from this thread, I've seen the following criteria proposed:
1. Early thirties or younger [x]bobcat2 wrote: ↑Sat Mar 02, 2019 8:46 pm
Lifecycle investing does call for a high percentage of investible assets be invested in risky assets for young investors no older than their early thirties, because so much of their wealth is in relatively safe human capital rather than financial capital. But their financial wealth wouldn’t be leveraged or even 100% because they need some safe assets to deal with bad financial states such as unemployment and bad health. For a young person to reasonably leverage their assets would require that she has no student debt, no credit card or other consumer debt such as car loan or lease, very stable employment such as tenured professor, physician, or law partner, employment not correlated with financial markets, and that she be very knowledgeable about financial markets and investing. The percentage of young investors that fit that leverage profile would appear to be less than 1% of the population of adults no older than their early thirties.
2. Safe human capital [x]
3. No debt of any kind [x] (including no mortgage)
4. Stable employment, not correlated with financial markets [x]
5. Knowledgeable about investing [ ] ? Improving hopefully. I have read two books about futures in general and other online education.
I would like to apply some leverage in my Roth IRA.
I'd rather keep this more theoretical and not go into my exact account balances, but to give some context:
Overall, I have around 100k invested, 95% equities, 5% cash. 80/20 split on total stock market or S&P 500 and international.
The Roth IRA I have has 34k currently and is currently 80/20% ITOT ( iShares Core S&P Total US Stock Market ETF) and IXUS (iShares Core MSCI Total International Stock ETF).
I wanted to start off targeting 1.5x leverage (in this account only), and adding some EDV for negative correlation.
Proposed allocation in Roth IRA:
1x Micro E-Mini S&P 500 futures contract : 5 x $3400 = $17,000
Margin for contract (1,200 required, but keep more for safety) = $3,000
EDV (Vanguard Extended Duration ETF) = $3,400 (10%)
ITOT = $13,800 (40.5%)
IXUS = $13,800 (40.5%)
Overall equity leverage would therefore be:
($17,000 (micro E mini) + $13,800+ $13,800) / ($13,800 + $13,800 + $3,000 + $3,400) = 131% equities + 10% EDV + 9% cash margin = 150% total
The plan would then be to roll over the futures contracts quarterly and potentially add a new contract every year with the $6,000 contribution (perhaps until I have a mortgage again and have leverage through that). If there is a large dip / margin call, I liquidate some of the (hopefully) excess EDV percentage over 10% and if above that, the equity ETFs to maintain the buy and hold strategy.
Thoughts on my calculations or the overall strategy in my position?