A very good morning to all copiers and followers.
As most of you know, I have been advertising the Macchia69 portfolio as an “income” rather than “accumulation” fund. What do I mean by this? At the end of each month, having reached $100,000 in portfolio value, I started withdrawing each amount the portfolio had grown. This meant that in eight months I took out just shy of $30,000 or an average of 4.2% growth per month. This withdrawal from my portfolio triggered a restitution to the copiers of the same percentage of the value of their copy. On average, a copier that invested $10,000 eight months ago would find themselves now with a portfolio unchanged in value, but having received, on average, a payout of $420 each month. The coding mechanism that was responsible for this replication of my behaviour onto the copy called this reimbursement a “dividend”.
I was not aware of this naming to start with, but having been alerted to it, I saw it as an opportunity, and I started marketing myself as a dividend-giving copy, albeit one that did not simply pass on the dividends provided by the assets held in the portfolio but one that distributed real banked profits deriving from the continued swing trading on the $UK100 . This practice was very much enjoyed by some who saw the coupling of a reasonable growth rate with a periodic way to get one’s hands on the growth as a feature. Others, keener on maximising the profit of their investment, found it a bit of a nuisance, as it forced them to remember to put the dividend back into the copy to let the investment compound the gains.
A few months ago, however, eToro embarked on a major updating of their copy trading engine, introducing a new portfolio rebalancing set of routines that, triggered by actions both on the copier and on the Popular Investor’s side, guarantees that the copy remains at all times in sync with the portfolio it copies. The aim of this change was, I’m fairly sure, to address the various complaints of people that saw their copy growing at a different rate from the portfolio they copied. In the “old days,” this event was possible as the copy of the portfolio and the portfolio could get wildly out of sync, and this was generally due to the actions of the copiers. For example a copier could choose to manually close some trades within the copy or withdrawing some of the unused cash. Some copiers thought they knew better, and sometimes they did, of the manager of the portfolio they copied.
One of the secondary effects of the portfolio rebalancing is that the link between the PI withdrawal and the copier dividend has been severed; this I got from a source within the eToro product team. Now, the withdrawal on the part of the PI does not trigger a dividend for the copier but simply a reallocation within the copy with the allocation of a higher value to each new position that gets opened and, sometimes, with some additional positions being added. In short, the “income” copy has been “ex machina” transformed into an “accumulation” copy. The result now will be that: those that liked the income will be less pleased, but those who plowed the dividend back into the portfolio will be more so.
I’m not sure I want to get too deeply into the wisdom of the change, I think most of the people that copy the Macchia69 portfolio are more interested in the fact that the year is ending on a 42% net growth than any other bells and whistles of the investment. I, however, reached out to eToro and suggested two things: first, that their comms strategy is 🤬, well… pants. Secondly, it might be an idea to reinstate the facility, for which the coding is still available, to allow the PIs to choose a withdrawal with dividends or without dividends. I rate as less than likely the possibility that they might go for it. In a previous life, I was a web app developer, and I know that each line of code you keep running in your application is a huge overhead in terms of both maintenance, security, and risk, but hey, maybe in the age of AI, code maintenance has become a breeze 😁.
I am considering stopping the withdrawals, as it does not add value for the copiers anymore. If I do so and the portfolio value grows, I will increase the value of the positions to keep the same proportions between individual positions (either 0.5% or 1%) and total value, in order to maintain the validity of my growth objectives. As I said, this will have little practical impact on the copiers who can withdraw funds at any time while being reassured by the fact that whatever they do, the copy will stay synchronised.
I’m fairly sure this will spark a lively discussion, which I welcome, and will provide me insight into your preferences and I can pass onto the eToro people if they ask.
Anyway, y’all have a great day.
Alex
P.S. For those interested in making money from the sideway moves of the UK100 or are tired of the unidirectionality of $NSDQ100 , $GER40 and $SPX500, this is the place for you.