Investing in undervalued securities worldwide

Weekly Update 16 October 2023

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The Financial Times published an article this weekend about copy trading.

The article makes a number of interesting observations, on which comments below.

“An equity trader abruptly abandoned his cautious strategy and lost half of the copier’s account.” This example showcases why diversifying your portfolio is important. Anyone can have a bad year, but if the person having the bad year is only a small part of your entire portfolio, you will be able to recover from the loss.

To reduce likelihood of such a large loss taking place, it helps to monitor the people you copy and start asking questions if positions of excessive size are opened or if the strategy being copied seems to change.

“How are people to know if they’re following a fantastic brain or an overinflated ego?” One thing that helps here is analysing the risks taken to get returns. What is the maximum risk score and how much variability is there in the risk score from one week and month to the next? What is the maximum position size? Is leverage used?

Returns that are made with lower, more consistent risk scores, and with more diversified portfolios, are less likely to have been generated by overinflated egos.

“If you [a Popular Investor] succeed, you make more money, but it doesn’t matter if you fail as you can delete your account and gamble again.” This problem will apply most acutely to investors with low copier counts. Those starting out need attention to get copiers. And one way to get attention is to post a fabulous year; and to do that, taking excessive risks helps.

However, after a Popular Investor gets thousands of copiers, incentives change, because people will remember you if you start to gamble and fail.

This is not to say that there won’t be investors with high copier counts who still feel pressure to gamble, because they want to make it to absolute #1. The antidote against this would be that Popular Investors should be required to invest a large part of their liquid net worths in their strategies.

“Several of the most-followed copy traders have started to lag behind after doing well before the pandemic.” I believe this is because the most-followed copy traders became so by being invested in Technology stocks and cryptos. Those assets performed badly in 2022. And they are very unlikely to post similar returns in the 2020s as during their golden years in 2018-2021.

This is an example of a situation where copying based on past returns may have been counterproductive.

“However, novice savers may be following a name rather than an investment strategy and be unaware of the risks involved.” This is undoubtedly true. Diversifying across a number of investors and other assets will help to contain the risks, however.

The challenge for most investors, whether retail or professional, is that it is difficult to identify good people to invest with, and there is no simple algorithm that can guarantee success.

It is in my view likely that only 1-2% of Popular Investors of the 3,000 on the platform have skill. Yet, if you manage to identify the best, then I believe copy trading may well provide superior returns over alternatives such as investing in index funds or actively managed funds over the long run.

(A user comment) “Probably better value for money than St James Place or Odey asset management” This I agree with. The advantages of copy trading over traditional fund or wealth management are several:

– Lower fees
– More transparency
– More interactive and educative

Investing always comes with risks, and copy trading certainly is no exception. But copy trading done right, with the risks appropriately managed, may well be the future of wealth management for retail investors.

2023 performance YTD
@triangulacapital +18.9%
$SWDA.L +11.6%

Portfolio changes

Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.

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eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 51% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

eToro (Europe) Ltd., a Financial Services Company authorised and regulated by the Cyprus Securities Exchange Commission (CySEC) under the license # 109/10.

eToro (UK) Ltd. is authorised and regulated by the Financial Conduct Authority (FCA) under the license FRN 583263.

Your capital is at risk. Other fees may apply. For more information, visit

Pietari Laurila is not a registered investment advisor and does not offer investment advisory, fund management or wealth management services.

Triangula Capital is a brand name, not an incorporated entity.

This page is provided for information purposes only. It is not a recommendation to copy the Triangula Capital strategy or to invest in any fund or security.

2009-2020 performance figures are from Pietari’s personal Interactive Brokers account. They are time-weighted returns calculated in accordance with the Global Investment Performance Standards (GIPS).

From 2021, performance is calculated by eToro.

Past performance is not indicative of future results.

Track Record

It is often said that past performance is not a guarantee of future performance.

That is true. But there is also some evidence indicating that portfolios that performed better in the past, do perform better in the future.

“[…] top-decile prior-alpha funds produce annual future alphas of about 150 bps, net of fees” Source

Risk warning: That is only one study. In general, past performance is not indicative of future results.

Aligned Incentives

Pietari invests the majority of his net worth in the strategy. This ensures that his interests are aligned with investors who copy the strategy.

“Funds with high-incentive contracts deliver higher risk-adjusted return, and the superior performance remains persistent. The top incentive quintile of funds outperforms the bottom quintile by 2.70% per year” Source

Risk warning: Pietari holds accounts with multiple brokers and may therefore have a conflict of interest when deciding which accounts he should trade in first.

Unconstrained Investments

The strategy has fewer constraints on its investments than traditional mutual funds.

The strategy portfolio can be invested in stocks, bonds or cash and these allocations can vary over time.

Compared to traditional mutual funds, the strategy also:

  • holds fewer securities
  • trades more
  • avoids following the index

Each of these points has been shown to be an important predictor of portfolio performance.

“We […] find that portfolio concentration is directly related to risk-adjusted returns for institutional investors worldwide” Source

“A one-standard-deviation increase in turnover is associated with a 0.65% per year increase in performance for the typical fund” Source

“We find that truly active funds significantly outperform closet indexers. Further, we find that the truly active funds are able to outperform their benchmarks on average by 1.04% per year” Source

Risk warning: Concentrated portfolios with few positions can suffer large losses if bad news arrives about any of the companies in the portfolio.

Cheap Stocks in Cheap Sectors

The strategy invests in geographies and sectors where values have collapsed due to macroeconomic problems.

Within these geographies and sectors, the strategy overweights stocks that trade at low valuations on measures such as price-to-earnings or price-to-net asset value.

Every stock in the strategy portfolio must also be a good company, with no obvious red flags or long-term threats to its business model.

The aim of the strategy is to maximize returns, even if this means taking more risks than usual.

Risk warning: The strategy portfolio tends to be concentrated in risky stocks, which means that its losses in any market downturn will likely exceed those of the market index.