Here's How to Beat Buy and Hold Returns
Buy and Hold is a simple plan that does not require much thought or effort. You can end up holding some coins with no idea what to do if you bought them without a plan or you didn't keep track of their cost. Because, if you know their cost, then you know whether selling now would be a loss. All of you need a plan and all plans need your cost basis. Toward that end, here is an example of one I use for receiving/sending fractional amounts of coin.
3 Sets of coins
Now, I consider Buy and Hold to be a terrible plan. Because, with a little effort and a few more trades, you can get a significant increase in profits. (see links to other articles at the end) For this article, I developed 3 sets of examples with three variations. For set #1 I used Bitcoin, Ethereum and Litecoin. Set # 2 used Ripple (XRP), Dash, and Nem (XEM). And set #3 is a combination of both set 1 & 2.
Equal Investment Plans
All coins in all plans started with $1,000 USD starting Jan 1, 2017 and running 6 months until Jun 30, 2017. The first plan is Buy and Hold, buy once at the beginning, assume sold at the end. The second plan is balanced where the daily valuation is checked and when a threshold is reached, then some coins are sold and others bought to bring all coins to the same (equal) valuation.
Scaled Investment Plan
It's not hard to figure out that there's a slim probability of getting the same percent gain with a $2,000 Bitcoin and a $200 Ethereum during the same time span. So, I setup another plan where instead of investing $1,000 in each coin, I used a weighting system. Bitcoin was weight of 1, Ethereum was weight of 4 and Litecoin a weight of 5. The weights sum to 10, but thats not required. Here are the begin/end prices and percent change for the six coins.
Summary of Plans & Results
Here is a summary of each plan and its results. Just in case your eyes glaze over with so many numbers, I have also created a chart combining all of the plans.
Equal Plans
I started with the set 1 coins using an equal $1,000 per coin, a $3,000 investment. The idea for this plan was whenever the difference between the highest valuation to the lowest reached a threshold, a rebalance would be done. It's easy to calculate because you take the total value and divide by 3 and thats the new target valuation for each coin. The coin where the new value went down gets some coins sold and that revenue is used to buy new coins to get the other values up.
Scaled Plans
After I saw the equal plan results, I knew if the investment amount were changed to more closely reflect the coin's potential that results would improve. The logic required to determine when to rebalance the coin values can be hard to handle and increases the number of trades. But, if you can handle them you will find a pot of gold at the other end.
Selling Your Coins
There are a number of reasons to sell (consume) your coins. Most don't leave you with a lot of control.
1 You need USD (or your fiat currency).
2 You are trading the coin and your trading software or trading plan drives your sale.
3 The price of your coin is rising in a series of up/down waves.
4 The price of your coin is correcting and falling in Down/up waves.
5 Your coin is trading sideways in up/down waves.
LINKS
Here's a link to my post Making Crypto Buy/Sell Decisions
The plans in this post deal with buying/selling whenever rebalancing is done. Another factor is how much coin you need to buy/sell. When you step back and look at all the coins all moving in different directions, it's easy to get confused. Instead, pick a coin and get down in the weeds. Get to know your coin, where it has been, and what it's doing now. Then you will have a better idea what price to make your next buy or sell.
Here is a link to a 7 part post of my 2005 booklet Improving Investment Profits .
https://steemit.com/investing/@toadslinger/improving-investment-profits
https://steemit.com/investing/@toadslinger/improving-investment-profits-pt-2-of-7
https://steemit.com/investing/@toadslinger/improving-investment-profit-pt-3-of-7
https://steemit.com/investing/@toadslinger/improving-investment-profits-pt-4-of-7
https://steemit.com/investing/@toadslinger/improving-investment-profits-pt-5-of-7
https://steemit.com/investing/@toadslinger/improving-investment-profits-pt-6-of-7
https://steemit.com/investing/@toadslinger/improving-investment-profits-pt-7-of-7
