HEDGEFUNDIE wrote: ↑Thu Aug 08, 2019 7:39 pm
LocusCoeruleus wrote: ↑Thu Aug 08, 2019 6:07 pm
So if TMF & UPRO are tax efficient from a holding perspective, instead of manual quarterly rebalance one just adds to whichever is off kilter from OP's allocation on a quarterly basis. Thus no st cap gain/loss. Then why is TMF & UPRO not suitable in taxable space?
The above assumes one has the ability to add sufficient funds to meet the OP's allocation on a quarterly basis without needing to sell / buy one fund for the other.
What if the portfolio crashes 50% or skyrockets 80%? Will you really have enough dry powder to fully rebalance?
I've seen this argument made previously on this thread. It doesn't have to be dry powder, assuming one's willingness and ability to cash flow the equalizer on a quarterly basis. If one is going to be investing in a regular basis in a taxable account - as noted by above why not make this the ultimate "two fund" portfolio.
Clearly, scale does matter. A $1mm portfolio would be much more challenging to cash flow the equalizer than something much smaller for the typical investor here. Though perhaps that is the point. When that $100k does hit $1mm then what do you do? To that point though, the flip side - the withdrawal stage could provide an opportunity to quarterly balance.
Furthermore, if suitable TLH partners are (or become) available for upro & tmf, lt cap gains spec id could be strategically harvested and st losses similarly for these volatile instruments providing an intriguing tax benefit that /u/livesoft would be proud of
No doubt, one wouldn't have to deal with these issues every quarter in tax advantaged space, though I would imagine there may be folks reading this who have ability to enlarge taxable space much faster than the limited tax advantaged space available to them. And the above may represent an option for them particularly in light of the very low tax drag associated with the dividends of these products than their non-leveraged counterparts that these same folks may be holding in their taxable space.