or $18,800. That’s almost three times LESS compared to Buy and Hold risk!
By relying on Libertify, Conservative strolls back to its lodge as a very happy bunny. It would eventually enjoy a $116k profit at an $18k risk exposure and zero stress by the end of 2021. Take a look at the table below.
| Performance | Max Drawdown | |
|---|---|---|
| Buy&Hold | 58% | 53% |
| LBFY (Conservative) | 117% | 18.80% |
| % Difference | 101.33% | -64.53% |
Overall, based on our analysis of 12 months of 2021, we can certainly say that Conservative performs much better.
Number-wise, that’s what both approaches deliver by the end of the year:
| Starting Capital | Gains | EOY Capital Value | |
|---|---|---|---|
| Buy&Hold | $100,000 | $58,000 | $158,000 |
| Conservative | $100,000 | $116,770 | $216,770 |
| $ Difference | $0 | $58,770 | $58,770 |
You might still wonder how Libertify delivers such results. Let us dive deep into mechanics.
Libertify uses sophisticated, in-house built algorithms capable of determining what trading action is correct given the market circumstances and a person’s unique risk profile.
When market moves change, a fully personalized risk-adjusted recommendation is created, and Libertify executes a trade by buying and selling different pairs of stablecoins and cryptocurrencies.
Take a look at how Libertify works for the end user.
A Libertify user receives fully personalized, risk-adjusted recommendations in the form of push notifications informing them of the changes in the crypto market. These notifications tell the user what amount of tokens should be bought or sold.
If you are on auto-pilot, Libertify automatically executes the trade within one hour unless the user dives deeper into data describing the current market situation.
They can finally accept or reject the recommendation, always keeping full control.
The advice is always based on the investor’s risk profile. Therefore, before sending notifications, Libertify asks a new user to complete the risk assessment quiz to assign a profile (Conservative, Moderately Conservative, Moderately Dynamic, Dynamic) corresponding to an appropriate risk adjustment strategy.
Once done and subscribed, a user gets notifications.
As you can see, the Buy and Hold strategy yields results but at a high cost. Constant worry and the urge to make emotional choices often lead to wrong decisions and missed opportunities.
And while you, as a hodler, make a 58% gain, you would have suffered from status-quo bias and a ton of stress.
However, with risk adjustment tightly embedded into your investment approach, you can get quality advice and run on autopilot without constantly checking your account every hour.
In 2021, the Conservative risk adjustments delivered much better results than the Buy and Hold strategy. After all, we always strive to reduce your exposure to risks and optimize your performance accordingly.
To decrease risks, you have to time the market, make timely decisions and actually act to make good gains in the crypto market. But how to do that effortlessly and accurately? Find out how Libertify can help you manage assets today.
Get Protected Today.
@ 2023 Libertify SAS. All rights reserved.
@ 2023 Libertify SAS. All rights reserved.
Investing in digital assets is highly speculative and volatile, and cryptocurrency is only suitable for investors who are willing to bear the risk of loss and experience sharp drawdowns. Please note, all past performance or hypothetical/backtested performance as expressed on this site, is not indicative or a promise of future performance.
Investments in digital assets and cryptocurrency are Not FDIC Insured, Not SIPC Insured, Not Bank or Government Guaranteed, and May Lose Value. Before investing consider your investment objective, risk tolerance, Libertify’s fees and expenses and any trading related fees before investing. Although the goal of Libertify and the crypto seatbelt is to reduce volatility in your portfolio, there is no guarantee that your portfolio or account will not lose value, including risk of loss of your entire principal invested. Your account may experience significant drawdowns and there is no guarantee that Libertify will outperform a buy and hold strategy.
Investing in digital assets is highly speculative and volatile, and cryptocurrency is only suitable for investors who are willing to bear the risk of loss and experience sharp drawdowns. Please note, all past performance or hypothetical/backtested performance as expressed on this site, is not indicative or a promise of future performance.
Investments in digital assets and cryptocurrency are Not FDIC Insured, Not SIPC Insured, Not Bank or Government Guaranteed, and May Lose Value. Before investing consider your investment objective, risk tolerance, Crypto Seatbelt’s fees and expenses and any trading related fees before investing. Although the goal of Crypto Seatbelt is to reduce volatility in your portfolio, there is no guarantee that your portfolio or account will not lose value, including risk of loss of your entire principal invested. Your account may experience significant drawdowns and there is no guarantee that Crypto Seatbelt will outperform a buy and hold strategy.
