How much Leverage should / could we use?

VTS Community,

How much leverage should / could we use?

The only true leverage we use is within the Defensive Rotation Strategy where we're using 2x the Nasdaq index with the ETF called QLD.  Now there's actually 3 main ETFs that could easily be used if a person wanted, without changing the daily trade thresholds at all.  It's just a simple ETF switch:

• QQQ  =  1x Nasdaq
• QLD  =  2x Nasdaq
• TQQQ  =  3x Nasdaq
• Given that brokerages allow margin trading you could easily just simulate a 4x ETF or even more and be like the recently margin called Leopold Aschenbrenner's Situational Awareness Fund.  July wasn't a great month for our Defensive Strategy, but we didn't have to sell assets to Citadel so I guess there's that  :)

For the most part, leverage isn't worth it

For me personally, using the 2x QLD is plenty aggressive for my risk tolerance.  Investing is an emotional endeavor and when you look at long term performance charts with leverage it can be tempting to gloss over the bad periods and focus on the killer return.  That may be a mistake.

Most investors overestimate their risk tolerance

They think they'll be fine and stay the course when things go wrong, but when they find themselves right in the heart of a real world drawdown it's no longer just lines on a chart, it's now an emotional experience.  Unfortunately, a lot of investors pull the plug when that happens and they ruin the long-term results they were trying to get.

Exiting a strategy every time there's a drawdown guarantees terrible long term results.  To success you have to follow strategies that you'll be able to be consistent with for multiple years through both bull and bear markets.  That's how true wealth is built.

You're investment decisions are your own

What you see in the emails is where 100% of my own capital is invested.  Now, when I say that I always feel the need to point out that it's actually 50%.  The other 50% being in my Options strategies, but the point is that 100% of my own money is in my strategies.  I don't own any investment properties, I don't have any other investing methods, I don't have any other capital in any other investments other than VTS. 

I'm a chef who eats his own cooking and ALL my money is in my own strategies

What you see in the emails is how I allocate my own capital.  Now you could, if you choose, make ETF replacements.  This is where good information and plenty of disclaimers and warnings come in. 

I'll be 52 years old soon so I still have time to grow assets, I'm an expert risk manager, I make a good income, and even I still don't go over the 2x QLD.  Just keep that in mind.  Of all the investor profiles that could talk themselves into going more than 2x leverage, it would be someone like me and I still don't.  

But I can present you with the data.  Here's the Defensive Rotation Strategy at various leverage factors, and then all of them compared to each other

VTS Defensive Rotation Strategy using (1x) QQQ

If you really can't handle drawdowns, just use QQQ.  The results are still incredible, you'll get to where you want to be in retirement, don't worry!

VTS Defensive Rotation Strategy using (2x) QLD

If you're like me and you can afford to be a little more aggressive, the risk reward ratio of 2x leverage is still within my risk tolerance, and likely most other investors as well.

VTS Defensive Rotation Strategy using (3x) TQQQ

Live dangerously if you want to, but this definitely breaches my own level of risk tolerance. 

* Having said that, perhaps when coming out the other side of a major market crash, that would be a time to consider it.  But in 2026 with markets at all time highs and extreme valuations, are you crazy?

VTS Defensive Rotation Strategy simulating 4x Nasdaq

NO, just, no.  A lot of people out there thought Leopold Aschenbrenner was a genius, and no doubt, betting on AI stocks with 4x leverage worked pretty well for a while and it was impressive gains.  But one bad month and he literally had to liquidate assets and sell to Ken Griffon.

Closing your eyes, crossing your fingers, and taking on massive risk does not make someone a good investor, it just makes them lucky for a while.

Our Defensive Rotation Strategy does exit to safety so it's not on the hook for the full brunt of a market downturn, but I just don't think there's anybody who could hold on for the ride

Choose your own adventure

I am solidly in the 2x camp, what about you?