The crypto-trading hamster who is crushing it. Photo / Supplied
The crypto-trading hamster who is crushing it. Photo / Supplied
Social media is blowing up with ongoing talks about a hamster.
A hamster? It may come as a surprise, but a hamster in Germany is proving A Random Walk Down Wall Street author Burton Malkiel's hypothesis that a blindfolded monkey throwing darts at a stock ticker list in the newspapercould do just as well as a human investment professional.
The social media sensation has been beating investors at their own game and has all eyes set on his next cryptocurrency "crypto" move. The furry little trader's plays in the crypto universe have been grabbing the attention of more-experienced and professional investors.
Here's all you need to know about Mr Goxx, how he has been trading and the key ingredients to his success. The four-legged critter is named after Mt. Gox — the notorious Bitcoin exchange that closed in 2014 after a reported $460 million of holdings went missing.
You're probably wondering how a hamster makes trades. According to a video on his YouTube account, the whole thing works like this: Goxx occasionally enters his "Goxx box" where all the magic happens.
This includes a hamster wheel (called the "intention wheel") and two distinct tunnels labelled "purchase" and "sell" respectively. When he runs on the wheel it begins a transaction: the wheel's motion is linked to an automated, revolving Rolodex of 30 distinct cryptocurrencies (Bitcoin, Ethereum, and other prominent coins are included).
After Goxx exits the wheel, whatever tunnel he runs through subsequently initiates a "buy" or "sell" position on that particular token.
This whole setup has been delivering big wins for the tiny rodent. In fact, the crypto-trading hamster has outperformed the S&P 500 since June. Eager followers have seen Mr Goxx make gains of 16.62 per cent as of last week, compared with S&P which has gained 4 per cent over that same period.
Not only is the hamster doing well in relation to S&P. But numerous reports highlight how he has outperformed investment titans like Warren Buffet's Berkshire Hathaway, Nasdaq 100, and even Bitcoin. In fact, his portfolio has gone up 20 per cent since he began investing in June1.
Nick Stewart
Despite this being interesting, it is quite ridiculous that a rodent is beating many masterminds of investing. It wasn't that long ago football pundits were left bemused at the forecasting skills of an octopus in Germany called Paul.
Individuals may start believing that if a hamster can achieve such gains, so can I. In the tongue-in-cheek case of Mr Goxx, it's typically a "game" of luck. He could make a loss or gain.
This is where diversification ties in. We've all heard of the common phrase "don't put all your eggs in one basket".
We can apply the same concept when creating investment portfolios. In 1952, Nobel prize laureate Harry Markowitz famously said, "diversification is the only free lunch in finance". Diversification within portfolios is an investor's best friend.
It spreads risks to more economies, to a greater number of stocks, to a wider range of companies, and to a wider spread of sectors.
Even if Mr Goxx continues to beat the market, investing based on a hamster's random short-term movements is not a sound investment strategy.
Mr Furry Trader is not here to give out financial advice ... we can leave that to the financial planning professionals.
• Nick Stewart is a financial adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX-certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, wealth management, risk insurance and KiwiSaver solutions.
• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or go to our website, www.stewartgroup.co.nz
