How to Create a PAMM Portfolio? Tips for a Beginner Investor

Almost every budding investor asks the same question: how to create a PAMM portfolio? This question also crosses the minds of seasoned investors, though on a different level. Regardless, this operation is crucial to earning profits and minimizing the risk of capital loss. Therefore, everyone participates in this process.

So, what's needed to build a portfolio? First and foremost, you need to choose a strategy or develop one. An investor should decide in advance who will be included in their portfolio (not specific accounts, but the style of the manager). Only then can decisions be made.

For example, when considering how to create a PAMM portfolio, an investor may decide to allocate management as follows: 60% conservative, 20% moderate, and 20% aggressive. This becomes the initial or base strategy. It might be successful or not—each investor determines their ideal balance.

A Few Useful Tips

There is a strategy based on the Martingale principle. Investors tend to avoid managers who use it. Why? Because these traders double the trade volume after each loss.

Why do investors dislike those using the Martingale strategy? It's a very risky method. The success depends on the account size of the manager. They might push the account into significant drawdown and eventually fail. This is why investors typically stay away from such traders.

How do you know if a trader uses Martingale? It's not as simple as it sounds, but it's doable. Visiting specialized forums where managers and investors interact can provide valuable insights.

Another helpful tip for creating a PAMM portfolio is not to allocate too much to aggressive traders. Some novices, chasing high returns, allocate more than half of their funds to aggressive strategies. Consequently, they risk losing those amounts quickly.

Investors might also consider PAMM indices and PAMM funds. We cover these concepts in detail in one of our articles. Essentially, these are ready-made portfolios. All an investor needs to do is adopt them.

With the rise of PAMM accounts, many services now offer portfolio selection assistance for investors. Thus, any newcomer can create a well-rounded group of managers by leveraging a service's help.