The ProShares Ultra S&P500 (SSO) is a leveraged ETF that tracks the S&P500. It seeks a return that is 2x the return of the underlying benchmark (SPY). The ProShares Ultra Short S&P500 (SDS) is like the ETF SSO but is a leveraged ETF that shorts the S&P500. It seeks a return that is 2x the return of shorting the S&P500.
Having a portfolio beta of 1.5 means that your portfolio is 50% more volatile than the market. I was able to run a scenario with this beta and it would take a .078% allocation in SDS and a .922% allocation in SSO. This portfolio will give you a return of 2.15% a month. If you were to allocate more of your portfolio to SDS it would greatly increase your return, however adding a lot more of volatility and risk as well. I also constructed a portfolio that would provide you a return of 1% per month. This portfolio is not ideal because it would involve you shorting a volatile stock (SDS) and getting a loan to over allocated the other stock (SSO). This would put your beta up even more to 1.94 causing more volatility.
Comparing Berkshire Hathaway’s (BRK-A) to the S&P500 return has provided results. It seems that that after every year BRK-A stays less then the return of the standard market. Calculating Alpha over a 5-year span three times it seems to be that BRK-a stays about 1% less of a return than SPY. Although it may be tempting to hop on the bandwagon and invest in Berkshire Hathaway, I can tell you that the market itself would provide higher returns.
