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TuringTrader’s All-Stars Leveraged

Summary

  • Objective: leveraged growth
  • Type: meta-portfolio
  • Invests in: individual stocks, leveraged ETFs tracking stocks, bonds, commodities
  • Rebalancing schedule: weekly + monthly
  • Taxation: 90% short-term capital gains
  • Minimum account size: $100,000

TuringTrader’s All-Stars Leveraged aims to outperform the S&P 500 by applying +33% leverage while carefully considering portfolio risk. The meta-portfolio combines two proprietary momentum strategies with a 2x leveraged mean-variance strategy, resulting in solid outperformance of the stock market at comparable risk. With its hybrid weekly/ monthly rebalancing schedule, All-Stars Leveraged has moderate maintenance requirements, appealing to busy and aggressive investors with larger accounts.

Performance

This table shows the portfolio’s key performance metrics over the course of the simulation:

The following chart shows the portfolio’s historical performance and drawdowns, compared to their benchmark, throughout the simulation:

This chart shows the portfolio’s annual returns:

The following charts show the Monte-Carlo simulation of returns and drawdowns, the portfolios 12-months rolling returns, and how the portfolio is tracking to its benchmark:

Asset Allocation

The portfolio last required rebalancing after the exchanges closed on @last-rebal@. Due to fluctuations in asset prices, the exact allocations vary daily, even when no rebalancing occurred. The current asset allocation is as follows:

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Strategy Rules

The operation of All-Stars Leveraged can be summarized as follows:

  • divide capital into three equal-sized tranches
  • allocate one tranche each to TuringTrader’s Round RobinStocks on the Loose, and Mach-2
  • rebalance between tranches once per month

By combining three portfolios, All-Stars Leveraged diversifies across management techniques. As a result, the meta-strategy achieves higher risk-adjusted returns than its components.

Diversification

In bullish markets, All-Stars Leveraged has up to 133% exposure to the U.S. stock market. By investing in various broad market indices along with individual stocks, the portfolio significantly reduces concentration risk. During bear markets, All-Stars Leveraged invests in various bonds and gold to profit from their negative correlation to the stock market.

To achieve diversification spanning multiple asset classes, All-Stars Leveraged relies on serial diversification over the entire economic cycle. Because the meta-portfolio combines three different mechanisms, it ensures diversification across trading styles and improves its ability to cope with a broad range of market conditions. The portfolio’s beta is approximately 0.5, showing how well the tactical management decouples the returns from the S&P 500.

Returns & Volatility

All-Stars Leveraged handily beats the S&P 500 benchmark in most years. Periods of temporary underperformance are rare and brief. As a result, the portfolio continually expands its lead over the benchmark.

Overall, All-Stars Leveraged delivers impressive returns. While the portfolio’s volatility is about on-par with the S&P 500, it achieves an overall much lower risk profile. The Monte-Carlo simulation confirms these claims of a massive upside and a much-reduced risk over the benchmark.

Account & Tax Considerations

All-Stars Leveraged trades frequently and regularly triggers taxable events. Investors should expect most of the portfolio’s capital gains to be short-term. Therefore, the portfolio works best in tax-deferred accounts. However, because of its outsized returns, All-Stars Leveraged also adds tremendous value to taxable accounts.

All-Stars Leveraged makes use of 2x leveraged ETFs which are considered high-risk instruments. Many brokerages require signing additional disclosures before allowing investors to use these instruments in their accounts. Because we use these products sparsely and in combination with tactical management, we believe our use of these instruments to be responsible.

To allow for proper position sizing, especially of the potentially expensive individual stock components, All-Stars Leveraged requires a minimum investment of $100,000.