Why is copy trading dismissed by so many investors?

Joedavis

About two years ago I set up a virtual portfolio on etoro. I virtually invested £1300 with a copy trader to see how it would perform. It has risen over 3000% and I would have made over £30,000. 

So obviously I wish I'd actually done it in my real portfolio! Did I just strike very lucky with my copying selection/entry date or are Etoros top copiers pretty reliable investments? 

ColdIron

Sounds like CFDs (Contracts For Difference)

Very very risky which is why etorro say this:

• CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider

https://www.etoro.com/customer-service/general-risk-disclosure

Hoenir

If investing were that easy all investors would by default be multi millionaires.  Unfortunately some suckers have to pay for those that are the winners. 

Joedavis

Hoenir said:

If investing were that easy all investors would by default be multi millionaires.  Unfortunately some suckers have to pay for those that are the winners. 

I don't think it's easy but had I invested £1300 with this one in May 2021, I'd now have over £43000. So I don't think it can be dismissed as a legitimate way to invest your money. 

I think most people lose money because they withdraw their funds when it's in a down cycle. 

InvesterJones

Sounds like you got lucky if you picked an investor who also happened to get lucky. Have any of them managed it twice though? And what are they investing in?

ColdIron

I can't think of any way to get 3,000% except from shorting. One bad day and you're wiped out

mark_cycling00

I did £1,000 with a famous etoro guy a few years ago. His performance was mostly due to a lucky bitcoin transaction, he then lost 20% in the next year fortunately the dollar rose against the pound by the same amount and I wasn't in loss and got my money out.

When BTC crashed he sold it all and missed out on the latest rally and is currently achieving a massive 3% pa return.

masonic

Joedavis said:

About two years ago I set up a virtual portfolio on etoro. I virtually invested £1300 with a copy trader to see how it would perform. It has risen over 3000% and I would have made over £30,000. 

So obviously I wish I'd actually done it in my real portfolio! Did I just strike very lucky with my copying selection/entry date or are Etoros top copiers pretty reliable investments? 

You can apply the same argument to winning the lottery. There are hundreds of big winners, but these need to be taken in the context of the millions who lost money. The existence of a success story does not itself tell you anything about the merits of the practice.

I don't think people are generally dismissive of all forms of copy trading. The most popular involves buying units in a collective investment scheme or investment company, otherwise known as a fund, ETF or investment trust.

Joedavis

InvesterJones said:

Sounds like you got lucky if you picked an investor who also happened to get lucky. Have any of them managed it twice though? And what are they investing in?

Crypto mostly. But the thing is, she's managed this through a period where crypto has been in the mud. 

Veteransaver

It's just gambling at the end of the day, To achieve those sorts of returns it must be in Cfds.
For example you could achieve some pretty easy huge returns just buying futures on the FTSE 100 3 months ago. Depends how many contracts you bought as to how much leverage you got.Thats the only factor (other than having to cover the margin requirements) but your gains (and losses) are effectively unlimited.

But it could completely wipe you out of it went against you.
And once you get into the realms of crypto as a form of investing,  well...

callum9999

Joedavis said:

InvesterJones said:

Sounds like you got lucky if you picked an investor who also happened to get lucky. Have any of them managed it twice though? And what are they investing in?

Crypto mostly. But the thing is, she's managed this through a period where crypto has been in the mud. 

Which doesn't remotely mean she's going to continue guessing right.