Description

Recommended for: Capital growth, speculation and young investors.

The Aggressive Risk Portfolio is appropriate for an investor with a high risk tolerance and a time horizon longer than 10 years. Aggressive investors should be willing to accept periods of extreme ups and downs in exchange for the possibility of receiving higher relative returns over the long term. A longer time horizon is needed to allow time for investments to recover in the event of a sharp downturn. This portfolio is heavily weighted with stocks which are historically more volatile than bonds and may include leveraged ETFs such as UGLD, SPXL and TMF.

Methodology & Assets
This portfolio is constructed by our proprietary optimization algorithm based on Modern Portfolio Theory pioneered by Nobel Laureate Harry Markowitz. Using historical returns, the algorithm finds the asset allocation that produced the highest return with volatility less than 17%.

While this portfolio provides an optimized asset allocation based on historical returns, your investment objectives, risk profile and personal experience are important factors when deciding on the best investment vehicle for yourself. You can also use the Portfolio Builder or Portfolio Optimizer to construct your own personalized portfolio.

Assets and weight constraints used in the optimizer process:
  • Bond ETF Rotation Strategy (BRS) (0% to 60%)
  • BUG Permanent Portfolio Strategy (BUG) (0% to 60%)
  • Global Market Rotation Strategy (GMRS) (0% to 60%)
  • Global Sector Rotation Strategy (GSRS) (0% to 60%)
  • Short Term Bond Strategy (STBS) (0% to 60%)
  • Universal Investment Strategy (UIS) (0% to 60%)
  • Universal Investment Strategy 2x Leverage (UISx2) (0% to 60%)
  • US Market Strategy 2x Leverage (USMx2) (0% to 60%)
  • US Sector Rotation Strategy (USSECT) (0% to 60%)
  • World Top 4 Strategy (WTOP4) (0% to 60%)

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Applying this definition to our asset in some examples:
  • Looking at the total return, or increase in value of 174.6% in the last 5 years of Aggressive Risk Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (97%)
  • Compared with SPY (39.3%) in the period of the last 3 years, the total return, or increase in value of 44.1% is greater, thus better.

CAGR:

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Using this definition on our asset we see for example:
  • The annual return (CAGR) over 5 years of Aggressive Risk Portfolio is 22.4%, which is larger, thus better compared to the benchmark SPY (14.6%) in the same period.
  • Compared with SPY (11.7%) in the period of the last 3 years, the annual performance (CAGR) of 13% is higher, thus better.

Volatility:

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Which means for our asset as example:
  • Compared with the benchmark SPY (20.9%) in the period of the last 5 years, the volatility of 15.5% of Aggressive Risk Portfolio is smaller, thus better.
  • During the last 3 years, the historical 30 days volatility is 14.1%, which is lower, thus better than the value of 17.5% from the benchmark.

DownVol:

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Applying this definition to our asset in some examples:
  • The downside volatility over 5 years of Aggressive Risk Portfolio is 10.9%, which is lower, thus better compared to the benchmark SPY (15%) in the same period.
  • Compared with SPY (12.1%) in the period of the last 3 years, the downside deviation of 9.9% is lower, thus better.

Sharpe:

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (0.58) in the period of the last 5 years, the Sharpe Ratio of 1.29 of Aggressive Risk Portfolio is greater, thus better.
  • Compared with SPY (0.53) in the period of the last 3 years, the Sharpe Ratio of 0.74 is greater, thus better.

Sortino:

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Using this definition on our asset we see for example:
  • The downside risk / excess return profile over 5 years of Aggressive Risk Portfolio is 1.83, which is higher, thus better compared to the benchmark SPY (0.8) in the same period.
  • Compared with SPY (0.76) in the period of the last 3 years, the excess return divided by the downside deviation of 1.06 is higher, thus better.

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Applying this definition to our asset in some examples:
  • The Downside risk index over 5 years of Aggressive Risk Portfolio is 5.53 , which is smaller, thus better compared to the benchmark SPY (9.33 ) in the same period.
  • Looking at Downside risk index in of 6.26 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (10 ).

MaxDD:

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum drop from peak to valley of -20.8 days of Aggressive Risk Portfolio is higher, thus better.
  • Compared with SPY (-24.5 days) in the period of the last 3 years, the maximum reduction from previous high of -19.6 days is greater, thus better.

MaxDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Which means for our asset as example:
  • The maximum time in days below previous high water mark over 5 years of Aggressive Risk Portfolio is 289 days, which is smaller, thus better compared to the benchmark SPY (488 days) in the same period.
  • Looking at maximum days under water in of 289 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (488 days).

AveDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Applying this definition to our asset in some examples:
  • The average days below previous high over 5 years of Aggressive Risk Portfolio is 54 days, which is lower, thus better compared to the benchmark SPY (123 days) in the same period.
  • Looking at average time in days below previous high water mark in of 74 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (181 days).

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Aggressive Risk Portfolio are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.