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:
  • Compared with the benchmark SPY (81.5%) in the period of the last 5 years, the total return, or increase in value of 181.6% of Aggressive Risk Portfolio is larger, thus better.
  • During the last 3 years, the total return, or performance is 100%, which is larger, thus better than the value of 48.1% 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.'

Which means for our asset as example:
  • The annual return (CAGR) over 5 years of Aggressive Risk Portfolio is 23%, which is larger, thus better compared to the benchmark SPY (12.7%) in the same period.
  • During the last 3 years, the annual performance (CAGR) is 26%, which is greater, thus better than the value of 14% from the benchmark.

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:
  • Compared with the benchmark SPY (20.5%) in the period of the last 5 years, the volatility of 14.7% of Aggressive Risk Portfolio is lower, thus better.
  • Looking at 30 days standard deviation in of 16.5% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (23.8%).

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:
  • Compared with the benchmark SPY (15%) in the period of the last 5 years, the downside volatility of 10.6% of Aggressive Risk Portfolio is lower, thus better.
  • Compared with SPY (17.3%) in the period of the last 3 years, the downside volatility of 11.9% 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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (0.5) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.39 of Aggressive Risk Portfolio is higher, thus better.
  • Looking at ratio of return and volatility (Sharpe) in of 1.42 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.48).

Sortino:

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Which means for our asset as example:
  • Looking at the excess return divided by the downside deviation of 1.95 in the last 5 years of Aggressive Risk Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.68)
  • Compared with SPY (0.66) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.99 is larger, 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.'

Which means for our asset as example:
  • Looking at the Ulcer Index of 4.2 in the last 5 years of Aggressive Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (7.13 )
  • Looking at Downside risk index in of 4.48 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (8.25 ).

MaxDD:

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Applying this definition to our asset in some examples:
  • The maximum DrawDown over 5 years of Aggressive Risk Portfolio is -20.8 days, which is greater, thus better compared to the benchmark SPY (-33.7 days) in the same period.
  • During the last 3 years, the maximum drop from peak to valley is -20.8 days, which is greater, thus better than the value of -33.7 days from the benchmark.

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 148 days, which is smaller, thus better compared to the benchmark SPY (150 days) in the same period.
  • Looking at maximum days under water in of 87 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (150 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 30 days, which is lower, thus better compared to the benchmark SPY (41 days) in the same period.
  • Compared with SPY (36 days) in the period of the last 3 years, the average days below previous high of 20 days is smaller, thus better.

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.