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:

'Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Using this definition on our asset we see for example:
  • The total return, or performance over 5 years of Aggressive Risk Portfolio is 109.7%, which is lower, thus worse compared to the benchmark SPY (124.9%) in the same period.
  • Looking at total return, or increase in value in of 54.7% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (60.5%).

CAGR:

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (17.6%) in the period of the last 5 years, the annual return (CAGR) of 16% of Aggressive Risk Portfolio is smaller, thus worse.
  • During the last 3 years, the compounded annual growth rate (CAGR) is 15.7%, which is lower, thus worse than the value of 17.1% from the benchmark.

Volatility:

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (18.7%) in the period of the last 5 years, the 30 days standard deviation of 9.8% of Aggressive Risk Portfolio is smaller, thus better.
  • Looking at historical 30 days volatility in of 11.6% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (22.6%).

DownVol:

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

Which means for our asset as example:
  • The downside risk over 5 years of Aggressive Risk Portfolio is 7%, which is lower, thus better compared to the benchmark SPY (13.5%) in the same period.
  • Looking at downside deviation in of 8.3% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (16.4%).

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.'

Applying this definition to our asset in some examples:
  • The ratio of return and volatility (Sharpe) over 5 years of Aggressive Risk Portfolio is 1.37, which is greater, thus better compared to the benchmark SPY (0.81) in the same period.
  • Looking at ratio of return and volatility (Sharpe) in of 1.13 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.65).

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.'

Which means for our asset as example:
  • Looking at the excess return divided by the downside deviation of 1.94 in the last 5 years of Aggressive Risk Portfolio, we see it is relatively greater, thus better in comparison to the benchmark SPY (1.12)
  • Compared with SPY (0.89) in the period of the last 3 years, the excess return divided by the downside deviation of 1.58 is greater, 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 2.19 , which is smaller, thus better compared to the benchmark SPY (5.58 ) in the same period.
  • Looking at Downside risk index in of 2.7 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (6.82 ).

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 (-33.7 days) in the period of the last 5 years, the maximum DrawDown of -17.5 days of Aggressive Risk Portfolio is larger, thus better.
  • During the last 3 years, the maximum reduction from previous high is -17.5 days, which is greater, thus better than the value of -33.7 days from the benchmark.

MaxDuration:

'The Maximum Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Which means for our asset as example:
  • The maximum days under water over 5 years of Aggressive Risk Portfolio is 95 days, which is smaller, thus better compared to the benchmark SPY (139 days) in the same period.
  • Looking at maximum days below previous high in of 95 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (128 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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (32 days) in the period of the last 5 years, the average time in days below previous high water mark of 20 days of Aggressive Risk Portfolio is lower, thus better.
  • During the last 3 years, the average days below previous high is 21 days, which is lower, thus better than the value of 33 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.