HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Locked
AlphaLess
Posts: 1554
Joined: Fri Sep 29, 2017 11:38 pm
Location: Kentucky

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by AlphaLess » Tue May 28, 2019 9:21 pm

fallingeggs wrote:
Thu May 09, 2019 6:57 pm
HEDGEFUNDIE wrote:
Wed May 08, 2019 8:50 pm
So much interest in futures.

I would encourage anyone to start a new thread implementing my strategy with futures. Would be instructive to see how the two strategies compare in real time.
Putting my fake money where my mouth is!

Opened a "practice" account at ThinkOrSwim to get use to the future trading platform there. In my margin account with $100k I purchased 2 E minis and 11 2-yr treasury futures for a 10%/90% portfolio leveraged by about 25. In my IRA, which also has $100k, I went 60% TMF and 40% UPRO. This ability to play with fake money should be a great way to figure out the practical nature of how to trade futures, including through the roll dates (which apparently are different for treasuries and the SP500).

It says I have 60 days to try it out. Not sure what happens afterwards. I assume I get booted unless I actually open an account. For what it's worth, I don't actually intend on figuring out which portfolio is "better" during this test. But it will be interesting to see which does outperform for this limited time period.
Excellent post. Operational excellence is one of the most important aspect of complex trades.
"You can get more with a kind word and a gun than with just a kind word." George Washington

AlphaLess
Posts: 1554
Joined: Fri Sep 29, 2017 11:38 pm
Location: Kentucky

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by AlphaLess » Tue May 28, 2019 9:25 pm

NotTooDeepLearning wrote:
Fri May 24, 2019 5:20 pm
MotoTrojan wrote:
Fri May 24, 2019 5:09 pm

Since it seems you are setup to test quickly, what would it be if you swapped between 100% UPRO and TMF?

Yeah I've got it all set up in R so I can test any strategy at will. Switching doesn't do much good imo, roughly 30% return, 42%sd, 61% drawdown. Going long upro only when you've got the signal isn't very good either.
Do you happen to have the data (.csv) for the return series?

I would like to download and script a bit too.

TY!
"You can get more with a kind word and a gun than with just a kind word." George Washington

AlphaLess
Posts: 1554
Joined: Fri Sep 29, 2017 11:38 pm
Location: Kentucky

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by AlphaLess » Tue May 28, 2019 9:26 pm

NotTooDeepLearning wrote:
Sat May 25, 2019 3:39 pm
My strange passion for reproducible research motivated me to get this done. I've uploaded a "bundle" with the code and data here: https://drive.google.com/drive/folders/ ... sp=sharing

I'm not certain there is no personally identifiable information there, so please let me know if there is.

Steps to make it work:
1. Install R (and Rstudio - its the best IDE on earth imo)
2. Download all the files to the same folder--don't change any file names
3. Open the script, make sure you working directory is the folder with all the files and install the required packages at the top of the script
4. In theory you can then highlight and run the whole script and immediately replicate my results

It's pretty advanced R, but I did my best to explain all my steps so you can understand things and test your own strategies. My conclusion is that using this simple timing strategy is a significant improvement over buying and holding upro/tmf--improving returns, lowering volatility, and cutting the max drawdown in half.
Great, thanks! I will try this next weekend.
"You can get more with a kind word and a gun than with just a kind word." George Washington

User avatar
ThereAreNoGurus
Posts: 219
Joined: Fri Jan 24, 2014 11:41 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by ThereAreNoGurus » Wed May 29, 2019 10:33 am

AlphaLess,

That quote in your sig is incorrectly attributed to George Washington. Please see: https://quoteinvestigator.com/2013/11/03/kind-gun/

MotoTrojan
Posts: 5502
Joined: Wed Feb 01, 2017 8:39 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by MotoTrojan » Thu May 30, 2019 1:20 pm

Had my 1st quarterly rebalance today (to be fair I did have some additional contributions which naturally rebalanced).

Was at a roughly 67%/33% TMF/UPRO allocation. Total gain of almost 11% since 1st contribution in late February with an XIRR of 70.6% 8-) . Currently makes up 25% of my liquid investments (that will diminish via contributions, I am an early accumulator).

BanditKing
Posts: 610
Joined: Tue Oct 29, 2013 11:11 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by BanditKing » Thu May 30, 2019 11:34 pm

I'm 30 days into the grand experiment (using Roth-space at M1Finance). I ended up doing 60% TMF, 23% of TQQQ and 17% UPRO for reasons that made sense in my brain at the time. This may or may not have been wise but we'll see. I may go to 20% in each of the equities when I eventually rebalance. Currently the portfolio is up a smidge overall (3.5%), all on the basis of TMF which is up about 17%. UPRO down 15% and TQQQ about 21%. This leaves me at a ratio of 68/17/15.

I've found the volatility of the underlying ETFs fascinating to watch, and yet the portfolio as a whole seems to be holding its own and doing exactly what was predicted.

Hard to resist the urge to smash the rebalance button. I'd be curious if anyone has any thoughts on establishing criteria when/if to do an early rebalance, or if it would be of any benefit. Otherwise, my rebalance is set for the end of July.

MotoTrojan
Posts: 5502
Joined: Wed Feb 01, 2017 8:39 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by MotoTrojan » Fri May 31, 2019 12:31 am

BanditKing wrote:
Thu May 30, 2019 11:34 pm
I'm 30 days into the grand experiment (using Roth-space at M1Finance). I ended up doing 60% TMF, 23% of TQQQ and 17% UPRO for reasons that made sense in my brain at the time. This may or may not have been wise but we'll see. I may go to 20% in each of the equities when I eventually rebalance. Currently the portfolio is up a smidge overall (3.5%), all on the basis of TMF which is up about 17%. UPRO down 15% and TQQQ about 21%. This leaves me at a ratio of 68/17/15.

I've found the volatility of the underlying ETFs fascinating to watch, and yet the portfolio as a whole seems to be holding its own and doing exactly what was predicted.

Hard to resist the urge to smash the rebalance button. I'd be curious if anyone has any thoughts on establishing criteria when/if to do an early rebalance, or if it would be of any benefit. Otherwise, my rebalance is set for the end of July.
I’d stick to the plan. Will you not be bummed if you rebalance and then equities plunge? Could also implement a rebalancing band but don’t time that change.

While fun to watch, this extreme negative correlation is far from “predicted”. It won’t always be this easy to enjoy the volatility.

Walkure
Posts: 106
Joined: Tue Apr 11, 2017 9:59 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by Walkure » Fri May 31, 2019 9:04 am

Today is the big day! Final trading window of my first quarter is now open. Rebalance is set to take effect.
Stats as of 9:59 AM eastern:
The 40/60 allocation has drifted to 32/68.
UPRO: (7.25)%
TMF: 31.98%
Total MWRR: 16.26% 8-)

SVT
Posts: 256
Joined: Mon Oct 13, 2008 8:56 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by SVT » Fri May 31, 2019 5:10 pm

Can't wait to see the comments in this thread when the volatility goes the other way lol

MotoTrojan
Posts: 5502
Joined: Wed Feb 01, 2017 8:39 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by MotoTrojan » Fri May 31, 2019 5:31 pm

SVT wrote:
Fri May 31, 2019 5:10 pm
Can't wait to see the comments in this thread when the volatility goes the other way lol
Will be interesting indeed, a bit sad really considering some actually moved their entire liquid portfolio into this...

I'll enjoy watching the ride in both directions.

User avatar
Kevin M
Posts: 10923
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by Kevin M » Fri May 31, 2019 6:10 pm

tchoupitoulas wrote:
Tue May 28, 2019 12:42 pm
Tyler from PortfolioCharts (I believe that's his name) has a new article out today about "bond convexity." I had never heard of this concept so I learned a ton. Helps explain the volatility of long bonds and, of particular relevance to this strategy, why they can be a good investment even in low rate environments when "everyone knows" rates will rise.

https://portfoliocharts.com/2019/05/27/ ... convexity/
Much of what Tyler attributes to convexity is really a function of low coupon rates. One can have a low coupon rate when yield (to maturity) is high or low. A zero-coupon bond is a good example of a bond with a low coupon rate that has nothing to do with the yield (to maturity), and a 30-year zero-coupon bond has very high interest-rate sensitivity regardless of the initial yield.

So if you want the kind of bond volatility that is touted in the article, with big upside as well as downside potential, you can buy a 30-year zero-coupon bond regardless of the yield. Here's an example.

A 30-year zero-coupon bond with an initial yield of 1% (low) will increase in value by about 35% if the yield drops to 0% (for simplicity, I assume an instantaneous drop). A 30-year zero-coupon bond with an initial yield of 10% (high) will increase in value by about 33% if the yield drops to 9%. So you get a little more capital gain for a one percentage point yield decrease if the initial yield is lower, but nothing like the difference per examples in the article.

The model used in the article is based on par bonds, where the initial yield equals the coupon rate, so there is some conflation about the effects due to yield and coupon rate.

A fundamental aspect of duration is that a higher coupon rate lowers duration, and thus lowers price sensitivity to yield change, and vice versa. So a bond with a lower coupon rate (higher duration) will be more volatile than one with a higher coupon rate (lower duration) for the same initial yield.

I'm not sure I agree that the answer to low yields is to take more term risk. If for whatever reason you want high volatility/risk in the bond portion of your portfolio, you can always buy 30-year zero-coupon bonds, regardless of whether yields are high or low.

Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)

User avatar
LadyGeek
Site Admin
Posts: 55793
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by LadyGeek » Fri May 31, 2019 7:53 pm

I have added NotTooDeepLearning's R script to the wiki. See: Using open source software for portfolio analysis (Risk parity strategy using 3x leveraged ETFs)

If we need a dedicated support / discussion thread for the script, post here and I'll move the posts into a new thread.

FYI - If anyone has general questions on the R language, start a thread in the Personal Consumer Issues forum.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

lkar
Posts: 109
Joined: Sat May 04, 2019 4:02 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by lkar » Fri May 31, 2019 9:46 pm

MotoTrojan wrote:
Fri May 31, 2019 5:31 pm
SVT wrote:
Fri May 31, 2019 5:10 pm
Can't wait to see the comments in this thread when the volatility goes the other way lol
Will be interesting indeed, a bit sad really considering some actually moved their entire liquid portfolio into this...

I'll enjoy watching the ride in both directions.
I think there are probably four groups. Those who have invested. Those who are watching with bemused detachment. Those who have not invested but are keenly interested. And those who are rooting hard for failure and sharpening their I told you so knives.

My guess is that for those who stick around long enough there will be time for each of these groups to be in the ascendancy compared to the others.

I would think when this approach is going through rough patches, the comments mostly will be coming from groups two through four. Those who are actually trying this plan with real money — at least those who are posting in the thread — seem to have their heads up about the fact that large downward fluctuations will happen. I really will be surprised if we see post like “nobody told me I could see a $11,000 drop in two hours,” because pretty much everybody, including the OP has repeatedly told everyone that.

User avatar
SevenBridgesRoad
Posts: 423
Joined: Sat Jul 07, 2018 12:14 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by SevenBridgesRoad » Fri May 31, 2019 9:53 pm

Fifth group: those whose actually follow Boglehead fundamentals and wonder why such a thread is even here (and has almost 2000 posts).
Retired 2018 | Love to work at nothing all day | 30:70 VTINX with two deferred single premium annuities and deferred SS | VPW Method | Sleeping very well at night

Topic Author
HEDGEFUNDIE
Posts: 3101
Joined: Sun Oct 22, 2017 2:06 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by HEDGEFUNDIE » Fri May 31, 2019 9:58 pm

SevenBridgesRoad wrote:
Fri May 31, 2019 9:53 pm
Fifth group: those whose actually follow Boglehead fundamentals and wonder why such a thread is even here (and has almost 2000 posts).
I have no problem with the moderators banning this thread, as long as they also ban (1) all the market timing threads, including those that advocate for short / intermediate bonds for accumulators, and (2) all the threads that ask “why international?”.

Or maybe, just maybe, there is more than one road to Dublin, and more than one way to be a Boglehead.

User avatar
SevenBridgesRoad
Posts: 423
Joined: Sat Jul 07, 2018 12:14 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by SevenBridgesRoad » Fri May 31, 2019 10:21 pm

Don't be ridiculous. There's off the ranch, and there's on an entirely different planet. Complex leveraging of one's portfolio (or whatever it is you are promoting) is pretty far off the posted Wiki Boglehead fundamentals of three funds and simplicity and set-it-and-forget-it.

Maybe it's what the crowd wants though. The usual stuff may be too boring and the crowd wants Circus.

Honestly, this is like a National Review board and Bernie has the most popular thread. I find it strange and fascinating and sad all at the same time.
Retired 2018 | Love to work at nothing all day | 30:70 VTINX with two deferred single premium annuities and deferred SS | VPW Method | Sleeping very well at night

Topic Author
HEDGEFUNDIE
Posts: 3101
Joined: Sun Oct 22, 2017 2:06 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by HEDGEFUNDIE » Fri May 31, 2019 10:25 pm

SevenBridgesRoad wrote:
Fri May 31, 2019 10:21 pm
Don't be ridiculous. There's off the ranch, and there's on an entirely different planet. Complex leveraging of one's portfolio (or whatever it is you are promoting) is pretty far off the posted Wiki Boglehead fundamentals of three funds and simplicity and set-it-and-forget-it.

Maybe it's what the crowd wants though. The usual stuff may be too boring and the crowd wants Circus.

Honestly, this is like a National Review board and Bernie has the most popular thread. I find it strange and fascinating and sad all at the same time.
I don’t believe I’m the one being ridiculous here.

Here are the Boglehead principles. Please point out which ones I am violating:

Develop a workable plan

Invest early and often

Never bear too much or too little risk

Diversify

Never try to time the market

Use index funds when possible

Keep costs low

Minimize taxes

Invest with simplicity

Stay the course

User avatar
market timer
Posts: 6148
Joined: Tue Aug 21, 2007 1:42 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by market timer » Fri May 31, 2019 10:54 pm

HEDGEFUNDIE wrote:
Fri May 31, 2019 10:25 pm
Here are the Boglehead principles. Please point out which ones I am violating:

...

Invest with simplicity
I'd say people would take most issue with the simplicity point. However, philosophically, I see no contradiction with what you are doing and Bogleheads principles--the market just hasn't yet provided a simple product (that I'm aware of) to allow risk parity investing at low cost. I liken what you are doing to those who might have tried to invest in the S&P 500 before index funds existed. That would have seemed complicated and unorthodox at the time. Now everybody just dumps their savings into VTI without a second thought.
Last edited by market timer on Fri May 31, 2019 10:55 pm, edited 1 time in total.

lkar
Posts: 109
Joined: Sat May 04, 2019 4:02 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by lkar » Fri May 31, 2019 10:55 pm

SevenBridgesRoad wrote:
Fri May 31, 2019 10:21 pm
Don't be ridiculous. There's off the ranch, and there's on an entirely different planet. Complex leveraging of one's portfolio (or whatever it is you are promoting) is pretty far off the posted Wiki Boglehead fundamentals of three funds and simplicity and set-it-and-forget-it.

Maybe it's what the crowd wants though. The usual stuff may be too boring and the crowd wants Circus.

Honestly, this is like a National Review board and Bernie has the most popular thread. I find it strange and fascinating and sad all at the same time.
I admit that I like it, but I’m new around here. I didn’t even know what a leveraged ETF was a month ago and I admit I have learned something about the interplay between stocks and bonds that I was kind of starting to understand anyway.

I think it could actually turn out the be a very Bogleheads type thread if things go a certain way. Where the rubber may meet the road, though, is if it proves very successful in the short term. It seems like the discussion has stayed away from get rich quick talk for the most part. If OP’s portfolio is at $300,000 in 18 months though then it starts to get problematic. (Obviously, not for the OP!) All of the sudden it’s no longer a game to play with a small bit of one’s portfolio, but instead “staying the course” becomes a potential commitment of 30 percent of one’s portfolio to a strategy with a non-zero wipeout scenario. Newcomers might not properly be admonished about the risks and the small slice becomes bigger and bigger.

User avatar
SevenBridgesRoad
Posts: 423
Joined: Sat Jul 07, 2018 12:14 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by SevenBridgesRoad » Fri May 31, 2019 11:15 pm

Clearly we disagree and I'm not asking for your ideas to be banned. And I'm truly not pulling for your failure. I merely added a fifth group to the previous post, which claimed four groups.

Fifth group, which may just be me: I just find it super strange and fascinating that you are posting here and have drawn almost 2,000 posts.

Re: Boglehead Philosophy and your ideas, I'll just use your own words, which in my mind seem at odds with the BH Wiki:

"Inspired by market timer's famous thread on his leveraged lifecycle investment strategy during the financial crisis, I am starting a thread of my own on a risk parity strategy using 3x leveraged ETFs. This thread will be a documented record of my strategy. I intend to update the tracker below on a quarterly basis.

What is your strategy?
I am young (33) and willing & able to take risk. For anyone in my position, one would recommend a large allocation to equities. But might there be a better way to hold those equities? Theoretically and historically, it can be shown that by holding an uncorrelated set of assets (e.g. S&P 500 & long Treasuries) and adding leverage, one could achieve a similar volatility profile with greater returns than by holding the S&P alone.

What is the evidence supporting your strategy?
UPRO & TMF, the two ETFs I will use, only have a history of 10 years. EfficientInvestor has suggested a formula to simulate how these funds would have behaved in the past that takes into account the daily leverage reset, the cost of borrowing (1-month LIBOR)*, and the expense ratio:
the equation I currently have in my spreadsheet for daily performance of a leveraged ETF is:

(Daily % of underlying total return index) * X - ER/250 - (X - 1) * (1 month LIBOR) * (Current date - previous date)/360

where X is the leverage (e.g. 2 or 3), the current date is the current date and the previous date is the previous trading day.
Here is how the simulated 40% UPRO & 60% TMF (accounting for borrowing costs, expense ratios, daily leverage resets and quarterly rebalancing back to 40/60) would have performed over 1987-2018, as compared to the S&P 500:

*The funds theoretically pay a negotiated spread above LIBOR to their total return swap counterparties, but for TMF there are times when this spread is negative. Therefore I did not model this spread in the simulated data.

What is the theory behind this strategy?

There are three theoretical principles behind the strategy.

First, diversification. When one part of a well-diversified portfolio does poorly, the other parts do not necessarily drop in kind. Over the long run, long term Treasuries and the S&P 500 have had a correlation of approximately 0. (Shorter term Treasuries have been slightly more correlated with the stock market.)

Second, risk parity. Once we have decided upon the assets to hold, the next question is in what proportion we hold them. If the two assets differ significantly in volatility, you’ll want to balance them so that the more volatile asset does not drive the volatility of the portfolio as a whole. Over the long run, the average annual volatility of long term Treasuries has been 10%; unsurprisingly, the S&P 500 has been more volatile, at 15%. Therefore, a risk parity portfolio would hold more Treasuries than stocks. Simple arithmetic shows parity is achieved at 40/60.

Obviously, the problem with a 40/60 portfolio is that it delivers relatively conservative returns. The solution is leverage. So far our work has been to take risk out of the portfolio; with this last step we are putting risk back in. The upshot, though, is that our diversified, balanced portfolio delivers more return per unit of risk (i.e. has a higher Sharpe ratio) than the S&P 500 alone. So once we increase the risk of the portfolio (through leverage) to equal the risk of the S&P 500, we end up with far more return than the S&P 500. Which is exactly what the historical evidence shows."


From the Wiki:

Invest with simplicity

Simplicity: A three fund portfolio
Simplicity is the master key to financial success. When there are multiple solutions to a problem, choose the simplest one.
— John Bogle
It is not necessary to own many funds to achieve effective diversification. A single total stock market index fund contains thousands of stocks, including all styles and cap-sizes. A total bond market index fund contains thousands of bonds of various types and maturities. In his Little Book of Common Sense Investing, Mr. Bogle recommends a simple portfolio of only two funds for many investors: Vanguard Total Stock Market Index Fund and Total Bond Market Index Fund. [15]

A simple portfolio has many advantages. It almost always lowers costs (including taxes), makes analysis easier, simplifies rebalancing, simplifies tax-preparation, reduces paper-work and record-keeping, and enables caregivers and heirs to easily take-over the portfolio when necessary. Best of all, a simple portfolio allows you to spend more time with family and friends, and less time managing your finances."
Retired 2018 | Love to work at nothing all day | 30:70 VTINX with two deferred single premium annuities and deferred SS | VPW Method | Sleeping very well at night

Topic Author
HEDGEFUNDIE
Posts: 3101
Joined: Sun Oct 22, 2017 2:06 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by HEDGEFUNDIE » Sat Jun 01, 2019 1:17 am

Interesting. If I had to guess which Boglehead principle I was supposedly violating, it would not have been Simplicity.

My strategy is the epitome of simplicity:

1. Buy and hold two ETFs.
2. Rebalance every quarter.

That’s it. How much more simple can it get?

Double-click into the leveraged ETF itself, and you quickly discover these are simple instruments as well. For example, UPRO delivers 3x the daily performance of the S&P 500. It does this by holding 66% individual S&P 500 stocks, 222% S&P 500 Total Return Swaps, and 12% S&P 500 futures = 300% of the S&P 500’s daily performance

Double-click one more time into the total return swaps, which sound complicated, but are actually just simple contracts between the ETF and major investment banks. Every day, the banks pay the ETF the value of the S&P 500’s return for that day, and in return the ETF pays the banks a pre-negotiated fixed rate of interest, which is slightly higher than the short term treasury rate. The ETF also holds some cash to serve as collateral for the banks. Finally, like any other investment, an expense ratio is deducted.

To summarize, the leveraged ETFs for the strategy borrows money at a short term rate and invests it into the S&P 500 (in the case of UPRO) and long term Treasuries (in the case of TMF).

This is basically the same as if I borrowed money on my credit card, and invested that money into those assets, if my credit card had an interest rate of ~3% + 1% annual fee.
Last edited by HEDGEFUNDIE on Sat Jun 01, 2019 1:27 am, edited 1 time in total.

HawkeyePierce
Posts: 533
Joined: Tue Mar 05, 2019 10:29 pm
Location: Colorado

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by HawkeyePierce » Sat Jun 01, 2019 1:22 am

I would argue cost is the biggest "violation" of Bogleheads guidelines with this strategy. TMF and UPRO are very, very expensive by BH standards.

I'm firmly in the "fascinating but not for me" camp. I've learned a lot from this thread and from others that advocate alternatives or augmentations to the three-fund portfolio, even if I don't choose to follow those strategies. I think there's value in debating alternatives—if anything, these debates reaffirm my commitment to my Bogleheads strategy.

Topic Author
HEDGEFUNDIE
Posts: 3101
Joined: Sun Oct 22, 2017 2:06 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by HEDGEFUNDIE » Sat Jun 01, 2019 1:41 am

HawkeyePierce wrote:
Sat Jun 01, 2019 1:22 am
I would argue cost is the biggest "violation" of Bogleheads guidelines with this strategy. TMF and UPRO are very, very expensive by BH standards.
I would have also thought cost was the issue.

But cost is relative. The total annual cost of the LETF is 3 - 4%. A common argument you see around here is that anyone who has a mortgage and investments is borrowing at the mortgage rate to invest, and mortgage rates are right around 3 - 4%.

User avatar
SevenBridgesRoad
Posts: 423
Joined: Sat Jul 07, 2018 12:14 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by SevenBridgesRoad » Sat Jun 01, 2019 2:10 am

HEDGEFUNDIE wrote:
Sat Jun 01, 2019 1:17 am

This is basically the same as if I borrowed money on my credit card, and invested that money into those assets, if my credit card had an interest rate of ~3% + 1% annual fee.
This is not the same thing as Taylor saying, “buy and hold three funds.”

Let’s quit arguing, my friend. Continue your adventure. We simply disagree.
Retired 2018 | Love to work at nothing all day | 30:70 VTINX with two deferred single premium annuities and deferred SS | VPW Method | Sleeping very well at night

User avatar
mrspock
Posts: 429
Joined: Tue Feb 13, 2018 2:49 am
Location: Vulcan

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by mrspock » Sat Jun 01, 2019 2:33 am

Let's stay on topic here, I don't think Hedgefundie has any ill intent here. He, and others were kind enough to share their investment ideas, along with extensive analysis, took feedback, did MORE analysis and shared again. You can't ask more from a Boglehead forum member.

I think this forum is large enough for a variety of reasonable scrutinized ideas, and this idea has probably been scrutinized to a degree which I've not seen on here.

It's been a rough week on the markets, so perhaps emotions are a bit high? But either way, let's support each other!

jminv
Posts: 944
Joined: Tue Jan 02, 2018 10:58 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by jminv » Sat Jun 01, 2019 5:32 am

This is an interesting thread so let's try not to get it further derailed and consequently locked.

But if we are talking about how this deviates most it's not the ER because that's more about leverage than anything, it's that the maximum drawdown would be intolerable for most people. They would bail long before it is reached. This will be when this thread becomes very lively. This is also one reason why someone should start lobbying M1 Finance to allow automatic rebalancing according to a predefined quarterly schedule to allow for a set and forget approach to it. They could charge for it as an add on feature.

User avatar
privatefarmer
Posts: 573
Joined: Mon Sep 08, 2014 2:45 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by privatefarmer » Sat Jun 01, 2019 6:40 am

lkar wrote:
Fri May 31, 2019 9:46 pm
MotoTrojan wrote:
Fri May 31, 2019 5:31 pm
SVT wrote:
Fri May 31, 2019 5:10 pm
Can't wait to see the comments in this thread when the volatility goes the other way lol
Will be interesting indeed, a bit sad really considering some actually moved their entire liquid portfolio into this...

I'll enjoy watching the ride in both directions.
I think there are probably four groups. Those who have invested. Those who are watching with bemused detachment. Those who have not invested but are keenly interested. And those who are rooting hard for failure and sharpening their I told you so knives.
count me in group #1. I've got 2/3 of my investable assets in this strategy (the remaining 1/3 is in emerging markets equities). I dipped my toes into this strategy on March 12th and since then my portfolio is up ~5% while the 100% equity-portfolio that I had been in is down ~5%. a couple month's of returns is nothing, I know, just noise. but nonetheless it's been nice to see the negative correlation between UPRO/TMF during "bad market" days.

The underlying philosophy of risk parity investing is actually very bogleheadish. Diversifying your portfolio amongst different risk premiums, including market risk, just makes sense. It historically has been shown to provide a higher sharpe ratio than 100% equities. It's the leverage part that I think throws people off, which is understandable. The thing about LETFs is that they are not like using "pure leverage". because they rebalance daily, they will never actually go to "zero", although they can certainly get very close. But, if the negative correlation btwn UPRO and TMF persists during bear markets then I don't anticipate my portfolio losing much more than 100% equities would as TMF should provide significant cushion. And I think anyone who argues "bonds have been in a bull market for 30 years" just hasn't done the research or looked into the historical performance of this portfolio. This portfolio has actually done VERY well even in times of increasing interest rates.

So anyhow, it's not perfect. LETFs are not as "clean" as I'd like them to be and I'm sure if I were sophisticated enough to understand options trading or using futures I could replicate this portfolio in a more efficient way. However, I think LETFs do a pretty decent job within a risk parity portfolio, time will tell I suppose.

lkar
Posts: 109
Joined: Sat May 04, 2019 4:02 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by lkar » Sat Jun 01, 2019 11:17 am

SevenBridgesRoad wrote:
Fri May 31, 2019 9:53 pm
Fifth group: those whose actually follow Boglehead fundamentals and wonder why such a thread is even here (and has almost 2000 posts).
I'm sorry about the four groups point. I really wasn't trying to provocative or throw things off track. It was a bit tongue in cheek, but my main goal is to try to make a case why the thread has value to me at least. I think the biggest challenge for the thread will be hindsight no matter which way things turn out. I'm not sure whether this belongs in this thread or is just too slippery to be a subject at all, but the juxtaposition (or, I guess OP would say concurrence) between this strategy and boglehead philosophy I think is very illuminating to those of us just getting our minds around boglehead philosphy to understand what it is and, maybe equally or even more importantly, what it isn't.

MotoTrojan
Posts: 5502
Joined: Wed Feb 01, 2017 8:39 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by MotoTrojan » Sat Jun 01, 2019 11:28 am

jminv wrote:
Sat Jun 01, 2019 5:32 am
This is an interesting thread so let's try not to get it further derailed and consequently locked.

But if we are talking about how this deviates most it's not the ER because that's more about leverage than anything, it's that the maximum drawdown would be intolerable for most people. They would bail long before it is reached. This will be when this thread becomes very lively. This is also one reason why someone should start lobbying M1 Finance to allow automatic rebalancing according to a predefined quarterly schedule to allow for a set and forget approach to it. They could charge for it as an add on feature.
In the last 3 decades its max drawdown has been on par with the global equity market. Sure it was worse during a wild inflationary period just before that, but it wasn’t as bad as the Great Depression. You can’t say someone should anticipate the 50-70’s market but not the GD.

This is certainly not a substitute for someone that is 60/40 but for a 100/0 person it certainly has appeal beyond leveraging to go 200/0.

NotTooDeepLearning
Posts: 75
Joined: Wed Oct 24, 2018 2:04 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by NotTooDeepLearning » Sat Jun 01, 2019 2:08 pm

LadyGeek wrote:
Fri May 31, 2019 7:53 pm
I have added NotTooDeepLearning's R script to the wiki. See: Using open source software for portfolio analysis (Risk parity strategy using 3x leveraged ETFs)

If we need a dedicated support / discussion thread for the script, post here and I'll move the posts into a new thread.

FYI - If anyone has general questions on the R language, start a thread in the Personal Consumer Issues forum.
I added the print() function to the script on google drive so we can remove that step on the wiki. It didn't occur to me I'm the only one who can change things there :happy

User avatar
LadyGeek
Site Admin
Posts: 55793
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by LadyGeek » Sat Jun 01, 2019 4:29 pm

Thanks, I updated the wiki: Using open source software for portfolio analysis (Risk parity strategy using 3x leveraged ETFs)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

boggledbogler
Posts: 3
Joined: Fri May 31, 2019 9:08 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by boggledbogler » Sat Jun 01, 2019 4:35 pm

Intriguing indeed!

Kudos to all the people putting in a lot of work to have these caclulations as ironed out as can be for the back tests. Is there anyway to calculate TQQQ (Proshares 3X QQQ), URTY (Proshares 3X Russell2000), and UST (ProShares 2X 7-10 Year Treasury) and have the SIM for portfoliovisualizer available?
There's definitely a tinkering scratch that needs to be itched.

Best of luck to all those who have put money into these various strategies. Stay vigilant and don't lose your heads!
Best, BB

MotoTrojan
Posts: 5502
Joined: Wed Feb 01, 2017 8:39 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by MotoTrojan » Sat Jun 01, 2019 4:55 pm

boggledbogler wrote:
Sat Jun 01, 2019 4:35 pm
Intriguing indeed!

Kudos to all the people putting in a lot of work to have these caclulations as ironed out as can be for the back tests. Is there anyway to calculate TQQQ (Proshares 3X QQQ), URTY (Proshares 3X Russell2000), and UST (ProShares 2X 7-10 Year Treasury) and have the SIM for portfoliovisualizer available?
There's definitely a tinkering scratch that needs to be itched.

Best of luck to all those who have put money into these various strategies. Stay vigilant and don't lose your heads!
Data exists for intermediate treasuries back to 1955 in 1x, 2x, and 3x flavor. Not sure if anybody made one for the Nasdaq but I'd be interested.

gtwhitegold
Posts: 433
Joined: Fri Sep 21, 2012 1:55 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by gtwhitegold » Sun Jun 02, 2019 7:57 am

MotoTrojan wrote:
Sat Jun 01, 2019 4:55 pm
boggledbogler wrote:
Sat Jun 01, 2019 4:35 pm
Intriguing indeed!

Kudos to all the people putting in a lot of work to have these caclulations as ironed out as can be for the back tests. Is there anyway to calculate TQQQ (Proshares 3X QQQ), URTY (Proshares 3X Russell2000), and UST (ProShares 2X 7-10 Year Treasury) and have the SIM for portfoliovisualizer available?
There's definitely a tinkering scratch that needs to be itched.

Best of luck to all those who have put money into these various strategies. Stay vigilant and don't lose your heads!
Data exists for intermediate treasuries back to 1955 in 1x, 2x, and 3x flavor. Not sure if anybody made one for the Nasdaq but I'd be interested.
The NASDAQ 100 index started in 1985 and the NASDAQ started trading sometime after 1971, so you may not be able to get the data that you are looking for.

dspencer
Posts: 184
Joined: Wed Jul 06, 2016 11:29 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by dspencer » Mon Jun 03, 2019 2:38 pm

HEDGEFUNDIE wrote:
Fri May 31, 2019 10:25 pm

I don’t believe I’m the one being ridiculous here.

Here are the Boglehead principles. Please point out which ones I am violating:

Develop a workable plan

Invest early and often

Never bear too much or too little risk

Diversify

Never try to time the market

Use index funds when possible

Keep costs low

Minimize taxes

Invest with simplicity

Stay the course
I appreciate the thread and while I'm not following this strategy, I am considering it with a small portion of my overall assets. I think what makes it interesting is that it's the most "out there" strategy that actually does fit with most of the Boglehead principles. I would argue that it is debatable whether this is "too much risk" but that's very dependent on the situation of the individual and how much of their portfolio is in this strategy. It can certainly be argued that it's not keeping costs low, but they are not just arbitrarily high. They are low relative to other options that provide the same result, unlike paying a financial advisor to buy a mutual fund you could buy yourself.

If you believe the market is efficient, even if not perfectly so, it's easy to see why all the usual strategies fail: market timing, stock picking, picking advisors who charge extra to stock pick and market time. At their heart they have the concept of outsmarting everyone else. This strategy does not rely on that and I think that's a big appeal.

User avatar
mrspock
Posts: 429
Joined: Tue Feb 13, 2018 2:49 am
Location: Vulcan

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by mrspock » Mon Jun 03, 2019 4:37 pm

I must say, the last week has been a stunning demonstration of risk parity in action. After seeing this (and many similar episodes in the past months), I’m tempted to move to VGLT in my primary 80/20 portfolio over the intermediate muni bonds, seems like the better risk to take over any potential muni fund ratings fiascos or state defaults which might happen in the future.

Very impressed.

MotoTrojan
Posts: 5502
Joined: Wed Feb 01, 2017 8:39 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by MotoTrojan » Mon Jun 03, 2019 5:22 pm

mrspock wrote:
Mon Jun 03, 2019 4:37 pm
I must say, the last week has been a stunning demonstration of risk parity in action. After seeing this (and many similar episodes in the past months), I’m tempted to move to VGLT in my primary 80/20 portfolio over the intermediate muni bonds, seems like the better risk to take over any potential muni fund ratings fiascos or state defaults which might happen in the future.

Very impressed.
Bit late, but yes it has been fascinating to watch rates continue to drop. Feel terrible saying this but I'd welcome a recession so I could watch this performance in action via this portfolio, while also getting a better deal on my regular ol' boring indexes.

NotTooDeepLearning
Posts: 75
Joined: Wed Oct 24, 2018 2:04 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by NotTooDeepLearning » Mon Jun 03, 2019 5:28 pm

mrspock wrote:
Mon Jun 03, 2019 4:37 pm
I must say, the last week has been a stunning demonstration of risk parity in action. After seeing this (and many similar episodes in the past months), I’m tempted to move to VGLT in my primary 80/20 portfolio over the intermediate muni bonds, seems like the better risk to take over any potential muni fund ratings fiascos or state defaults which might happen in the future.

Very impressed.
The s&p isn't even in a correction, yet treasuries are soaring... I think recent price movements are more attributable to a shift in the macroeconomic environment than what is typical of a risk-balanced portfolio.

robertmcd
Posts: 457
Joined: Tue Aug 09, 2016 9:06 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by robertmcd » Tue Jun 04, 2019 10:44 am

So something I noticed today. The 2 yr yield is up by 10 basis points or so, while the 1 yr and shorter yields have all dropped. I had been thinking that at this point in the cycle, if you wanted to keep exposure to the short end of the curve while using leverage thru the futures market, you would be paying a rather large spread due to the inverted yield curve ( 3 mo t bill vs. 2 yr treasury). So could you go even shorter by using Fed funds futures contracts to go extremely long the 3 mo t bill essentially?

MotoTrojan
Posts: 5502
Joined: Wed Feb 01, 2017 8:39 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by MotoTrojan » Tue Jun 04, 2019 10:48 am

robertmcd wrote:
Tue Jun 04, 2019 10:44 am
So something I noticed today. The 2 yr yield is up by 10 basis points or so, while the 1 yr and shorter yields have all dropped. I had been thinking that at this point in the cycle, if you wanted to keep exposure to the short end of the curve while using leverage thru the futures market, you would be paying a rather large spread due to the inverted yield curve ( 3 mo t bill vs. 2 yr treasury). So could you go even shorter by using Fed funds futures contracts to go extremely long the 3 mo t bill essentially?
More work/active than I would want to deal with.

robertmcd
Posts: 457
Joined: Tue Aug 09, 2016 9:06 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by robertmcd » Tue Jun 04, 2019 10:56 am

MotoTrojan wrote:
Tue Jun 04, 2019 10:48 am
robertmcd wrote:
Tue Jun 04, 2019 10:44 am
So something I noticed today. The 2 yr yield is up by 10 basis points or so, while the 1 yr and shorter yields have all dropped. I had been thinking that at this point in the cycle, if you wanted to keep exposure to the short end of the curve while using leverage thru the futures market, you would be paying a rather large spread due to the inverted yield curve ( 3 mo t bill vs. 2 yr treasury). So could you go even shorter by using Fed funds futures contracts to go extremely long the 3 mo t bill essentially?
More work/active than I would want to deal with.
Not to mention a single contract is 5,000,000 exposure.

MotoTrojan
Posts: 5502
Joined: Wed Feb 01, 2017 8:39 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by MotoTrojan » Tue Jun 04, 2019 10:59 am

robertmcd wrote:
Tue Jun 04, 2019 10:56 am
MotoTrojan wrote:
Tue Jun 04, 2019 10:48 am
robertmcd wrote:
Tue Jun 04, 2019 10:44 am
So something I noticed today. The 2 yr yield is up by 10 basis points or so, while the 1 yr and shorter yields have all dropped. I had been thinking that at this point in the cycle, if you wanted to keep exposure to the short end of the curve while using leverage thru the futures market, you would be paying a rather large spread due to the inverted yield curve ( 3 mo t bill vs. 2 yr treasury). So could you go even shorter by using Fed funds futures contracts to go extremely long the 3 mo t bill essentially?
More work/active than I would want to deal with.
Not to mention a single contract is 5,000,000 exposure.
Maybe if everyone on this thread combines assets we can utilize this. I’m happy to be the account holder.

reformed.trader
Posts: 71
Joined: Sat Apr 15, 2017 11:14 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by reformed.trader » Tue Jun 04, 2019 1:19 pm

robertmcd wrote:
Tue Jun 04, 2019 10:44 am
So something I noticed today. The 2 yr yield is up by 10 basis points or so, while the 1 yr and shorter yields have all dropped. I had been thinking that at this point in the cycle, if you wanted to keep exposure to the short end of the curve while using leverage thru the futures market, you would be paying a rather large spread due to the inverted yield curve ( 3 mo t bill vs. 2 yr treasury). So could you go even shorter by using Fed funds futures contracts to go extremely long the 3 mo t bill essentially?
Check out TYD if you are concerned with duration risk.

robertmcd
Posts: 457
Joined: Tue Aug 09, 2016 9:06 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by robertmcd » Tue Jun 04, 2019 1:35 pm

reformed.trader wrote:
Tue Jun 04, 2019 1:19 pm
robertmcd wrote:
Tue Jun 04, 2019 10:44 am
So something I noticed today. The 2 yr yield is up by 10 basis points or so, while the 1 yr and shorter yields have all dropped. I had been thinking that at this point in the cycle, if you wanted to keep exposure to the short end of the curve while using leverage thru the futures market, you would be paying a rather large spread due to the inverted yield curve ( 3 mo t bill vs. 2 yr treasury). So could you go even shorter by using Fed funds futures contracts to go extremely long the 3 mo t bill essentially?
Check out TYD if you are concerned with duration risk.
No what I was saying is that now is the time to be in levered 3 month T bills. Look at today, yields are up across the board from the 2 yr to the 30 yr. But not the 3 mo and 6 mo. This is due to the Fed jawboning that they are open to a cut. I think the only way to get exposure to this is with Fed funds futures contracts. It would take a massive amount of leverage to achieve risk parity with a sizeable stock allocation though.

bizkitgto
Posts: 50
Joined: Tue Mar 14, 2017 11:54 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by bizkitgto » Tue Jun 04, 2019 2:28 pm

Does anyone know how to model this portfolio in portfolio viz?
Keep it simple: 20% BND, 50% VTI and 30% VXUS

rascott
Posts: 485
Joined: Wed Apr 15, 2015 10:53 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by rascott » Tue Jun 04, 2019 3:33 pm

This a fascinating thread. Have been reading it last month or so....to make sure I understand all the nuances.

Really thinking of DCA this into my Roth for a while going forward. Would be a very small % of my total AA.

MotoTrojan
Posts: 5502
Joined: Wed Feb 01, 2017 8:39 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by MotoTrojan » Tue Jun 04, 2019 3:34 pm

rascott wrote:
Tue Jun 04, 2019 3:33 pm
This a fascinating thread. Have been reading it last month or so....to make sure I understand all the nuances.

Really thinking of DCA this into my Roth for a while going forward. Would be a very small % of my total AA.
The nice thing about DCA with M1 would be totally hands-free rebalancing via contributions until it got a good deal larger than them.

rascott
Posts: 485
Joined: Wed Apr 15, 2015 10:53 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by rascott » Tue Jun 04, 2019 3:42 pm

MotoTrojan wrote:
Tue Jun 04, 2019 3:34 pm
rascott wrote:
Tue Jun 04, 2019 3:33 pm
This a fascinating thread. Have been reading it last month or so....to make sure I understand all the nuances.

Really thinking of DCA this into my Roth for a while going forward. Would be a very small % of my total AA.
The nice thing about DCA with M1 would be totally hands-free rebalancing via contributions until it got a good deal larger than them.

Yeah I have a Roth at M1 already. Love the platform.

samsdad
Posts: 713
Joined: Sat Jan 02, 2016 6:20 pm

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by samsdad » Tue Jun 04, 2019 9:40 pm

bizkitgto wrote:
Tue Jun 04, 2019 2:28 pm
Does anyone know how to model this portfolio in portfolio viz?
(1) Go back to the original post, where the data sets for both can be downloaded in a link about half-way through the original post just after the graphs that have all the red little dots (the blue link "here").
(2) Create an account in PV.
(3) Upload the datasets using the "import benchmark" option when you click the blue username button on the top right of PV.
(4) Under "series name," name them whatever you want to name them, for example "UPRO86 simdata".
(5) Retrieve the data files from your computer and upload them with the "browse" button.
(6) These are "daily returns" for the "series" option.
(7) For "percentage values" you want to select "yes".
(8) Assign them ticker name, I use something like UPROHF86.
(9) Click the blue "import data series" at the bottom of this menu.
(10) Then click the blue "save changes" button at the bottom when the window changes.
(11) Go back to portfolio backtest and they should be there when you type in whatever ticker you assigned.

Let me know if you have any issues, I'll be glad to help.

bizkitgto
Posts: 50
Joined: Tue Mar 14, 2017 11:54 am

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by bizkitgto » Tue Jun 04, 2019 11:04 pm

samsdad wrote:
Tue Jun 04, 2019 9:40 pm
bizkitgto wrote:
Tue Jun 04, 2019 2:28 pm
Does anyone know how to model this portfolio in portfolio viz?
(1) Go back to the original post, where the data sets for both can be downloaded in a link about half-way through the original post just after the graphs that have all the red little dots (the blue link "here").
(2) Create an account in PV.
(3) Upload the datasets using the "import benchmark" option when you click the blue username button on the top right of PV.
(4) Under "series name," name them whatever you want to name them, for example "UPRO86 simdata".
(5) Retrieve the data files from your computer and upload them with the "browse" button.
(6) These are "daily returns" for the "series" option.
(7) For "percentage values" you want to select "yes".
(8) Assign them ticker name, I use something like UPROHF86.
(9) Click the blue "import data series" at the bottom of this menu.
(10) Then click the blue "save changes" button at the bottom when the window changes.
(11) Go back to portfolio backtest and they should be there when you type in whatever ticker you assigned.

Let me know if you have any issues, I'll be glad to help.
It worked like a charm, thanks!
Keep it simple: 20% BND, 50% VTI and 30% VXUS

Locked