Income & Tech 3x Returns 38% Annualized
By David Kreinces, 8/3/20
Over the first seven months of this year, the Income and Technology 3x (IT 3x) investable benchmark rose by 58%, adding to its 85% gain last year, to produce a 19-month trailing return of 192%. This aggressive growth benchmark targets an equal 50/50 combination of both long-term Treasuries 3x and the Nasdaq-100 3x, rebalanced annually.
As of July 31, the S&P 500 is up 3% year-to-date (YTD), after gaining 31% last year, leaving it up 35% over the past 19 months. This means that IT 3x delivered more than 5x the S&P 500 return in less than two years! In addition, the 10.6 year total return for IT 3x was almost 2,906% (or 38% annualized), which is more than 11x the S&P 500 gain of 261%. In other words, in only 11-years, a $10k investment would have grown to just over $300k.
Long-Term Treasuries
Over the past seven months, long-term Treasuries (TLT) gained 27%, and TMF, the 3x leveraged version, rose by 78%. In total, over the past 19 months, these two defensive bond ETFs gained 45% and 143%, respectively. It seems that extraordinary protection has become expected from long-term Treasuries as TLT gained 34% in both the housing crash of 2008 and again in the European debt crisis of 2011.
Nasdaq-100
The Nasdaq-100 (QQQ) is a leading growth index with heavy exposure to technology. Over the past 10.6 years, we estimate that QQQ returned 546%, or roughly 19% annualized, while the 3x version returned 5,874%, or 47% annualized. This means that TQQQ, which we now call the “American Dream ETF,” delivered a shocking return that was over 22x the S&P 500 total return of 261%.
These leading Nasdaq-100 ETFs provide exposure to many of the world’s top growth stocks, which helps to attract both the largest global investors, and the mega-growth companies of tomorrow. The index also enables investors to efficiently maintain appropriate exposure to each of the index components, and to avoid the risk of missing the next Amazon (AMZN) or Tesla (TSLA). However, these aggressive growth ETFs are still somewhat concentrated and may decline precipitously at times, such as the TQQQ loss of 73% in just four weeks during the coronavirus this year.
Income & Tech 3x
Income and Tech 3x (IT 3x) is an efficient aggressive growth core portfolio solution with 50% in both long-term Treasuries 3x (TMF) and the Nasdaq-100 3x (TQQQ). Over the past 10.6 years, we estimate that this portfolio delivered an astonishing 2,906% in total return, or 38% annualized, just over 11x the S&P 500 return of 261%.
Leveraged Diversification
Harry Markowitz explained that “diversification is a free lunch” and the investable benchmarks show that leveraged diversification can produce a carton of extra retirement nest eggs. Read more about these revolutionary core portfolios in our new book: “Investable Benchmarks: A Guide to ETFs, Technology, and Leverage.”
Still, investors must be mindful of the risks, regulatory issues, and misunderstandings concerning leveraged ETFs. Per Greek philosopher Heraclitus, “Life is Flux” meaning “all things change.” Given this truth, and the wide range of economic environments, even the best ETF portfolio is certain to change over time.
See prior versions of this article: 6/20, 4/20, 2/20, 12/19, 6/19, 5/19, 8/18, 4/18, 12/17, 12/17, 6/17, 10/16, 6/16, 3/16, 9/14, 6/14, 3/14, 12/13, 9/13, 9/12, 5/12, 4/10, 4/09.
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