So today was the first day that I was eligible for Covestor’s Investor/Trader Top 100 Ranking. Because my account has only be tracked for one month, I was only eligible for the Top 100 Month-to-Date, but since the month is soon to be coming to a close, let’s take a moment to see where I stack up compared to my peers – For the month of July I checked in at #17. Covestor has over 25,000 members, so I am quite pleased to be at #17, and that doesn’t include today’s performance, which I’m assuming will push us up maybe a few more notches. Covestor takes into account 3 variables when ranking traders and investors. 1) Sharpe Ratio 2) Risk Since Inception (Standard Deviation) and 3) Actual Return.
The Sharpe Ratio is the measure of risk-adjusted return, using the return and standard deviation. A higher Sharpe Ratio indicates the portfolio has earned a higher return for each unit of risk incurred. The higher the better. This essentially measures your legitimacy as a trader, are you getting lucky, and thus a one-hit wonder, or are you managing risk and making consistent and steady gains. Here we ranked 17.
The Risk Since Inception (Standard Deviation) measures the volatility of the portfolio returns. It represents the consistency with which returns were delivered in the past. This looks for whether you are up 5% one day, down 10% the next, up 25% the following day, down 50% after that or are you trading up 1%, up 1.5%, up 1.3% and etc. Here is where we showed our strength the most coming in at #2.
We are on the bottom of the screen-shot – couldn’t get it any bigger – don’t strain your eyes though, you can click here to see the actual page.
This goes to show that managing risk, not letting losses get out of hand, and having a plan and trading according to that plan, places the trader in the position for the best chance at success. Keep risk low, volatility low, and the draw-downs low, and you have the recipe for success. Now granted this is only one month’s results, but we do expect to frequent the top 100 list quite a bit in the future.