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With rates at 5%, my understanding is that LETFs are nearly off the table with 3x having implicit costs of 10% and 2x having costs at 5%.

However, I still see people using managed futures funds. Are futures effectively immune to high rates since you can hold the collateral as treasury bills? Any explanation or references on this would be much appreciated.

I'm sorry, I'm not trying to confuse anybody. I thought everybody in HFEA had lost half their money from the peak, but that's not what I intended to flag as important. Just ignore that comment. The important thing is that with LEAPS you aren't adjusting leverage every day, so there's no volatility decay at all. Instead, you have theta decay. So once a year, let's say, you have a decision to make about how much volatility decay you're going to accept. Again, 'what about' is a really open-ended question and I was just throwing out the most interesting thing I could think of. I'd love to see how to do this strategy with LEAPS and the likelihood of going bust. Maybe it's historically better than HFEA with LETFs. That's what I was getting at.

However UPRO is such bang for your buck compared to going heavier with SSO. What about buying LEAPS at a fixed strike in the event you need to roll and it wasn't breached? That way you're only paying for time interest. "What about" is a pretty open-ended question. It's sort of traditional to look at January, so if you did this (and I did) January of 2023 was an interesting moment where you lost half your money and the leverage is now 5 or 6 instead of 3. So you have to decide whether or not to stay at a leverage of 5 or 6 or go back to 3. You can do either one. How did you lose so much since opening a LEAPs position in January? We are basically flat since then. Is this a position opened from long ago? I'd stay. Chance of going bu...

Thanks! I also read your 2022 thread. Are DFSV and DISV more suitable for a taxable account despite the ER? DISV is 100% qualified whereas AVDV is more like 70-80%. The dimensional small cap yield have been about half of their avantis counterparts. The foreign source income factor for DISV of 0.7196, indicates 71% of the dividend is foreign taxes paid no? Div comparison so far AVUV vs DFSV dividend yield / AVDV vs DISV dividend yield . I don't like trying to project dividends from a fund's first year. In particular, when a fund is growing rapidly, the dividend yield of the fund will be less than the dividend yield of the stocks it holds, because the yield is based on the fund value on the record date, while the dividends were received when...

Thanks! I also read your 2022 thread. Are DFSV and DISV more suitable for a taxable account despite the ER? DISV is 100% qualified whereas AVDV is more like 70-80%. The dimensional small cap yield have been about half of their avantis counterparts. The foreign source income factor for DISV of 0.7196, indicates 71% of the dividend is foreign taxes paid no? Div comparison so far AVUV vs DFSV dividend yield / AVDV vs DISV dividend yield . I don't like trying to project dividends from a fund's first year. In particular, when a fund is growing rapidly, the dividend yield of the fund will be less than the dividend yield of the stocks it holds, because the yield is based on the fund value on the record date, while the dividends were received when...

The 1099 will show how much foreign tax was withheld, but you need to go to Avantis's web site to find out how much of the dividend was foreign, which you will need for Form 1116. For 2022, Avantis ETF Tax Information (XLS) Thanks! I didn’t realize this would be the case with funds that rotate actively. I assumed it would change drastically So if you DCA throughout the year, you'll need to manually differentiate all the lots and figure out which dividends impacted which? Seems potentially quite tedious and almost untenable with lots of lots. At every fund provider I have seen, either there is only one total for the year, or the ratios for each dividend are the same. Thus, if a fund paid a dividend of $2.00 per share which was $1.80 per sha...

Any fund is fine in an IRA. While you lose the foreign tax credit on international stocks, you also avoid the tax on the non-qualified dividends. The purpose of my analyses is to suggest which funds should go in taxable and which in the IRA if you don't have room for both. I hold AVDV in my Roth IRA, as the 2020 numbers showed it to be less tax-efficient than IVLU, which I hold in the taxable account. Conversely wouldn’t you want to have the roth grow the most though? So if you only put international there, it’s a higher risk of just doing a split. Currently still debating if I should hold international like avdv in taxable Note updated data: 2022 tax costs for value ETFs I expect similar growth for US and foreign stock, so there is no par...

grabiner wrote: ↑Mon Mar 06, 2023 11:09 pm
The 1099 will show how much foreign tax was withheld, but you need to go to Avantis's web site to find out how much of the dividend was foreign, which you will need for Form 1116. For 2022, Avantis ETF Tax Information (XLS)

So if you DCA throughout the year, you'll need to manually differentiate all the lots and figure out which dividends impacted which? Seems potentially quite tedious and almost untenable with lots of lots.

Marseille07 wrote: ↑Mon Mar 06, 2023 9:12 pm

hiddenpower wrote: ↑Mon Mar 06, 2023 8:37 pm Can you share a few over different timeframes? From what I remember UPRO/TMF typically crushed PSLDX.

Never mind, I think I misinterpreted what you were saying. It seems like you were talking about leverage construction.

If you want to increase leverage then UPRO needs to be used, as SSO takes up more of your portfolio space with lower leverage.

Imagine leveraging the initial deposit to SSO/TYA more than 1x to be say $150k at the start for example whereas HFEA starts at $100k. Same initial notional value

Marseille07 wrote: ↑Mon Mar 06, 2023 8:00 pm

hiddenpower wrote: ↑Mon Mar 06, 2023 7:32 pm Not quite following can you elaborate what’s not substantiated? even if you buy more SSO at the start of the lottery ticket, it won’t behave the same

Based on my backtest, SSO's long-term CAGR was higher than UPRO. Higher leverage isn't necessarily optimal due to beta slippage.

Can you share a few over different timeframes? From what I remember UPRO/TMF typically crushed PSLDX.

Marseille07 wrote: ↑Mon Mar 06, 2023 6:59 pm

hiddenpower wrote: ↑Mon Mar 06, 2023 1:51 pm However UPRO is such bang for your buck compared to going heavier with SSO.

I don't think this is substantiated. If you backtested this, be sure the backtest included 2008 GFC.

Not quite following can you elaborate what’s not substantiated? even if you buy more SSO at the start of the lottery ticket, it won’t behave the same

Does your 1099 specific how much FTC you can claim or is this something you'll have to get off avantis' page? I would hope it's in the 1099 otherwise i'm not sure how to compute for a partial year holding.

Is the consensus that AVDV is suitable for a taxable account?

er999 wrote: ↑Mon Mar 06, 2023 10:30 am

hiddenpower wrote: ↑Mon Mar 06, 2023 9:27 am

TBF wouldn't it be worse if using futures and you happened to rebalance exactly on the bottoms? What we need is a loan

Right, it really shows the benefit of low cost loans. I paid off early my 2.75% mortgage in 2018, started HFEA 12/2021 (with about 8% of my portfolio) and it would have been better to keep the mortgage and invest the difference rather than paying it off early and using extreme leverage for a small part of the portfolio.

However UPRO is such bang for your buck compared to going heavier with SSO.

What about buying LEAPS at a fixed strike in the event you need to roll and it wasn't breached? That way you're only paying for time interest.

er999 wrote: ↑Mon Mar 06, 2023 9:21 am 12 month return UPRO -25%, VOO (s&p 500) -3%, more than 3x the losses. Volatility decay in action — hopefully will work in reverse if there’s a recovery before my position is ground down to zero!

TBF wouldn't it be worse if using futures and you happened to rebalance exactly on the bottoms? What we need is a loan

Looks like AVDV- (international small value) is 71% qualified dividends and has 0.1% foreign tax credit Dividend yield was 2.5% based on Dec 31 closing price So if I figured this all correctly it appears to be tax efficient especially for an international small value type fund. I suppose VEA would be even more tax efficient but it a large cap blend fund. A foreign tax credit of only 4% of the dividend yield is rather low for an international fund, so this makes the fund somewhat less tax efficient. I made a comparison last year: Tax costs for US and international value ETFs I will update it with this year's data. Does this mean you'd have no qualms holding it in an IRA? Here is the new data: 2021 tax costs for value ETFs Any fund is fine i...

Here is the link for AVGE sim vs VT vs a 70/30 portfolio and looks like the Avantis magic adds about 2.3% after fees vs the plain vanilla 70/30 since Jan 2020. https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&s...

I haven't seen a rough backtest with Avantis funds so made this on PortfolioVisualizer using Avantis funds, only available since Jan 2020. Still about 70/30 and shows substantial outperformance vs VT (though this is during a period where SCV did outperform). https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maint...

Seems overly complicated. I'm guessing that you could construct a fund with the same returns with fewer constituent ETFs. Maybe I’m missing something but isn’t this a major advantage? Otherwise you would have extra tax drag from rebalancing yourself I haven't seen an analysis of this but that's my hope...essentially tax free rebalancing that helps make this a bit more tax efficient to compensate for the slightly higher dividends and fees in the fund. I think there would need to be about 0.3-0.4% outperformance by this fund with the factor loading to compensate for extra fees at .23% compared to .03-.07% or so with broad based fund alternatives, plus extra dividends associated with value stocks given I'm in a high tax bracket in a high tax ...

TUA/TYA won’t be nearly as leveraged as NTSX.

Yes NTSX is safer today. We will experience more cycles though

I know this has probably been covered elsewhere in this thread, but is it a good idea to use this fund as a 20% equities sleeve to juice up my EF vs. Total Stock Market? I've got our cash balance where I want it, so I want to add some equities for growth to the taxable account. I was debating on just putting money into a balanced fund like AOK, or putting it into VTI/NTSX. NTSX is great for what it is, but I would not view it as an emergency fund if thats what you are getting at. I think many treat it similar mentally to VTI in terms of risk (or worse this past year). It's not going to do fantastic with rising rates as one would expect being balanced/leveraged. NTSX is my primary holding now as I like the treasury/sap500 combination with t...

Hello!

Curious to get opinions here. For a 30 year horizon, would it benefit me to separate out the legs of AVGE into something like VTI/VEA/AVDV/AVUV? I see pros and cons to each. The major pro is more control, can tweak tilts over-time such as DCA-ing based on momentum, can TLH, can sell the leading asset to scoot towards rebalancing when in retirement. The main downside I see is that it's likely to drift from my asset allocation (is this a big deal?)?

I'm also considering using QMOM/IMOM in place of VTI/VEA.

UpperNwGuy wrote: ↑Tue Jun 28, 2022 8:41 pm Seems overly complicated. I'm guessing that you could construct a fund with the same returns with fewer constituent ETFs.

Maybe I’m missing something but isn’t this a major advantage? Otherwise you would have extra tax drag from rebalancing yourself

jarjarM wrote: ↑Wed Jan 18, 2023 12:52 pm
Total return is slightly better than SP500 in the same timeframe but it's no the golden ticket to retirement for sure. So a lesson to those who believe this is their ticket to financial freedom, there's not easy way out other than earn/save/invest and a bit of luck too

You need to wait 20-30 years too

lawyeredCLO wrote: ↑Thu Feb 16, 2023 1:32 pm

hiddenpower wrote: ↑Thu Feb 16, 2023 12:03 pm

lawyeredCLO wrote: ↑Thu Feb 16, 2023 7:59 am With treasury yields where they are today and S&P 500 valuations where they are, this strategy should probably shift to 50% UPRO/50% TMF or 45% UPRO/55% TMF again.

Why? Rates could just stay flat and TMF could then decay. UPRO is the growth driver.

Because valuations of the s&p 500 are over 20 price earning ratio. Meanwhile long-term treasuries valuations are at 10 year lows and highest yields

It was over 20 when the strategy was started too.

lawyeredCLO wrote: ↑Thu Feb 16, 2023 7:59 am With treasury yields where they are today and S&P 500 valuations where they are, this strategy should probably shift to 50% UPRO/50% TMF or 45% UPRO/55% TMF again.

Why? Rates could just stay flat and TMF could then decay. UPRO is the growth driver.

It looks like with everything reinvested, it tracks the better HYSA basically 1:1. By safe, I mean any risk of complete loss. insolvency? etc? HYSA has some form of protection. You are speaking in both cases of extreme conditions of very, very low probability. I would not have numbers applicable to either case. Just taking a guess, I would imagine that the most likely, though temporary, upset to your investment would be to somehow get locked out of your account or some other IT glitch happening. Alongside that would be issues such as identity theft or something. I don't know any reason one of those would be more risky than the other. Maybe some bizzare market glitch could effect an ETF. Someone might have some comments on safety at the ext...

It looks like with everything reinvested, it tracks the better HYSA basically 1:1.

By safe, I mean any risk of complete loss. insolvency? etc? HYSA has some form of protection.

I have cash saved up that I intend to DCA over the coming 6 months - 1 year now that I have my IPS written out. In the meantime is it safe to keep it all in $SGOV (short term tbill ETF) as opposed to a HYSA? I see the yield is a bit higher (1%) on the tbills than what my broker's hysa offers me. It looks like SGOV has no interest rate risk but just want to sanity check myself that it can't backfire.

Thanks!

sailaway wrote: ↑Tue Jan 24, 2023 5:22 pm

hiddenpower wrote: ↑Tue Jan 24, 2023 5:18 pm Can anyone answer the question LOL?

According to etrade you're supposed to freeze the solo401k when your business is not operating. So I guess having a business is a requirement to open one? To be clear, I do not intend to "contribute" to this account (not anytime soon at least!)

Yes, you have to be doing business to open a solo 401k. That's why I started with that question.

What evidence do you need to open one? You also need a business to open a business credit card and well.

Can anyone answer the question LOL?

According to etrade you're supposed to freeze the solo401k when your business is not operating. So I guess having a business is a requirement to open one? To be clear, I do not intend to "contribute" to this account (not anytime soon at least!)

Joe Public wrote: ↑Tue Jan 24, 2023 5:00 pm Have you considered moving the employer 401(k) assets into a rollover IRA? If so, what is driving your preference toward a solo 401(k) over the rollover IRA?

that prevents backdoor roth conversions

sailaway wrote: ↑Tue Jan 24, 2023 4:44 pm Will you have a business or self employment when you leave your current employer?

Not anytime soon but would love to one day! I don't think that's a requirement to open an individual 401k but I'm going to ask.

Based on what I've read I can open a solo 401k, and move over my employer's 401k after leaving the company. It looks like I'll have to file an extra form each year but is that the only downside? I'm leaving a company where right now my pre-tax 401k is in a linked self-directed brokerage account. It allows me to trade most] assets with not too many restrictions. So I also don't mind just leaving is there but was wondering if there's a good reason to open a solo 401k and make the move to consolidate everything into the same broker and get rid of trading restrictions like T+2. Thanks!

what's the true cost of these treasuries with rates where they are?

With the FFR rising, are products like TYA (and futures in general) going to suffer more than non-leveraged counterparts (suppose you were using futures and targeting 1x exposure for equal comparison to just holding 100% of of that given underlying)?

Figured this would be a great thread to ask. Thank you!

I would just allocate x% of yearly income to kelly bets personally. Always fresh powder to have some fun if things blow up

whodidntante wrote: ↑Mon Jan 02, 2023 11:28 am

hiddenpower wrote: ↑Mon Jan 02, 2023 11:18 am Can't he/she just use the futures collateral as tbills instead of cash? Seems simpler.

Which brokers allow this in your experience and what is the minimum?

I have yet to do it myself but when I called etrade and ibkr I was told it is possible. I believe an annoyance is that daily settlement will always be distributed as cash.

Can't he/she just use the futures collateral as tbills instead of cash? Seems simpler.

If you want capital efficiency in pursuit of some so-called risk parity portfolio you'll need a different product (e.g. TYA), but even then the short track record of that fund is not hugely inspiring. Hi Vineviz, can you expand on this some? Is TYA not behaving exactly as it should? The track record has been poor but isn’t that just because bonds have sucked since it released? Also why NOT use TYA as a drop in for TLT in a taxable account? And similarly TUA in place of IEF. Thanks! Basically nominal duration was in a bubble and is suffering a bubble level drawdown. You are spot on about how you can use them for drop in replacements. I am not long TYA here for a few reasons (30y10ys is still positive), 10y2ys deeply inverted, carry on the 1...

vineviz wrote: ↑Sat Nov 19, 2022 8:20 pm
If you want capital efficiency in pursuit of some so-called risk parity portfolio you'll need a different product (e.g. TYA), but even then the short track record of that fund is not hugely inspiring.

Hi Vineviz, can you expand on this some? Is TYA not behaving exactly as it should? The track record has been poor but isn’t that just because bonds have sucked since it released?

Also why NOT use TYA as a drop in for TLT in a taxable account? And similarly TUA in place of IEF.

Thanks!

Tamalak wrote: ↑Mon Oct 17, 2022 10:41 am This volatile market really throws into the light how leverage can decay.. VOO is back to where it was on June 16 but UPRO is over 5% down from then!

That’s peanuts. If there’s a 1.5% day on voo, then UPRO is caught up. If anything it makes me realize letfs aren’t terrible for long term hold

I see T-bills have been recommended a lot recently because of their high yields. Is there anything similar to a T-bill in terms of yield and safety but not as complicated to buy? I am ok with giving up some yield for simplicity and ease. This is for an investment in my taxable Vanguard account that will be used in 1-2 years. It is currently in a HYSA earning 2%. Buy the ETF SGOV. probably the best answer in thread other than just 'leave it in vmfxx and wait'. sgov does what everyone else is talking about in terms of buying and rolling t-bills and wraps it all up in a super convenient and simple package. https://stockcharts.com/freecharts/perf.php?VMFXX,SGOV&n=500&O=011000 https://www.ishares.com/us/products/314116/ishares-0-3-month...

I see T-bills have been recommended a lot recently because of their high yields. Is there anything similar to a T-bill in terms of yield and safety but not as complicated to buy? I am ok with giving up some yield for simplicity and ease. This is for an investment in my taxable Vanguard account that will be used in 1-2 years. It is currently in a HYSA earning 2%. Buy the ETF SGOV. probably the best answer in thread other than just 'leave it in vmfxx and wait'. sgov does what everyone else is talking about in terms of buying and rolling t-bills and wraps it all up in a super convenient and simple package. https://stockcharts.com/freecharts/perf.php?VMFXX,SGOV&n=500&O=011000 https://www.ishares.com/us/products/314116/ishares-0-3-month...

Another quick question. Does it make sense to prefer SGOV and short term treasuries over a HYSA in some instances? For example if you live in CA/NY you could have an additional 15% state tax if you're in a high bracket. So a 2.75% HYSA would drop to 2.33% before federal taxes. In that case it seems like the 2.64% yield on SGOV trumps it. Thanks!

I'm surprised anyone stayed the course earlier this year when it became obvious bonds would not be a good hedge for equities in this environment. It makes more sense to me to switch over to managed futures as the hedge, since that should do well in all sorts of environments (the actual hedge changes; this year it's largely been short bonds). I have an allocation to DBMF I started in August and it's definitely softened the pain of the last 2 months. I have faith in it long term even after a huge runup (it won't keep winning forever but I doubt it will ever lose bigly). The backtest below has a short timeframe and all, but the premise seems more likely to succeed now and into the future given changing macro environments. Typically, managed f...

I'm surprised anyone stayed the course earlier this year when it became obvious bonds would not be a good hedge for equities in this environment. It makes more sense to me to switch over to managed futures as the hedge, since that should do well in all sorts of environments (the actual hedge changes; this year it's largely been short bonds). I have an allocation to DBMF I started in August and it's definitely softened the pain of the last 2 months. I have faith in it long term even after a huge runup (it won't keep winning forever but I doubt it will ever lose bigly). The backtest below has a short timeframe and all, but the premise seems more likely to succeed now and into the future given changing macro environments. Typically, managed f...

Can you use it in place of a checking account for paying things like credit card bills automatically? Seems ideal for people in their ecosystem already since I assume transfers to the brokerage are instant.

edit: i see you're limited to 6 withdrawals a month... I'll admit I'm tempted to try and use this as my core deposit account but I have quite a few credit cards

CletusCaddy wrote: ↑Tue Oct 04, 2022 8:49 pm The maturity of the bonds is 20 years. If you can hold for that long the bond side will recover. If not you shouldn’t have bought the fund in the first place.

I mean that’s a little drastic of a timeframe. It’s a volatile diversifier.

Thanks for the low down on interest rates to different derivatives, it sounds like it's close enough to not sweat the small stuff.

Hydromod wrote: ↑Sat Oct 01, 2022 10:45 am I don't want to be a grump, but isn't all of this discussion about futures etc. kind of the point of the modified HFEA thread? It just seems a bit cleaner for folks to have that discussion in one place...

So... How about that round trip for HEDGEFUNDIE? You can join the adventure with a mirrored portfolio to the OG now

If you look at their portfolios they use swap agreements similar to futures and they publish the rates I think and they are close to market rate. Right but it's not clear to me if they can, or do, also collateralize in tbills like you could for futures. Upro holds a few hundred million in tbills so I think yes. The only reason we don't in individual accounts is the middle man broker. In a competitive efficient market we would interest on our collateral. So using futures and letfs are efficient and have extremely low interest rates because of tbills with the excess cash . Using a margin loan or portfolio margin would be a different story entirely and you'd eat a 4%+ interest fee? That about right? Are LEAPS somewhere between the two? I thin...