Investable Benchmarks: A Guide To ETFs, Technology & Leverage by David S. Kreinces

Author:David S. Kreinces [Kreinces, David S.]
Language: eng
Format: epub
Published: 2020-02-02T05:00:00+00:00

ChaPter 6: Leveraged Income and Growth

Clone Your Portfolio

Would you “clone” your annual income if you could? How about your investment portfolio? Is your portfolio too volatile to be cloned?

Clone A Safer Portfolio

This past decade, new leveraged ETFs enable you to somewhat “clone” your investment portfolio. While it may sound futuristic, this extraordinary opportunity is worth considering with the right risk controls.

When you contemplate leverage on a typical growth portfolio, the risk level would be far too dangerous for most investors. However, if you monitor the effect of moderate leverage on a strategically balanced portfolio, you may feel much differently. In addition, many investors may need to clone their investment income and growth in order to replace labor income lost to automation.[27]

Risk Parity

At ETF PM, our research indicates that a low-risk balanced portfolio is capable of generating more return, per unit of risk, than a traditional growth portfolio. In fact, one of the most effective strategies on Wall Street this past decade is “risk far parity,” which is also referred to as “leveraged income and growth.”[28]

Risk parity refers to broadly diversified and balanced portfolios that sometimes utilize leverage. Just imagine your retirement nest egg as a power boat.

Do you want one big risky engine, or three smaller and safer engines?

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