I. About Returns
Assuming you have 1 million, when your returns reach 100%, your assets will reach 2 million. If you subsequently lose 50%, that means your assets will return to 1 million. Clearly, losing 50% is much easier than earning 100%.
II. About Price Changes
If you have 1 million, after a 10% increase on the first day your assets will reach 1.1 million, then after a 10% drop on the second day your assets will remain at 990,000. Conversely, if you drop 10% on the first day and then rise 10% on the second day, your assets will still be 990,000.
III. 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 will remain at 1.405 million, with an annualized return of only 5.83%, which is even lower than the yield of a 5-year treasury bond.
IV. About 1% Every Day
If you have 1 million and can earn 1% every day before exiting, then after 250 days your assets can reach 12.032 million, and after 500 days your assets will reach 145 million.
V. About 200% Every Year
If you have 1 million, and achieve a 200% return over 5 consecutive years, your assets will reach 243 million after 5 years, but such high returns are very difficult to sustain.
VI. About 10 Times in Ten Years
If you have 1 million and hope 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%.
VII. About Averaging Down
Assuming you buy 10,000 yuan of a certain cryptocurrency when it is at 10 yuan, and now it has dropped to 5 yuan, if you buy another 10,000 yuan, your holding cost can be reduced to 6.67 yuan, rather than the 7.5 yuan you might have imagined.
VIII. About Holding Costs
If you have 1 million and invest in a certain cryptocurrency with a 10% profit, when you decide to sell, you can leave 100,000 yuan worth of chips, which will make your holding cost zero, allowing you to hold 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 a loss.
IX. 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, so your worst-case return for the year is zero, while the best return could be 12%. This is the prototype of the CPPI technique applied to capital-protected funds.