Ah, the end of the year. Snow is drifting and music is playing softly in the background. Everyone is relaxed and settling in for a cozy winter nap….
Well, not really… For me it was more a season for business and busyness! As some of you know, I have been working for quite a while now to make the Penta Strategies more accessible and cost effective for us all. Starting next year, our favorite Penta strategies will be available as investment vehicles that you can add to your portfolio like stocks at any Swiss or European bank! More on that in a bit…
But first, let’s take a look at the past month: Positive momentum from November and more good news on Covid-19 vaccines along with another $900 billion bill from the U.S. Congress had stock markets hitting new all-time highs almost weekly.
Meanwhile BTC (Bitcoin) gained over 50% as hype and institutional investment soared. On the other hand, XRP (Ripple), the third largest cryptocurrency, plunged over 50% after the U.S. Securities and Exchange Commission (SEC) sued Ripple Labs for violating the U.S. Securities Act. This came after a long debate over whether XRP needs to be regulated as a security like a stock or whether it is a currency outside the SEC’s jurisdiction. XRP is centrally operated by Ripple Labs, unlike the two largest cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH), which have decentralized systems of mining and transactions. In previous announcements, the SEC has therefore already ruled that both of them are not considered securities.
The S&P 500 rose by 3.14% and the MSCI World Index by 3.63% while 20-year bonds lost -1.46%.
Our strategies performed stable again with Pro +0.74% (unfortunately -4% due to Ripple), MiniMax +10.4% (focusing on Bitcoin and Ethereum) and Universal with 1.5%.
All in all, we had another great year with double-digit growth in all three strategies:
But of course, there is always room for improvement! Last year I worked on further stabilizing PentaTrader Pro and developed a new version, which I called Penta Progressive. As usual, I tried this out myself over the last 9 months with nice results:
During summer I further analyzed the underlying economic and mathematical logic of Bitcoin and concluded that it might be a good idea to develop another strategy that may benefit from the expected rise in cryptocurrencies over the next 18 months while keeping volatility to a manageable level. Again, I have been acting as a guinea pig with my own money for the last few months and lo and behold, so far it has also worked surprisingly well:
In parallel, I had a closer look at the real-life costs of implementing the Penta strategies, including all fees and taxes, across various portfolios of family, friends, and myself. A ~150k USD portfolio incurs total expenses in the order of 2.1% (Universal), 3% (MiniMax), 3.9% (Pro/Progressive) and 7.7% (Cryptomax, due to weekly rebalancing). Even for portfolios >500k USD, the expenses for Pro/Progressive did not go below 2%. A 10k USD MiniMax portfolio even incurred expenses of 17.9% (!). That’s crazy for doing all the rebalancing work yourself…
Analyzing the main reasons shows that the base transaction fees and the Swiss stamp duty for every trade make it really difficult for smaller portfolios to be cost effective.
So what is the solution? The basic concept sounds simple: run a larger portfolio and manage it outside of Switzerland! In practice, of course, it’s a bit more complicated. But with some professional partners, it was possible to set up three AMC funds in Jersey, a beautiful island near the Normandy coast. Jersey is a British crown dependency, but actually like a separate country with its own government and its own financial and legal system. Similar to Liechtenstein or Luxembourg, Jersey is an ideal place for financial services.
The three Penta funds, while legally located in Jersey, are managed by Peersuna, a registered Swiss asset manager, have a Swiss securities number (ISIN), and as of next week can be purchased by any qualified investor in Switzerland or Europe through virtually any bank.
As a result, I will liquidate my portfolio tonight and shift most of my investments into these new funds. If you would like to join me and get more details about this, just let me know.
I am very grateful for all the support and encouragement I have received from all of you. A crazy year has come to an end. And a new journey begins!
All the best to you and your loved ones and a great start into a wonderful New Year!
Stay happy, healthy and wealthy!
Omar