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Published in:
A Brief History of Money Read chapter Read first chapter

2023 | OriginalPaper | Chapter

4. Portfolio Management Primer

Author : Thomas Jeegers

Published in: Understanding Crypto Fundamentals

Publisher: Apress

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Abstract

Let us change perspective and look at cryptoassets from a financial portfolio management point of view. This chapter introduces the basics of portfolio management to assess the financial characteristics of cryptoassets. As the analysis shows, cryptoassets have been the most financially attractive investment of the last decade, even risk-adjusted, and could remain so for the upcoming one.

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previous chapter Blockchain As a Force for Good
next chapter Birth of a New Asset Class
Footnotes
1
Investors may be interested in performing a similar analysis but, instead of the Sharpe ratio, using the Treynor ratio or Jensen’s alpha, by using the S&P 500 or the NASDAQ as a benchmark. However, a similar conclusion would be drawn from such approaches.
 
2
The Sortino ratio only considers the standard deviation of observations below the arbitrary target, ignoring the other ones. It cannot be computed for yearly NASDAQ data over this period because the NASDAQ’s yearly returns were not below 5% during any year of the horizon. The formula would therefore require to “divide by 0”, which is mathematically impossible.
 
3
Over the same period, the S&P500 went from $2,300 to $4,200, yielding an 83% increase over a four-year period, which is a 16% CAGR.
 
4
US Treasury bonds for this period are around the 1% annual return. More risky corporate bonds would yield marginally more, but still far below returns mentioned here.
 
5
Note, however, that since 2020, the level of correlation of cryptoassets with the NASDAQ (which is an index massively tilted toward tech companies) has increased significantly.
 
Metadata
Title
Portfolio Management Primer
Author
Thomas Jeegers
Copyright Year
2023
Publisher
Apress
Book
Understanding Crypto Fundamentals

Print ISBN: 978-1-4842-9308-9

Electronic ISBN: 978-1-4842-9309-6

Copyright Year: 2023

DOI
https://doi.org/10.1007/978-1-4842-9309-6_4

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