2023 Total Portfolio Solution Performance Summary

Jan 07, 2024


VTS Community,

At the end of every year I prefer to highlight the best and worst strategy we had and really dive into what worked and what didn't.  I'll still do that, but today let's just do a final update on the yearly numbers for all 5 and compare them to the long-term results of each strategy.  

It was a pretty boring year to be honest, and that's largely due to the nature of 2023 in general.  It was a year with a fairly consistent trend in the stock market with 2 longer phases of very little trade activity.  Personally, I love lower trade frequency.  It means the strategies are working.  In stark contrast to 2022 which very much was not smooth, 2023 was a year where the trend was our friend.

Our Tactical Rotation ETF strategies all did well, and our counter trend strategies did not.  In summary I would say that's exactly what I would expect in a stable year for the stock market.  I'm not overly surprised by the performance in any of the strategies.


VTS Total Portfolio Solution  (all 5 strategies combined)


2023 CAGR:  22.04%

Long-term CAGR:  22.44%


2023 Max drawdown:  5.96%

Long-term Max drawdown:  25.62%


Smooth sailing, the diversified nature of the portfolio worked well last year and contained the drawdown to less than 1/3 of the return.  As you'll see shortly, the Volatility Trend Strategy did drag down performance a bit, but overall no complaints.

If you offered me these numbers every year going forward, that's a quick handshake deal on my part, I'd take it every year  :)


* By the way, I've rebranded to a green and black logo so I'm going to change the color of the main Total Portfolio Solution.  It was turquoise, and now it'll also be some form of green so hopefully there's no confusion.


Defensive Rotation Strategy  (the big winner in 2023)


2023 CAGR:  82.89%

Long-term CAGR:  31.33%


2023 Max drawdown:  17.50%

Long-term Max drawdown:  43.17%


As our top performing strategy in 2023, Defensive Rotation crushed its long-term numbers both in rate of return and drawdown reduction.  We'll talk more about this in a stand alone blog, but obviously very happy with the numbers here.


Tactical Volatility Strategy


2023 CAGR:  80.88%

Long-term CAGR:  38.45%


2023 Max drawdown:  9.86%

Long-term Max drawdown:  23.83%


There is one very big caveat with these numbers in that the Tactical Volatility Strategy was only in the portfolio for the last 5 months of 2023.  It did contribute nicely to results the last half of the year, but that first big run up was missed as it was on the sidelines.

Introduced in January 2012, the Tactical Volatility Strategy was in our portfolio until February 2022.  It was removed for a short time because I felt the market was not conducive to have short Volatility exposure.  At that time, 2x leveraged equity ETFs were working better so we just went with those for 2022.

That decision did reduce drawdown because in 2022 the Tactical Volatility Strategy would have been down over 30%.  However, we were a little late getting back in and missed that early run up in 2023.  In the end it's kind of a wash.  We avoided a -30% drawdown, and missed the subsequent recovery.


Strategic Tail Risk Strategy


2023 CAGR:  19.87%

Long-term CAGR:  28.54%


2023 Max drawdown:  7.03%

Long-term Max drawdown:  38.11%


2023 did not require any "Tail Risk" positions so it was essentially just an S&P 500 strategy with a lower trade frequency where we also spent some time in Cash.  Still though, a good year with a low drawdown is always welcome in any portfolio.


Iron Condor Strategy


2023 CAGR:  -1.80%

Long-term CAGR:  16.51%


2023 Max drawdown:  11.54%

Long-term Max drawdown:  15.27%


The Iron Condor Strategy is definitely one of my favourites, but as I mentioned throughout the mega course, it does perform better in higher Volatility environments.  2023 was a relatively low Volatility year so the strategy basically was just treading water.  It started the year off just fine, but then had 3 losing trades in a row to close the year which did hurt performance.

Remember, the Iron Condor Strategy was our top performer in 2022 finishing that brutal year with a +26% return.  That's more the type of market it shines in, which is why it's in the portfolio in the first place. 

Every portfolio needs a little counter trend balance, even though at times it can drag down performance.


Volatility Trend Strategy  (removed to start 2024)


2023 CAGR:  -9.97%

Long-term CAGR:  13.31%


2023 Max drawdown:  12.44%

Long-term Max drawdown:  17.59%


A rough first half of the year and this strategy also suffered in 2023.  I talked about this as well in its extended course, but all the largest drawdowns in this strategy happen when stocks are doing well.

Remember, Broken Wing Butterflies on Volatility ETPs means that the only way it can lose money is if there are strong downward trends in VXX and UVXY.  Well, 2023 had a couple, which meant we were getting more losses on the low side than a "normal" year.

While the strategy has been removed to start 2024, I still consider diversification through counter trend strategies like this one to be important to long-term performance.  Don't be surprised to see it return at some point in the future.  When I have more time to explain it more thoroughly, it may yet become one of your favourites, who knows  :)


2023 was quite positive overall

Overall I'd give our 2023 a solid B+ score.  It was important to have a nice recovery year after the troubles in 2022, so in that respect we're back on track. 

And again, interesting pattern with Defensive Rotation being the worst performer of 2022 and the best in 2023, and Iron Condors being the best performer in 2022 and the 2nd worst in 2023.  Investing is like that sometimes.

It may not make perfect sense why we use counter trend Option strategies, and this is probably especially true for people on smaller account sizes.  Sometimes there's a natural tendency to just want to go for it with the higher return strategies. 

However, as your nest egg grows over time, most people come to the realization that they would always trade a little high end performance for lower drawdowns in bad periods.

I will talk more in the coming weeks about what people should do if they want to throw caution to the wind and chase a little higher return.

We do have a couple strategies you could focus on if absolute return is your main goal.  More on that in the future though, stay tuned...

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