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Insider:[MTGO] Managing Your Portfolio

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In this last “How to” article I will discuss proper management of your portfolio and talk about some of the expectations you should have when speculating on MTGO.

Being successful in investing on MTGO is not a matter of having a large bankroll and/or finding the perfect specs. And losing money on some investments is not necessarily a sign of poor management.

A Better Management of Your Portfolio?

Optimizing your portfolio and the way you manage it may have several benefits you were not necessarily aware of.

If after six months of speculation your bankroll has lost 50% of its value, it is clear that something is wrong with your strategy. Perhaps after six months your bankroll has increased by 10%, 50% or even 100%? Nonetheless, could this figure be better with a better management of your portfolio?

Tracking Your Specs

Keep track of every single card/booster you buy and sell is probably the best favor you can to do yourself if you're not already doing it.

Basically, with an excel sheet like the one below, you want to track basic information about your positions. This will help you better evaluate how you perform. Here's some of the information you want to track:

  • Name of the cards
  • Quantities, totals and unit prices for your buys and sells
  • Percentages and tix profits
  • Comments or notes of any kind

Here is an example of how I typically keep track of my portfolio.

In the tix total columns I add the price of all my buys/sells and use a simple formula to calculate the unit prices and the %/tix profits.

Recently, I divided my investments into several different tables, depending on the format--Modern, Standard and Legacy/Vintage. Investments in the different formats have different expectations and time frames.

Lessons From the Past

Similar actions lead to similar results, good or bad. Learning from your past experiences and others, especially from other QS members, is crucial. It is nice and profitable to follow someone experienced on any spec, but it is better to understand the process behind any position taken.

The person you like to follow might not call such or such spec that you like, maybe because he/she learnt from a previous spec that this type of card doesn't work for x/y/z reasons. Ultimately, you want to know why in order to progress.

Alternatively, that same person you follow may have missed an opportunity that you saw. For these reasons, it is important to understand as much as possible of the dynamic of the market and of your investments, even if it means making some "mistakes" or investing in losing positions from time to time.

Keeping track of your specs is a great way to remember your past speculations and how they ended.

Charts from MtgGoldfish can be helpful here, especially for cyclical investments--it is so much easier when you have two years or more of history to base your specs on. It may be interesting to retrospectively check how low you bought and how high you sell a given card as compared to MtgGoldfish charts. Maybe next time you'll buy earlier and sell later, and maximize your profits.

Diversify Your Portfolio

You want to be not only successful, but consistently successful. Diversification is more important for small and big bankrolls. With a small bankroll you could easily use all of your tix in two or three specs. If things don't turn out as expected you really don't want to lose your all your bankroll on two or three specs.

The simple idea behind diversification is to spread the risk, preventing any bad spec(s) from eventually driving you to bankruptcy. Even the best investor is going to have a bad calls at some point. Especially as a beginner, you want to bet first on more winners than losers. With more experience and/or confidence you will increase that winners/losers ratio, with better profit percentages as well.

On the QS forums the consensus seems to be 5% maximum for each spec. The idea is that no single position in your portfolio should represent more than 5% of your total bankroll. If one or more of your positions are seriously plummeting, the largest part of your bankroll is still safe.

I apply this strategy to my portfolio and most of my investments represent probably 2 to 3%, or less, of my total bankroll. Very few of my positions represent more than 5%:

  • Boosters can sometimes represent 10% or more of my portfolio. Booster speculations are indeed a little bit different. They are pretty much unaffected by any tournament results, or by the ban list announcement, and there's no risk that boosters drop to 0.10 tix in a matter of weeks. Because of their inherent stability they might be the only reasonable exception to the "5% rule".
  • I also make an exception to the rule when two specific events occur together: a card is expecting to increase in a very short term and its price is pretty low for what it should/could be. If these conditions are met I'm inclined to invest more than usual with the goal to sell most of this position quickly.

For small bankrolls, this may imply that buying a 30+ tix card is not recommended as it could be way more than 5% of your portfolio.

Invest the Same Tix Amount

Whenever possible, I try to dedicate the same volume of tix for my investments. This is an extension of the diversification idea; you want your spec to weigh more or less equally in your portfolio. You never really know which of your positions is going to be spec of the year. This is particularly true when you speculate on junk rares or mythics.

According to the price and/or the availability of a card, you might not be able to allocate the same number of tix for every specs. As your bankroll gets bigger it will become almost impossible to buy 150 tix worth of a 0.20 tix card, especially if this card if from an older set.

You may have to spread your buys over many days, with the risk of buying at higher prices. Simply buy as much as you can with the buying price you are ready to pay.

Expectations From Your MTGO Investments

The Size of Your Bankroll

According to the size of your bankroll, the management of your positions might not be the same. This is due in part to availability and price of cards, as well as the time you have to dedicate to your MTGO finances.

At a 100 tix bankroll level, your goal might be to make that bankroll grow as fast as possible. At a 10,000 tix bankroll level, your goal might be to manage a good time/ROI ratio and simply collect your benefits every six months or so. Doubling the size of these two bankrolls will not take the same amount of time and effort, and you might not want deal with the same type of cards.

As I mentioned in my first article, I divide MTGO investments into three types: cyclicals, speculations and quick profits. I believe the ratio dedicated to these types of investments should differ according to the size or your bankroll.

  • With a small bankroll (100 to 1000 tix), I would recommend a minimum of speculative positions, and probably none to be honest. I would dedicate a large amount of my portfolio to quick flips, meaning up to 50% of your bankroll will be in the form of free tix most of the time. The other 50% should be invested in cyclic investments. Overall, you don't want to have uncertain speculative positions that can considerably slow you down if nothing happens, or worse, they lose value.
  • A mid-size bankroll (1000 to 10,000 tix) (this is my case) may incorporate some speculative and long-term investments. Cyclical investments should probably represent the largest part of your portfolio as they are reliable and generally yield good returns. You may still have part of your portfolio dedicated to quick flips but you might find it time-consuming for marginal profits. However, buying MTGO out of something like Blood Baron of Vizkopa is not going to be a problem for you now, so some quick flips might still be interesting.
  • Big bankroll (10,000 tix and over). Depending on the time you have to allocate to your MTGO portfolio, you may rely mostly on cyclical "high price-tag" investments and some speculations. You may want to dedicate some time to gathering 500 copies of junk rares and mythics now and then and wait for some to explode. Quick flips might not be attractive at all for you, as it requires a lot of time for a very minor fraction of your benefits in the end. If managed well, a bankroll of this size becomes a decent source of income.

Time Frame

As "easy" as it may seem, and as for any type of financial investments, don't expect miracles. Unsurprisingly, the more you get involved and the more time you dedicate to your MTGO speculation, the more success and profit you are likely to achieve.

When I started exploring investments on MTGO, my goal was to generate a 10% profit within my first year. After my first year and a couple transactions, I defined a good spec as a spec able to generate a 30% profit in three months. At that time, my bankroll was worth about 1000 to 1500 tix.

As I said before, it is easier to make a smaller bankroll grow. Whatever the size of your bankroll, I still think that having all your positions generate on average 30% profits every three months, or about 100% per year is a pretty good goal.

Also, before drawing any sort of conclusions, good or bad, give yourself at least six months to one year. Some seasons of the year are more likely to generate profits than other. Modern season, for instance, is a period you don't want to miss.

Remember to be patient and disciplined--you are likely to spend most of your time waiting for you positions to grow and/or for new opportunities to happen.

Cash Out Benefits From Time to Time

Lastly, allow yourself some form of concrete rewards after several months of successful speculation online. Even if your goal is to make your bankroll grow as much as possible until it reaches a 10,000 tix value, cash out some of your benefits and offer yourself a treat. Nobody wants to be caught with $20,000 worth of tix and a MTGO market that crashes for unexpected reasons.

 

Next week, I'll review these first two months of 2014 and the aftermath of the Modern PT.

Thank you for reading,

Sylvain Lehoux

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Sylvain Lehoux

Sylvain started playing Mtg in 1998 and played at competitive level for more than 10 years including several GP and 3 PT. When he moved to Atlanta in 2010 for his job he sold all his cards and stopped "playing". In 2011 he turned to Mtg Online and he experimented whether it was possible to successfully speculate on this platform. Two years later and with the help of the QS community his experience has grown tremendously and investing on MTGO has proven to be greatly successful. He is now sharing the knowledge he acquired during his MTGO journey! @Lepongemagique on Twitter

View More By Sylvain Lehoux

Posted in Finance, Free Insider, MTGOTagged

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12 thoughts on “Insider:[MTGO] Managing Your Portfolio

  1. I really enjoyed this article Sylvain even if I only speculate in paper compared to your background in MTGO. In particular I feel a lot of the newer speculators would benefit greatly from the diversity paragraph, as they are often quite rash. One of the biggest keys to be successful over a long period is risk mitigation and I felt you summed it up perfectly

    1. Thank you for your comment!

      Totally agree with you, I think diversification is one thing that has changed the most in my portfolio since my debuts, and probably help me being more, consistently, successful.

  2. Like this one a lot too. One of the best portfolio articles i’ve read so far (for a MTGO-only guy like me.).
    Makes me want to reorganize my excel sheet!

    For cashing out though, do you have a number in mind to tell you that you have to cash out? say, anything above 10k will be cashed out.. or maybe you cash out a certain percentage of profits every month?
    I cant imagine myself holding $10k in virtual value in mtgo..

    also, that is one sweet payout on Chandra!

  3. Thanks both of your comments guys,

    @Mico, as for cashing out, above 10k I will definitely consider cashing out at least 50% annually (it can be once a year or every 2 months). I’m talking here based on what my goals would be with a 10k bankroll.

    Usually, I cash out every 6 months or so, depending on the needs.

    I think having a goal with what you cash out is nice too.

    As for the spreadsheet, my first version was pretty simple and not really well organized. Now, I want it to be as nice and easy to read as possible. I incorporated colors, bold titles, different color background every other line for better reading, etc…

    Dividing the tables by formats or goals also helps for clarity.

    I add new lines of spec every time I buy a new cards, and from time to time I sort it by alphabetic order.

    It might take some time in the beginning to organize all of that (especially if your spreadsheet was rather unorganized) but it’s a real plus.

    Alos, don’t forget to make a copy of your spreadsheet, I lost my very first one after 1.5 year of specs :/

  4. Great article. I think we should all share our spreadsheets at some point (empty or populated) as I bet everyone has some neat little quirks build in 🙂

    1. I’ll check that and post my spreadsheets, no problem. It will be blank essentially because I’m planing on having a series of articles with the content of my main portfolio/spreadsheet, and I want to keep the suspense on the outcomes for now 😉

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