Why We Don't Short, Buy Crypto, or Use Leverage

Discipline Is Also Knowing What to Avoid

Most investing advice tells you what to buy. We think the bigger edge is in what you refuse to do. Veloris Capital is a long-only, stocks-only strategy. We do not short the market, we do not buy cryptocurrencies, and we never use leverage.

This is not caution for its own sake. Since our start in November 2025, the strategy has returned +35.6% while the S&P 500 returned +6.4%. We did this with a smaller worst-case fall along the way. Our maximum drawdown was -8.8%, against -9.1% for the S&P 500 and -11.8% for the Nasdaq.

The three rules below explain why. Each one removes a way to lose money permanently. In Formula 1 terms, you win races by knowing when to accelerate and when to brake, and these rules are part of our braking system.

Why We Don't Short the Market

Shorting means betting that a stock or the whole market will fall. It can work for short stretches. Over time, it fights a powerful force: markets rise.

The reason is simple. Over long periods, stock prices follow company earnings, and earnings grow. For the S&P 500, the correlation between forward earnings and the index level is around 0.98, where 1.0 would be a perfect match. Betting against that is betting against the long-term growth of business itself.

Whole generations are shaped by themes that lift earnings for years. Think of electricity, the car, the personal computer, the internet, and now artificial intelligence. A short seller has to time the exact moment these waves break. History shows that is close to impossible.

The track record of professional pessimists makes the point. Nouriel Roubini, nicknamed "Dr. Doom", called the 2008 crash correctly. He then predicted more crashes through one of the longest bull markets in history. An investor who shorted on those later calls would have lost money for years.

Some investors try to soften this by hedging instead of shorting outright. But hedging with options, CFDs, or futures is not free. Because markets drift upward over the long run, paying for downside protection year after year is a steady drag on returns. The protection usually costs more than it saves.

Why We Avoid Cryptocurrencies

There is an old rule in investing: never put money into something you do not understand. We apply it strictly to cryptocurrencies.

A share of stock is a claim on a real business that earns profit. A bond pays interest. A property collects rent. Most cryptocurrencies have no intrinsic value of this kind. They produce no earnings and pay no cash to their owners. Their price rests almost entirely on what the next buyer is willing to pay.

Supporters once called crypto a hedge against inflation. The recent record has not supported that claim. During the inflation spike of 2022, major cryptocurrencies fell sharply at the very moment a hedge was supposed to help.

None of this is a moral judgment. It is a discipline. We invest where we can measure value with data, and cryptocurrencies do not pass that test.

Why We Never Use Leverage

Leverage means investing with borrowed money to control more than you actually own. It magnifies gains when you are right. It also magnifies losses when you are wrong, and that second half is where accounts are destroyed.

The math is unforgiving. A loss always needs a larger gain to recover, and leverage makes the hole much deeper. The table below uses real market falls from recent history.

Read the bottom row carefully. The S&P 500 fell by roughly half during the 2008 crisis. An investor without leverage was down 50% and needed a 100% gain to break even, which the market eventually delivered. A 2x leveraged investor was wiped out completely. There is no recovery from a 100% loss.

These figures are hypothetical illustrations of leverage on its own. They do not include the effect of our risk overlay, which is built to control drawdowns. We show them only to make the risk of leverage itself clear.

Leveraged products carry a second, quieter cost called volatility decay. In choppy markets, the daily resets eat into value even when the index ends flat. Borrowed money also charges interest every day. Over the long run, these costs compound against you.

So when we reduce risk, we do it the simple way: we hold more cash. When we are fully invested, it is 100% stocks and 0% borrowed money. Today the strategy holds about 49% in equities, in what we call Cruising mode.

What We Do Instead

We are not traders chasing the next move. We are two veterans with 40+ years of combined experience, putting our own money to work with confidence and guided by data, not by gut feeling. The whole strategy runs on three pillars: Stock Universe, then Optimizer, then Risk Overlay.

• Stock Universe. We screen US large-cap companies for quality and good execution. We weigh profitability and growth, the quality of those earnings, the direction of earnings revisions, and price strength. The strongest fundamentals rise to the top of the list.
• Optimizer. From that list, our model builds the portfolio it judges best. It holds roughly 15 to 30 stocks, equal-weighted within the invested part of the account.
• Risk Overlay. Every night, the system recalculates more than 20 risk indicators across markets and sets our equity exposure for the next day.

None of this is a set of personal opinions or stock tips. The picks are data-driven, not gut-driven, and rebalanced every month. Every name must re-qualify against the same tests, and only the best opportunities stay. In our June reshuffle, the model added eight new positions and closed eight others.

One point matters most. Our risk overlay is not a prediction machine. It does not claim to know where the market is going next week. It is time-tested to control drawdown, not to forecast prices. Timing the market has proven impossible, and timing the downside is the hardest task of all.

Our edge is meant to come from owning the right companies and not being hit too hard when markets fall. Our robustness checks suggest the framework is in place to fall less than the S&P 500 in a crisis. We aim for that, but we cannot promise it, because every correction is different.

“Know when to accelerate, and know when to brake. We grow by owning quality businesses, and we endure by refusing the bets that potentially destroy accounts.”

Related reading: for the long-run case behind staying invested, see Long-Term Investing: How Compounding Wins. For how the risk overlay behaved in the latest month, read our Monthly Review: May 2026. A short summary of what we will and will not trade also lives in our FAQ.

Past performance is not an indication of future results. Your capital is at risk.

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