My FIRE Path: 2025H1 Update – Managing Leverage Through Volatility

WHAT. A. RIDE.

Six months of Trump’s presidency gave me more market whiplash than the previous three years combined. Here’s how I navigated the chaos with a leveraged portfolio – and what I learned about risk management when the stakes were highest.

Before we jump in, here are the sections in this update if you’d like to jump to a specific part:

1. Market Summary
2. How I invested, results (so far), and lessons learned
3. Portfolio Update
4. Conclusion & Parting Thoughts

TL;DR: Through Trump’s 2025 trade war volatility, my risk management approach of reducing leverage from 1.5x to 1.2x resulted in:

• 21.6% max drawdown vs 27% if I’d done nothing
• +S$68,200 better portfolio performance
• Much better sleep during the chaos
• Key lesson: When utilizing leverage, sometimes active risk management is better for my mental health than “stay the course”

Now first, let’s revisit what’s been happening in the markets over the last 6 months.

Market Summary

Given that I’ve already written extensively about Trump’s tariffs in my last post at the end of April, I won’t revisit the details here.

However, suffice it to say that never in the history of the stock market has a single person had so much influence on market movements – and not in a good way.

If I had to summarize what happened to the market in the last 6 months in one sentence, it would be:

First they took him seriously, and then they didn’t.

FIRE-Path Lion (July 2025)

From Trade War to Trump Always Chickens Out

Basically, at the beginning everybody thought the world was ending.

Peak Fear

When Trump announced the Liberation Day tariffs (and his feud with the U.S.’s biggest trade allies: U.K., Canada, and Mexico), everybody took him and his administration seriously. The market believed Trump would actually implement the tariffs he announced.

As a result, the market took a massive nosedive in anticipation of:

• The end of global free trade
• A reduction in goods being imported into America
• Decreased global economic activity
• A spike in U.S. inflation due to increased prices from the tariffs

This was when the market reached peak fear, and quite a number of investors sold and went to cash to wait out the storm.

Major Reversal

However, 2 days after the Liberation Day tariffs went into effect, Trump reversed course, paused, and postponed the tariffs for most countries for 90 days. This gave everybody whiplash and sent the market soaring back.

Due to the massive uncertainty around how Trump and his team behaved, the market was extremely volatile. It was impossible to predict what would be announced next. This caused many investors to sit on the sidelines, waiting for the uncertainty to subside.

Trump Always Chickens Out

Then gradually, as Trump and his team constantly reversed course on their own policies (plus making big shows of deals that effectively put them back where they started), the market began discounting whatever Trump was saying.

This didn’t happen all at once. Gradually, people realized that Trump’s ego wouldn’t allow him to be tied to bad stock market performance. People started assuming that none of the negative policies would be upheld, and the market started to recover.

Soon T.A.C.O. (“Trump Always Chickens Out”) became a meme, uncertainty (at least the kind tied to Trump’s actions) slowly dissipated, and market performance has directly reflected that sentiment ever since.

Which brings us to today, where the S&P 500 (at least in U.S. Dollar terms) has returned to all-time highs, less than 3 months from the bottom on April 8th. Who knows where we’ll go from here.

So how did I invest through all this?

How I invested, results, and lessons learned

Well… similar to most investors, I was pretty concerned when Trump’s trade war rhetoric ramped up after he took office.

Normally I would have ignored the political news and continued to dollar-cost-average into the market. But this time around, I made a tough decision to break from that usual approach.

It was a pretty big internal dilemma that ended with me deciding to sell a large portion of my holdings in late February and early March as the market began to drop.

This goes completely against my core belief of not timing the market. So why did I decide to do it? The answer was my significant use of leverage.

Obligatory Warning: Using leverage for investing is extremely risky and can wipe out your portfolio if you don’t know what you’re doing. This post is not intended to be a recommendation for anyone to use leverage. If you’re considering leverage, ensure you’re fully informed about the risks and have a clear plan before jumping in.

On this note, I only use leverage for my own portion of the investment portfolios. While I also invest for my wife, her portfolio is invested in similar global indexes but is leverage-free (and thus lower risk).

If you’d like to read how I started using leverage, my reasoning, and how it’s performed so far, you can read these posts in chronological order.

The Market Timing Decision to Sell

The full detailed reasoning as to why I decided to sell can be read in my previous post “Trump Tariffs 2025: Investing Through Another Crash” but here’s the summary:

Due to my use of 1.5x leverage, I decided to maximize my ability to sleep at night and err on the side of caution rather than maximize returns.

So instead of keeping my 1.5x leverage and 50% crash buffer in place, I sold to cover some of my leverage when it started to seem like Trump’s policies were seriously unhinged (and that he seemed intent on carrying through with them).

My “Good Enough” Approach to Risk Management

I didn’t have some sophisticated formula to determine the exact right buffer. Instead, I just picked something that felt “safe enough” – and that happened to be about an 70% crash buffer (where 100% means I’m no longer leveraged at all).

This way I could maintain some leverage exposure while being safe enough that I’d practically never get margin called. I figured that if the market actually crashed by 70%, we’d have much bigger problems than worrying about stock portfolios.

The Real Strategy

The key insight was that I wasn’t trying to time the exact bottom or top. I was simply shifting my risk profile from “quite aggressive” to “moderately aggressive” to weather whatever storm was coming.

It’s like moving from riding a motorcycle in a thunderstorm to driving a car with good brakes – you’re still moving forward, just with a better chance of handling whatever comes next.

Of course, making the decision to sell was just one side of the equation. It’s also important to have a decent plan for when to get back in if you don’t want to end up sitting on the sidelines missing the recovery.

How I was supposed to buy back in

My going-in assumption was that I would never be able to time the bottom. I knew it was impossible to know where the bottom would be and when the rebound would come. Therefore, the idea was to have a methodical approach to buying back in on a regular schedule to ensure I wouldn’t be stuck outside the market for too long.

I imagined buying back in regular amounts each week as Trump’s tariff policies became clearer. For example, I’d make $50,000 purchases every Friday regardless of the price.

This would allow time for Trump’s policies to play out and their impacts to become clearer while forcing me to buy back in regardless of prices.

This would have been more systematic. However, things changed much more quickly than I anticipated, and the methodical plan went out the window a bit.

How it actually happened

What actually happened was that his policies were much worse than anticipated, so the market started moving downward much more quickly than I expected.

In a way this was good, but it also caused me to abandon my initial methodical plan and start buying whenever the market made significant moves.

As the market dropped, I would buy in quick succession. If the market made a small rebound, I’d worry that “this might be the bottom” and thus also bought in slowly when the market increased or moved sideways.

However, I also tried to ensure that my crash buffer didn’t go below 50%.

By the time the market bottomed, I was back up at 1.5x leverage again – and at that point I couldn’t buy more without breaching my crash buffer limit.

So I could only buy more when the market rebounded and gave me more headroom.

Here’s what that looked like.

Sales and purchase timing vs VWRA price

I break this chart into 3 sections:

The Sale:

• I made 2 sales when the market started dropping due to Trump’s trade war with Canada, Mexico, and U.K. and the expectation of the Liberation Day tariff announcement.

The Drop (between the sale and the bottom):

• As the market dropped in response to the developing story around tariffs against Canada and the lead-up to Liberation Day announcement, I made a number of purchases.
• As the Liberation Day tariffs were announced, the market started dropping and bottomed on April 7th-9th, the first few days of the tariffs taking effect. I was buying throughout this time and only made 1 buy on the 9th at the bottom.
• I ran out of “dry powder” at this point as I hit my 50% crash buffer cap.

The Recovery (after the bottom):

• As the market recovered, it slowly gave me more headroom and thus more “dry powder” to deploy back into the market while maintaining my crash buffer higher than 50%. I continued buying each time there was a small dip when more headroom became available.

This brings us to today.

Result (so far)

That was a lot of activity and definitely a lot of buying both on the way down and on the way back up.

So you might wonder: what did doing all of that get me? How would this have compared if I had done absolutely nothing and just held on (buy & hold)?

Here’s how doing nothing would have compared to my current portfolio value:

Here’s the breakdown of the results:

1. Portfolio Value Difference: ~S$68,200 in favor of my current portfolio
2. Risk Management: Lower drawdown (21.6% vs 27%) and higher crash buffer (50% vs 35.5%), meaning significantly lower risk of margin call

The Bottom Line

So all-in-all, I made out quite well.

To be clear, the buy & hold approach would have been perfectly fine too. Even at the lowest point, the market could have dropped another 35.5% before triggering a margin call. Plus, I could have continued injecting capital to add more cushion if needed. So I was never truly at risk of getting margin called.

However, I probably would have been sweating bullets watching my portfolio swing so wildly. A 27% drawdown versus the 21.6% I actually experienced might not sound like much on paper, but when you’re talking about hundreds of thousands of dollars, that psychological difference is significant.

The Reality Check

Of course, the results would have definitely gone in favor of buy & hold if the market had continued upward after I sold. However, I erred on the side of caution and it paid off this time.

While I didn’t maximize my returns by timing the bottom perfectly, I did reduce risk and came out better than if I hadn’t taken any action at all. More importantly, I was able to sleep better at night during one of the most volatile periods I’ve experienced since I’ve started utilizing leverage.

Reflecting on this experience and outcome, there were several things that worked against me and others that worked in my favor…

Lessons Learned

What Worked Against Me: Fear and FOMO

I read too much economic, political, and market news

I debated whether to put this in things that worked against me or worked in my favor.

After all, I would credit my risk management decision to sell to having my finger on the pulse of the news. In this case it worked out well, but in most other situations, this would have been a distraction at best and temptation to continuously try to time the market at worst – which doesn’t have positive expected returns in most cases.

Given that news and media outlets are often trying to grab your attention, many headlines are designed to over-sensationalize what’s happening – leading to the subsequent things that worked against me.

I was not immune to fear

Again, in this particular case it worked out positively, but it could have turned out badly if I didn’t have the discipline to invest systematically.

The fear in this case drove me to take risk mitigation actions, but if I didn’t have my current discipline, it could have convinced me to sell out of my portfolio completely and sit on the sidelines waiting for certainty that would never come, missing the rebound completely.

However, given the level of leverage in my portfolio, having a little dose of fear is healthy to manage risk appropriately.

I did not time my sale perfectly at the peak

My timing wasn’t perfect. It took me some time to debate internally while assessing the news and market movements before selling. By that time, the market had already dropped about 5% from all-time high before I built enough resolve to sell a portion of my portfolio.

This took a while because it really went against my often-preached “stay the course” mantra – but given the increased risk of my leveraged portfolio, I managed to convince myself to err on the side of caution.

I was not immune to FOMO & I did not time by buys perfectly

On the flip side of selling too late, I also ended up buying back in way too early.

I was certainly aware that I was buying back in too soon and too often. However, given that it’s impossible to predict the future, it always felt like each drop was significant, that the drop could be the bottom, and that the rebound could come at any moment.

Coupled with Trump’s tendency to say whatever benefits him, it wasn’t certain that he wouldn’t just reverse course quickly. I was worried I would be caught out of the market as the rebound happened.

I took it as “as long as I buy in below my sale price, I’m coming out ahead” which was true, but it also caused me to buy back in too early.

Market timing is hard…

What Worked in My Favor: Risk Awareness and Discipline

I was aware of my risk appetite & risk exposure

Due to my heavy use of leverage in my portfolio, risk management is extremely important. I was extremely aware of the level of risk this exposed me to.

I was also aware of my risk appetite as I started feeling quite uneasy with all the trade war rhetoric. This helped me consider reducing my leverage to sleep better at night, which led me to actually make the call to sell.

I had a balanced view between greed and fear

While I sold due to being uncomfortable with the risk, I wasn’t so worried that I’d sell out of all my positions and sit in 100% cash.

Even though I erred on the side of caution, I didn’t go down to 0 leverage, but instead only went down to 1.2x leverage from 1.5x so I could still capture upside if the market continued to increase after I sold. This ensured I’d still capture upside if I was wrong.

So while I wanted to be cautious, my portfolio was still positioned quite aggressively as I still assumed the market would go up long term – I just didn’t want to be SO aggressive.

I did roughly stick to my plan to buy back in as the market dropped

While I was overly aggressive with my purchases as the market dropped, it was “good enough.”

Although my approach caused a high proportion of my purchases to be at the earlier part of the market drop and much less as the market bottomed (rather suboptimal), it still allowed me to reduce risk and buy in at lower prices.

I’d rather this than wait too long and end up with funds still not deployed when the market had already rebounded.

The regular and frequent purchases as the market dropped helped ensure I was buying as the market fell. As people were selling in panic, I was buying – arguably the best time to buy.

I don’t need to catch the bottom perfectly as long as I was buying on the way down.

What This Means for Regular Investors

Even if you don’t use leverage, this experience offers lessons:

• Know your risk tolerance: If market drops keep you awake, consider your allocation
• Have a plan for volatility: Decide in advance how you’ll handle 20%+ drops
• Have a plan for entry and exit: If you’re going to time the market, decide your exit strategy before you buy and your re-entry plan before you sell. “Hold until retirement” is a perfectly valid exit strategy.
• Cash can be a position: Sometimes reducing risk is the right move, even if it costs returns

So after all that, how does my portfolio look today?

Portfolio Update

Snapshot

Here’s the snapshot of the performance so far:

Here’s what the portfolio value chart looks like as of today:

And the capital injection vs market growth chart as of today:

Table format:

Conclusion & Parting Thoughts

Given everything that’s happened plus the major market drop and rebound, I’d say I managed my risk decently and came out a little ahead.

This episode taught me about risk management and my own risk appetite.

While not taking any risk management action (just buy & hold through) would have done alright – the 50% crash buffer would have held out just fine, and the portfolio value would still be quite decent – the risk management actions I took ended up winning on all fronts due to:

1. Overall lower risk of margin call. As the crash buffer never went below 50% and was as high as 83% at the beginning of the downturn, I was very comfortable during the big drops.
2. Lower portfolio drawdown, and thus lower volatility.
3. Most importantly, it helped me sleep better at night.

The fact that I ended up with even higher portfolio value than if I had just held, even though I didn’t time the sale perfectly at the top nor my purchases perfectly at the bottom, was just cherry on top.

The biggest lesson? Risk management isn’t about maximizing returns – it’s about staying in the game. A 21.6% drawdown I can handle; a 27% drawdown that keeps me awake at night might lead to panic selling. Know thyself, and invest accordingly.

What’s the plan for the next 6 months

Going forward, I plan to:

1. Continue my normal investment strategy – regular contributions to VWRA and maintaining my global diversification approach
2. Monitor my leverage ratio – keeping it around 1.5x but being ready to adjust if market conditions become extremely volatile again
3. Stay informed but not obsessed – I learned that while staying informed helped me make good risk management decisions, I need to be careful not to let news consumption drive emotional decisions
4. Maintain my crash buffer discipline – never letting it drop below 50% regardless of market opportunities

The Trump tariff saga taught me that even when you can’t time the market perfectly, having a systematic approach to risk management can still lead to better outcomes than doing nothing. But more importantly, it reinforced that the key to successful investing isn’t about being right about market timing – it’s about having a plan you can stick to and managing your risk appropriately for your situation.

What about you? How did you fare this year? I’d love to hear how you weathered the storm in the comments below!

Until next time, stay the course!

FPL