The Levered Seasons Portfolio

Like the Levered Butterfly portfolio, the task here was to tweak a classic portfolio to see how added leverage impacts performance. The result: a very different portfolio than its namesake, with high expected returns and high volatility.

Breakdown for the Levered Seasons portfolio

In this Levered Seasons portfolio, I’ve created a +90% leveraged version of Ray Dalio’s All Seasons portfolio,while trying to keep its nominal asset allocations in line with the original. By adding leveraged funds in place of the standard fare, the portfolio gains “extra” room to allocate but can keep the proportions of the All Seasons intact. That one is 30/55/15 equities/bonds/commodities+gold, while this one is 30/50/20 in terms of allocation, but 90/80/20 in terms of impact. With higher risk allocation towards equities, this portfolio will likely be a very aggressive version of the regular All Seasons. In terms of volatility, this portfolio has the highest standard deviation of the ten sample portfolios, slightly more than the 100% equity or RPC Growth portfolios.

Looking at the portfolio before really putting it through its paces, I am optimistic that it will perform well most of the time (when stocks are going up) and then not too badly in other times. It does project to be an improvement over the 100% equity portfolio, with 2.3% higher projected annual returns, but with just .3% more standard deviation. It has slightly lower and shallower drawdowns that portfolio and is estimated to support higher withdrawal rates. Compared to the original All Seasons, there is not too much resemblance any more outside of the name. Whereas the original is likely to be in the running for the least volatile portfolios, this one should be one of the most. The best way to look at this one, then, is another approach to achieving aggressive growth.

At the same time, it might not be the best way to achieve that aim. The RPC Growth portfolio beats this one in all phases except for annual real return, where it is tied. The RPC Growth portfolio does also have the random element of cryptocurrency investment, so if that tanks, then the Levered Seasons portfolio might prove superior.

Here is the Correlation Matrix (Data from 2009; credit to Portfolio Visualizer):

Correlation Matrix for the Levered Seasons portfolio

And, the Backtest Analysis (Data from 1970; credit to Portfolio Charts):

Backtest for the Levered Seasons portfolio