We will be continuing our series on the DCA investment strategy on various coins listed on the Midas platform. Be sure to also check out our analysis on DIVI and Midas!
In this piece, we will be looking at Telos coin. As we have stated before, this article is intended only for educational purposes on the benefit of dollar cost averaging, and should not be taken as financial advice. Always do your own research and never invest more than you are willing to lose.
Before we get started, it’s important to ask the question: What is dollar cost averaging? This is a strategy where investors purchase an asset in increments over time. Rather than making one large purchase all at once, averaging in your position reduces risk caused by volatile markets. This is not a get rich quick scheme. Instead of short term trades based off price speculation, the DCA strategy is one that investors use to create good long-term hold positions.
In this example, we will be looking at the DCA strategy applied to Telos over a period of one year. For the purpose of showing the benefit of PoS and Masternode coins – as well as the advantages of the Midas platform – all purchased coins for this example will be held in Midas Instant Shares.
Our Application of the Strategy:
For the purposes of calculation, price snapshots will be taken for Telos on the first day of each month, starting on May 1, 2019 and ending on May 1, 2020. This gives us a total of 13 price points. Our hypothetical investor will purchase $100 worth of Telos coins on the first day of each month, regardless of the price, for a total investment of $1300. We will then examine the results of two different versions of the DCA strategy: one with reward reinvestment and one with selling rewards monthly.
Backtest:
- Total Capital Invested: $1300
- May 2020 Balance (USD, Reinvesting): $3130.65
- May 2020 Balance (USD, Selling Rewards): $2262.44
- *Dividend: $758.96
*NOTE: The “DIVIDEND” portion only applies to the “selling rewards” plan. The total portfolio value of this plan can be determined by adding the balance and dividend.
Below is a graph of portfolio value per month vs. investment amount:
In this chart, the blue bar represents the total invested capital, and the red bar represents the portfolio value of Telos holding (with reward reinvestment). As you can see, the portfolio is in profit for the entire life of the strategy. Actually, the portfolio peaked in value on Mar 1, with a value of $4231.37, before declining with the decline in value of Telos coins. Including reward reinvestment, this strategy ends with a value of $3130.65, representing a 240.8% return on investment! Send the word “win-win” to the Telegram chat and get extra $10!
The alternative strategy of DCA with selling rewards yields the following result:
Once again, the blue bar represents invested capital and the red represents portfolio value, but now the yellow bar represents the dividend created by selling rewards each month.
The total return of Telos holding and sold dividend combined is $3021.39, representing a total ROI of 232.4%. This number is only slightly less than the return from reinvestment, and experiences much less volatility in the later months due to the stability of sold rewards.
Yet again we see that both versions of the DCA strategy are quite profitable! We will be continuing the DCA analysis on various coins and portfolios available on the Midas platform in the coming days/weeks. Stay tuned for more updates!
