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 16%.

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%)
  • World Top 4 Strategy (WTOP4) (0% to 60%)
  • Global Sector Rotation Strategy (GSRS) (0% to 60%)
  • Global Market Rotation Strategy (GMRS) (0% to 60%)
  • NASDAQ 100 Strategy (NAS100) (0% to 60%)
  • US Sector Rotation Strategy (USSECT) (0% to 60%)
  • Leveraged Universal Investment Strategy (UISx3) (0% to 15%)
  • Universal Investment Strategy (UIS) (0% to 60%)
  • US Market Strategy (USMarket) (0% to 60%)
  • Dow 30 Strategy (DOW30) (0% to 60%)
  • Short Term Bond Strategy (STBS) (0% to 60%)

Statistics (YTD)

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

TotalReturn:

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Applying this definition to our asset in some examples:
  • The total return, or performance over 5 years of Aggressive Risk Portfolio is 142.8%, which is greater, thus better compared to the benchmark SPY (74.2%) in the same period.
  • During the last 3 years, the total return, or increase in value is 87.4%, which is higher, thus better than the value of 50.1% from the benchmark.

CAGR:

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Using this definition on our asset we see for example:
  • Looking at the compounded annual growth rate (CAGR) of 19.4% in the last 5 years of Aggressive Risk Portfolio, we see it is relatively higher, thus better in comparison to the benchmark SPY (11.8%)
  • Compared with SPY (14.5%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 23.3% 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.'

Using this definition on our asset we see for example:
  • The 30 days standard deviation over 5 years of Aggressive Risk Portfolio is 8.2%, which is lower, thus better compared to the benchmark SPY (13.3%) in the same period.
  • During the last 3 years, the historical 30 days volatility is 7.9%, which is lower, thus better than the value of 13% from the benchmark.

DownVol:

'Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Applying this definition to our asset in some examples:
  • Looking at the downside risk of 5.5% in the last 5 years of Aggressive Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (9.6%)
  • Compared with SPY (9.4%) in the period of the last 3 years, the downside deviation of 5.4% is smaller, 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:
  • The Sharpe Ratio over 5 years of Aggressive Risk Portfolio is 2.07, which is higher, thus better compared to the benchmark SPY (0.69) in the same period.
  • Compared with SPY (0.93) in the period of the last 3 years, the risk / return profile (Sharpe) of 2.62 is greater, thus better.

Sortino:

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Applying this definition to our asset in some examples:
  • Looking at the excess return divided by the downside deviation of 3.07 in the last 5 years of Aggressive Risk Portfolio, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.96)
  • Looking at downside risk / excess return profile in of 3.88 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (1.27).

Ulcer:

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Which means for our asset as example:
  • Compared with the benchmark SPY (3.97 ) in the period of the last 5 years, the Downside risk index of 2.1 of Aggressive Risk Portfolio is lower, thus better.
  • During the last 3 years, the Ulcer Ratio is 1.59 , which is lower, thus better than the value of 4.1 from the benchmark.

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (-19.3 days) in the period of the last 5 years, the maximum reduction from previous high of -8 days of Aggressive Risk Portfolio is larger, thus better.
  • Looking at maximum drop from peak to valley in of -8 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (-19.3 days).

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'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days under water of 223 days of Aggressive Risk Portfolio is higher, thus worse.
  • During the last 3 years, the maximum days below previous high is 89 days, which is lower, thus better than the value of 139 days from the benchmark.

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 39 days, which is lower, thus better compared to the benchmark SPY (42 days) in the same period.
  • During the last 3 years, the average time in days below previous high water mark is 20 days, which is lower, thus better than the value of 37 days from the benchmark.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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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.