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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (125.9%) in the period of the last 5 years, the total return, or increase in value of 126.7% of Aggressive Risk Portfolio is larger, thus better.
  • Compared with SPY (44.4%) in the period of the last 3 years, the total return of 50.5% is larger, 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:
  • Looking at the annual return (CAGR) of 17.8% in the last 5 years of Aggressive Risk Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (17.7%)
  • Compared with SPY (13%) in the period of the last 3 years, the annual return (CAGR) of 14.6% 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 (18.7%) in the period of the last 5 years, the volatility of 9.2% of Aggressive Risk Portfolio is smaller, thus better.
  • Compared with SPY (22.8%) in the period of the last 3 years, the historical 30 days volatility of 11% is smaller, thus better.

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.'

Using this definition on our asset we see for example:
  • The downside volatility over 5 years of Aggressive Risk Portfolio is 6.5%, which is smaller, thus better compared to the benchmark SPY (13.6%) in the same period.
  • Compared with SPY (16.7%) in the period of the last 3 years, the downside deviation of 7.9% 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (0.81) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.66 of Aggressive Risk Portfolio is higher, thus better.
  • During the last 3 years, the risk / return profile (Sharpe) is 1.1, which is greater, thus better than the value of 0.46 from the benchmark.

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.'

Using this definition on our asset we see for example:
  • The excess return divided by the downside deviation over 5 years of Aggressive Risk Portfolio is 2.37, which is higher, thus better compared to the benchmark SPY (1.12) in the same period.
  • Compared with SPY (0.63) in the period of the last 3 years, the downside risk / excess return profile of 1.52 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.'

Using this definition on our asset we see for example:
  • The Ulcer Index over 5 years of Aggressive Risk Portfolio is 2.13 , which is lower, thus better compared to the benchmark SPY (5.59 ) in the same period.
  • During the last 3 years, the Downside risk index is 2.68 , which is lower, thus better than the value of 7.14 from the benchmark.

MaxDD:

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Using this definition on our asset we see for example:
  • Looking at the maximum drop from peak to valley of -17.5 days in the last 5 years of Aggressive Risk Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (-33.7 days)
  • Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum drop from peak to valley of -17.5 days is larger, 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) in days.'

Which means for our asset as example:
  • 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 (139 days)
  • Looking at maximum time in days below previous high water mark 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.'

Applying this definition to our asset in some examples:
  • The average days under water over 5 years of Aggressive Risk Portfolio is 20 days, which is smaller, thus better compared to the benchmark SPY (33 days) in the same period.
  • Looking at average days under water in of 23 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (45 days).

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.