Income & Tech 3x Returns 36% Annualized
Over the first five months of this year, the Income and Technology 3x investable benchmark rose by 26%, adding to its 85% gain last year, to produce a 17-month trailing return of 133%. This aggressive growth benchmark targets an equal 50/50 combination of long-term Treasuries and the Nasdaq-100; both with 3x leverage and rebalanced annually.
As of May 31, the S&P 500 lost 5% year-to-date (YTD), after gaining 31% last year, leaving it up 25% over the past 17 months. This means that IT 3x delivered 5x the S&P 500 return in less than two years. In addition, the 10.4 year total return for IT 3x was 2,298% (or 36% annualized), which is almost 10x the S&P 500 gain of 235%. In one decade, a $10k investment would have grown to almost $240k.
Long-Term Treasuries
Over the past five months, TLT gained 21% and TMF, the 3x leveraged version, rose by 57%. In total, over the past 17 months, these two defensive bond ETFs gained 39% and 114%, 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 10.4 years, we estimate that QQQ returned 466%, or roughly 18% annualized, while the 3x version returned 4,042%, or almost 43% annualized. This means that TQQQ, which we now call the “American Dream ETF,” delivered a shocking return that was over 17x the S&P 500 total return of 235%.
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. This 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 crash last quarter.
Income & Tech 3x
Income and Tech 3x (IT 3x) is an efficient aggressive growth core portfolio solution with 50% in long-term Treasuries 3x (TMF) and 50% in the Nasdaq 100 3x (TQQQ). Over the past 10.4 years, we estimate that this portfolio delivered an astonishing 2,298% in total return, or 36% annualized, almost 12x the Income & Growth total return of 194%.
Leveraged Diversification
Harry Markowitz explained that “diversification is a free lunch” and the investable benchmarks show that leveraged diversification can be a free retirement nest egg. 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: 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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