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:

'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.'

Which means for our asset as example:
  • The total return over 5 years of Aggressive Risk Portfolio is 159.8%, which is larger, thus better compared to the benchmark SPY (66.6%) in the same period.
  • Looking at total return, or performance in of 79% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (36.1%).

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.'

Applying this definition to our asset in some examples:
  • The annual return (CAGR) over 5 years of Aggressive Risk Portfolio is 21%, which is greater, thus better compared to the benchmark SPY (10.8%) in the same period.
  • Looking at compounded annual growth rate (CAGR) in of 21.4% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (10.8%).

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.'

Which means for our asset as example:
  • Looking at the volatility of 10.3% in the last 5 years of Aggressive Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (19%)
  • During the last 3 years, the historical 30 days volatility is 11.7%, which is lower, thus better than the value of 22% from the benchmark.

DownVol:

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

Using this definition on our asset we see for example:
  • Looking at the downside volatility of 7.3% in the last 5 years of Aggressive Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.9%)
  • Compared with SPY (16.2%) in the period of the last 3 years, the downside volatility of 8.4% 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (0.43) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.8 of Aggressive Risk Portfolio is larger, thus better.
  • Looking at risk / return profile (Sharpe) in of 1.62 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.38).

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:
  • The downside risk / excess return profile over 5 years of Aggressive Risk Portfolio is 2.55, which is larger, thus better compared to the benchmark SPY (0.59) in the same period.
  • Compared with SPY (0.52) in the period of the last 3 years, the excess return divided by the downside deviation of 2.24 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.'

Which means for our asset as example:
  • The Ulcer Ratio over 5 years of Aggressive Risk Portfolio is 2.51 , which is lower, thus better compared to the benchmark SPY (5.9 ) in the same period.
  • Compared with SPY (6.98 ) in the period of the last 3 years, the Downside risk index of 2.91 is smaller, thus better.

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 -19.4 days of Aggressive Risk Portfolio is higher, thus better.
  • During the last 3 years, the maximum drop from peak to valley is -19.4 days, which is larger, 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) in days.'

Applying this definition to our asset in some examples:
  • Looking at the maximum time in days below previous high water mark of 95 days in the last 5 years of Aggressive Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (187 days)
  • 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 (139 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.'

Using this definition on our asset we see for example:
  • The average days under water over 5 years of Aggressive Risk Portfolio is 21 days, which is lower, thus better compared to the benchmark SPY (44 days) in the same period.
  • Compared with SPY (41 days) in the period of the last 3 years, the average days under water of 24 days is smaller, thus better.

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.