Solo Trading Vs Investing in Crypto Fund

There is a common expression in the traditional markets: “90% of the traders fail”. Let’s check if there’s any truth to it, or is this just a myth.

I’ve researched many studies and came to some interesting findings:

  • Unprofitable traders account for over 80% of the entire trading volume.1

  • Average traders are more prone to invest in high-risk, low-cap assets.3

  • An average investor underperforms the market by 3.7% annually. Active investors who trade frequently underperform the market by 10.3% annually.3

  • Traders significantly lower their returns by not accounting for the transaction fees.2,3

  • Traders continue to trade, even though their past performance has been negative for an extensive time.4

Not many studies have been carried out specifically on crypto traders. Still, my guess would be that the crypto investors would perform even worse than the (above mentioned) traditional investors. Let me explain why.

  • The crypto market is still being run primarily by retail investors, rather than institutional investors. These are people with regular jobs and families. Retail investors lack the financial background to efficiently evaluate an investment, and to accurately analyze and consistently monitor the market.

  • Among the crypto investors, it is very popular to HODL an investment. But HODLing inherently suggests holding firmly onto an asset, even when it has long been underperforming the market.

  • Compared to the traditional market, the crypto market is open 24/7. Accordingly, the crypto market would require even more time and effort for analyzing and monitoring, for an investor to be able to beat the market.

Having said that, the best option for most crypto investors would be to either hold the assets (without trading) or to invest in a professionally managed fund that focuses on the long-term results.

Crypto funds present a great solution for an average investor. They provide an easy-accessible, diversified, and secure investment for all investors, without taking on the burden of constantly analyzing and monitoring the market, or making trading mistakes.

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Sources:

Do Day Traders Rationally Learn About Their Ability?

2 Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors

3 Fight or Flight? Portfolio Rebalancing by Individual Investors

4 Do Investors Trade Too Much?

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