Portfolio Manager

What exactly portfolio manager bot does?

Portfolio management is a widely used tool in the hedge fund industry where funds create a portfolio consists of a basket of currencies or stocks. In this method of trading, the portfolio manager will sell the assets that are surging price and use the same capital to buy the assets that are going down in price. So, the manager can lower his/her overall risk and diversify his/her investment. Therefore, even a price of an asset in the portfolio takes a big dive, the profit from other assets that are surging will be able to buy the down trending asset at a lower price.

How does portfolio manager bot make money?

When you have a portfolio that’s fluctuating in value, it provides opportunity for profit. During the day, some coins may perform better than other and some coins may perform worse than other. So, the portfolio manager aims to sell the coins that are performing well and allocate that capital to the coins that are doing worse for the day with the ultimate hope that eventually all assets will trend up. Portfolio manager bot is in a constant state of selling the coins that are going up and buying the coins that are going down within your portfolio. By shuffling and reallocating capital across many different assets provides a continuous loop of profitable trades.

Let’s put that into context.

Example

You as a portfolio manager select a basket of coins and allocate a percentage of the overall portfolio value into individual coins. For this example, we will create a hypothetical portfolio with made up numbers. So, the calculation is easy to follow along.

You have 10,000$ and you want to invest into 5 coins.

You may be already holding the coins you want in your portfolio or you may have been thinking to invest in them. Let’s assume you want to create a USD based portfolio. Though, you are a risk averse investor and understand that prices may go down. So, you want to keep 5,000$ in USD just in case if the price of the entire portfolio takes a dive, you have enough capital to buy at a lower price.

You select the following coins to be in your portfolio with the respective allocation percentage; BTC 20%, ETH 20% and BNB 20%, LTC 20%, EOS 20%. In another words, you want to be holding 1000$ worth of each of the coins mentioned above.

Now that we have created the portfolio, we need to choose when we want to rebalance the portfolio. Here, you choose a percentage value which the value of your holdings is exceeded by that much, the bot will sell the access and pull you back down to desired allocation. So, if Bitcoin goes up 10%, the bot will sell 10% of your holding to bring back your BTC holdings down. On the contrary, if the price dumps 10%, it will use the 5,000$ you have left in USD to buy it cheaper. So, it can sell it later when the price goes up.