One, about returns
Assuming you have 1 million, when the return reaches 100%, your assets will reach 2 million. If you subsequently lose 50%, it means your assets will return to 1 million. Clearly, losing 50% is much easier than earning 100%.
Two, about price fluctuations
If you have 1 million, after a 10% increase on the first day, your assets reach 1.1 million, then after a 10% drop on the second day, your assets remain at 990,000. Conversely, if you drop 10% on the first day and increase 10% on the second day, your assets are still 990,000.
Three, about volatility
If you have 1 million, earn 40% in the first year, lose 20% in the second year, earn 40% in the third year, lose 20% in the fourth year, earn 40% in the fifth year, and lose 20% in the sixth year, your assets remaining will be 1.405 million, with an annualized return of only 5.83%, even lower than the coupon rate of a five-year treasury bond.
Four, about earning 1% daily
If you have 1 million, if you can earn 1% daily and exit, then after 250 days, your assets can reach 12.032 million, and after 500 days, your assets will reach 145 million.
Five, about earning 200% annually
If you have 1 million, and continuously achieve a 200% return over 5 years, then after 5 years your assets will reach 243 million, but such high returns are very difficult to sustain.
Six, about a tenfold increase in ten years
If you have 1 million, hoping to reach 10 million in ten years, 100 million in twenty years, and 1 billion in thirty years, then you need to achieve an annualized return of 25.89%.
Seven, about averaging down
Assuming you buy 10,000 yuan of a certain cryptocurrency when it's 10 yuan, and now it has dropped to 5 yuan, if you buy another 10,000 yuan, then at this point, your holding cost can be reduced to 6.67 yuan, rather than the 7.5 yuan you might expect.
Eight, about holding costs
If you have 1 million and profit 10% by investing in a certain cryptocurrency, when you decide to sell, you can leave 100,000 yuan worth of chips, then your holding cost will be zero, and you can hold it long-term without pressure. If you are extremely optimistic about this cryptocurrency and leave 200,000 yuan worth of chips, you will find that your profit will rise from 10% to 100%. But don’t be complacent, because if this cryptocurrency drops by 50% later, you might still incur losses.
Nine, about asset allocation
With a risk-free asset A (annual return 5%) and a risky asset B (return -20% to 40%), if you have 1 million, you can invest 800,000 in risk-free asset A and 200,000 in risky asset B, then your worst return for the year is zero, and the best return could be 12%. This is the prototype of the CPPI technique applied to capital preservation funds.
