Core Portfolio (26 Jan 18)

A long-term investment that forms the foundation of an investor’s portfolio.  A core portfolio strategy is to primarily own an investment that tracks the overall market.  A solid core holding gives an investor the flexibility to take a chance with riskier investments in other areas of the portfolio.

Calendar Year	S&P 500 (UPRO)	Nasdaq 100 (TQQQ)	Russell 2000 (URTY)	Volatility (XIV)
2018	23.0%	31.2%	14.3%	1.7%
2017	71.4%	118.1%	38.9%	187.6%
2016	30.8%	11.4%	60.1%	81.2%
2015	-5.2%	17.2%	-21.0%	-17.1%
2014	38.0%	57.1%	5.9%	-9.4%
2013	118.5%	139.7%	147.9%	107.2%
2012	46.8%	52.3%	44.6%	154.9%
2011	-11.9%	-8.0%	-37.6%	-45.5%
2010	36.3%	78.1%	90.1%	24.9%
Avg Ret.	38.6%	55.2%	38.1%	53.9%

A properly constructed core portfolio of leveraged ETFs will tend to outperform the benchmark.  A core portfolio strategy also results in a portfolio that is easy to monitor and rebalance because it only contains a few investments.

 

Long Stock (Oversold) 26 Jan 18

Oversold is a condition in which the price of an underlying stock has fallen sharply to a level below where its true value resides.  This condition is usually a result of market overreaction or panic selling and is generally considered short term in nature.  When an underlying stock has been oversold, the price is expected to rebound in an event referred to as a price bounce.

Symbol	Price	RSI-2	Full STO	MACD
LEN	$67.82	2.84	16.11	-0.784
TMHC	$26.85	7.07	29.61	-0.228
MTG	$15.16	4.65	8.58	-0.121
DHI	$50.35	8.56	30.94	-0.399
WEN	$16.50	1.34	34.33	-0.072
ETFC	$53.49	9.37	44.43	-0.315

Identifying areas where the price of an underlying stock has been unjustifiably pushed to extremely low levels is the main goal of many technical indicators such as the relative strength index (RSI), the stochastic oscillator (STO) and the moving average convergence divergence (MACD).  This allows investors to purchase securities at below-actual-value prices and potentially sets up for a quick return should the market correct as expected.

Leveraged ETFs (Growth Leaders) 26 Jan 18

Leveraged ETFs use a combination of stocks, options and futures to double or triple the movement of an underlying asset or index that it tracks.  Leveraged ETFs have grown in popularity with the trading crowd because the funds can generate returns very quickly (provided of course, that the trader is on the right side of the trade).

Symbol	Price	RSI-2	6-Month	1-Year
XIV	$136.73	9.08	44.32%	122.25%
SOXL	$181.13	68.18	88.34%	177.57%
URTY	$94.08	72.88	38.35%	53.65%
TNA	$80.14	74.52	38.52%	53.47%
YINN	$53.80	81.28	106.35%	204.45%
LABU	$110.61	82.47	67.30%	204.12%
BRZU	$63.39	92.22	90.36%	44.59%
EDC	$168.60	97.48	68.77%	161.88%
UPRO	$172.44	98.50	55.86%	96.13%
SPY	$286.58	98.94	16.99%	27.39%

Leveraged ETFs are not for the faint of heart.  Traders who can stomach the volatility can realize large gains (or losses) on their positions very quickly.  These funds should only be tackled by an experienced trader with a stomach to handle losses.