HEDGEFUNDIE's excellent adventure Part II: The next journey

[MotoTrojan]

What have I started!

[SVT]

I'm still at the original 40/60 since Feb, although it's drifted to 50/50 and has been there for a couple of months now. I'm up 50% and $40k.

[rudeboy]

I've been away from the board for awhile. Can someone post some cliffnotes as to how this excellent adventure is progressing, how many people have joined in, and all that good stuff? Impressions are fine.

[SVT]

I've been away from the board for awhile. Can someone post some cliffnotes as to how this excellent adventure is progressing, how many people have joined in, and all that good stuff? Impressions are fine.

No one knows how many have joined in but it seems like several of those that have, have changed their minds in various ways; either substituting funds or getting out completely.

[MotoTrojan]

I'm still at the original 40/60 since Feb, although it's drifted to 50/50 and has been there for a couple of months now. I'm up 50% and $40k.

Good luck. If the market dumps and treasuries pop I would consider the 55/45 myself for a nice rebalance.

[butricksaid]

I'm still at the original 40/60 since Feb, although it's drifted to 50/50 and has been there for a couple of months now. I'm up 50% and $40k.

It's a bit easier to tolerate the recent seesaw movements if you have a thick padding of gains to fall against. Your risk-reward trade-off is much better than mine since I only discovered and started the strategy in August. Again; great strategy, wrong time.

[HawkeyePierce]

I'm staying in with MotoTrojan's 43/57 UPRO/EDV. 10% of my portfolio, all in Roth space. Up a nice 12.3% since I got in.

The rest of my portfolio is 90/10 with a domestic small-cap value tilt and a mix of ex-US small cap and emerging markets for my intl allocation.

[MotoTrojan]

I'm staying in with MotoTrojan's 43/57 UPRO/EDV. 10% of my portfolio, all in Roth space. Up a nice 12.3% since I got in.

The rest of my portfolio is 90/10 with a domestic small-cap value tilt and a mix of ex-US small cap and emerging markets for my intl allocation.

Glad it lives on without me .

[guyinlaw]

I'm staying in with MotoTrojan's 43/57 UPRO/EDV. 10% of my portfolio, all in Roth space. Up a nice 12.3% since I got in.

The rest of my portfolio is 90/10 with a domestic small-cap value tilt and a mix of ex-US small cap and emerging markets for my intl allocation.

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

[willthrill81]

I'm still at the original 40/60 since Feb, although it's drifted to 50/50 and has been there for a couple of months now. I'm up 50% and $40k.

It's a bit easier to tolerate the recent seesaw movements if you have a thick padding of gains to fall against. Your risk-reward trade-off is much better than mine since I only discovered and started the strategy in August. Again; great strategy, wrong time.

I don't follow. A 40/60 mix of UPRO/TMF from August through November returned 15.29%, and a 55/45 mix of the same returned a nearly identical 15.24%.

[MotoTrojan]

I'm staying in with MotoTrojan's 43/57 UPRO/EDV. 10% of my portfolio, all in Roth space. Up a nice 12.3% since I got in.

The rest of my portfolio is 90/10 with a domestic small-cap value tilt and a mix of ex-US small cap and emerging markets for my intl allocation.

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

[Busdrvr]

I abandoned the edv for tmf at 55/45 per HF’s plan. All in Roth and will plan on adding to it thru tax day.

[willthrill81]

I'm staying in with MotoTrojan's 43/57 UPRO/EDV. 10% of my portfolio, all in Roth space. Up a nice 12.3% since I got in.

The rest of my portfolio is 90/10 with a domestic small-cap value tilt and a mix of ex-US small cap and emerging markets for my intl allocation.

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

That's why I opted to use a target volatility approach rather than a static AA. Rather than using distant historic data to determine the appropriate AA, it uses recent historic data (i.e. prior month's). Some may berate this method, but any decision regarding one's AA is largely driven by historic data.

[MotoTrojan]

I'm staying in with MotoTrojan's 43/57 UPRO/EDV. 10% of my portfolio, all in Roth space. Up a nice 12.3% since I got in.

The rest of my portfolio is 90/10 with a domestic small-cap value tilt and a mix of ex-US small cap and emerging markets for my intl allocation.

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

That's why I opted to use a target volatility approach rather than a static AA. Rather than using distant historic data to determine the appropriate AA, it uses recent historic data (i.e. prior month's). Some may berate this method, but any decision regarding one's AA is largely driven by historic data.

Quite like your approach (with a small portion of course) but I’m trying to make conscious decisions to minimize the time I spend fussing with my finances. Nasty habit .

[willthrill81]

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

That's why I opted to use a target volatility approach rather than a static AA. Rather than using distant historic data to determine the appropriate AA, it uses recent historic data (i.e. prior month's). Some may berate this method, but any decision regarding one's AA is largely driven by historic data.

Quite like your approach (with a small portion of course) but I’m trying to make conscious decisions to minimize the time I spend fussing with my finances. Nasty habit .

I can certainly see that. Since I'm a trend follower anyway, it only takes me an additional ~45 seconds to check what the new AA should be and change it in M1 Finance.

If I took a hands-off approach, I don't think that I would want to look at the performance at all more than once per year. Even my approach is volatile as heck. In the last five months, I've swung from -8% to +17% (now).

[keith6014]

For the people who constantly rebalance, how do you measure performance? I have amended from UPRO to TQQQ; TMF to EDV and back to TMF several times. I did 35 trades from August till now.


Debating if I should use https://goo.gl/5NSnKi from https://www.bogleheads.org/wiki/Calcula ... al_returns

Would love to compare returns from S&P and my portfolio with rebalances.

[willthrill81]

For the people who constantly rebalance, how do you measure performance?

M1 Finance shows me what my YTD return is. I could do it myself in Excel if I wanted to, but I don't.

[HEDGEFUNDIE]

I'm staying in with MotoTrojan's 43/57 UPRO/EDV. 10% of my portfolio, all in Roth space. Up a nice 12.3% since I got in.

The rest of my portfolio is 90/10 with a domestic small-cap value tilt and a mix of ex-US small cap and emerging markets for my intl allocation.

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

Your objection basically amounts to, “I don’t like this because it’s making too much money”

[rascott]

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

That's why I opted to use a target volatility approach rather than a static AA. Rather than using distant historic data to determine the appropriate AA, it uses recent historic data (i.e. prior month's). Some may berate this method, but any decision regarding one's AA is largely driven by historic data.

Quite like your approach (with a small portion of course) but I’m trying to make conscious decisions to minimize the time I spend fussing with my finances. Nasty habit .

I can certainly see that. Since I'm a trend follower anyway, it only takes me an additional ~45 seconds to check what the new AA should be and change it in M1 Finance.

If I took a hands-off approach, I don't think that I would want to look at the performance at all more than once per year. Even my approach is volatile as heck. In the last five months, I've swung from -8% to +17% (now).

You should see my 100% TQQQ trend following portfolio.

[rascott]

I'm staying in with MotoTrojan's 43/57 UPRO/EDV. 10% of my portfolio, all in Roth space. Up a nice 12.3% since I got in.

The rest of my portfolio is 90/10 with a domestic small-cap value tilt and a mix of ex-US small cap and emerging markets for my intl allocation.

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

Your objection basically amounts to, “I don’t like this because it’s making too much money”

I'm staying the course with 55/45 with you.... along with three other leveraged portfolios (TQQQ trend following, a futures account (which I think will be a long term PITA), and some PIMCO funds.

I think I'll likely drop the futures accounts at some point. It's been fine, but after doing it for bit I could see it getting real old. And difficult to stick with. PIMCO is obviously paying them to do it, set and forget..... and the trend following is just about as passive as anything else for probably 85% of the time, taking very little time.

If nothing else, I've leaned a lot this year about these different products..... including not to be afraid of holding them long term. For that you are owed a big thank you.

[HEDGEFUNDIE]

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

Your objection basically amounts to, “I don’t like this because it’s making too much money”

I'm staying the course with 55/45 with you.... along with three other leveraged portfolios (TQQQ trend following, a futures account (which I think will be a long term PITA), and some PIMCO funds.

I think I'll likely drop the futures accounts at some point. It's been fine, but after doing it for bit I could see it getting real old. And difficult to stick with. PIMCO is obviously paying them to do it, set and forget..... and the trend following is just about as passive as anything else for probably 85% of the time, taking very little time.

If nothing else, I've leaned a lot this year about these different products..... including not to be afraid of holding them long term. For that you are owed a big thank you.

You’re welcome! Nothing like trying it for yourself

[schismal]

Well, I'm still here.

My Roth is split between PSLDX and 55/45 UPRO/TMF.

In the summer, I'd started a small taxable pie that's 50/25/25 UPRO/TMF/EDV. I'm not actively contributing to this anymore, but I do toss a few hundred into it quarterly to rebalance, and I'll just let it ride until rebalancing becomes an issue. Interestingly, this allocation has been very stable compared to my Roth, so it hasn't yet moved more than a few percentage points off target. EDV does kick off distributions, unlike the leveraged funds. But aside from that, the relative stability so far has made this a superior taxable strategy compared to the OG. So that's another Moto idea still living on.

[caklim00]

I think I'll likely drop the futures accounts at some point. It's been fine, but after doing it for bit I could see it getting real old. And difficult to stick with.

Haha, yeah I've learned a lot since I bought 2 ZN contracts. Like you need to make sure and have much more cushion than the original margin requirements.

I've had a couple of times where I've gotten an email like this from IKBR:

Margin cushion: 8.62% remaining

When P/L can swing 40% in one day making sure you have adequate backup cash is definitely an issue with futures.

[MotoTrojan]

I'm staying in with MotoTrojan's 43/57 UPRO/EDV. 10% of my portfolio, all in Roth space. Up a nice 12.3% since I got in.

The rest of my portfolio is 90/10 with a domestic small-cap value tilt and a mix of ex-US small cap and emerging markets for my intl allocation.

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

Your objection basically amounts to, “I don’t like this because it’s making too much money”

I have no idea what you’re talking about.

[caklim00]

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

Your objection basically amounts to, “I don’t like this because it’s making too much money”

I have no idea what you’re talking about.

I don't have a clue either. Like Moto I'm putting my faith into diversified SCV tilts. The more I put into this (hedgefundie adventure), the less I can put into funds such as SLYV/VIOV, ISCF or AVDV, or VFMF. I also have no desire to be > 100% equity (or even 100% anymore for that matter since I'm almost 40 now). I'm now just adding a bit of leverage to increase my bond allocation. I think Moto is saying he has more confidence a SCV tilted portfolio will outperform LETF S&P500 with super long bonds. I get the idea of long term bonds but I'll even admit that I'm not sure how much more room it has to run. That plus I already hold mostly intermediate bonds got me thinking I wanted to hold ZN over ZB. Perhaps it doens't provide quite as much protection if equities plummet but its a risk I'm going to take.

[Hydromod]

I'm still at the original 40/60 since Feb, although it's drifted to 50/50 and has been there for a couple of months now. I'm up 50% and $40k.

It's a bit easier to tolerate the recent seesaw movements if you have a thick padding of gains to fall against. Your risk-reward trade-off is much better than mine since I only discovered and started the strategy in August. Again; great strategy, wrong time.

I don't follow. A 40/60 mix of UPRO/TMF from August through November returned 15.29%, and a 55/45 mix of the same returned a nearly identical 15.24%.

August saw a huge bump, end of the month was up 11 percent over start of month. Huge difference to now depending on start date.

[butricksaid]

I'm still at the original 40/60 since Feb, although it's drifted to 50/50 and has been there for a couple of months now. I'm up 50% and $40k.

It's a bit easier to tolerate the recent seesaw movements if you have a thick padding of gains to fall against. Your risk-reward trade-off is much better than mine since I only discovered and started the strategy in August. Again; great strategy, wrong time.

I don't follow. A 40/60 mix of UPRO/TMF from August through November returned 15.29%, and a 55/45 mix of the same returned a nearly identical 15.24%.

I'm not talking about allocation percentage, I'm talking about date of entry.
Starting in Feb + 5 months yielded a gradual climb in gains.
Starting in August + 5 months yielded an initial climb followed by sideways market meaning the risks stayed the same, while the reward dwindled a lot faster than Feb + 5 months.

[butricksaid]

I'm still at the original 40/60 since Feb, although it's drifted to 50/50 and has been there for a couple of months now. I'm up 50% and $40k.

It's a bit easier to tolerate the recent seesaw movements if you have a thick padding of gains to fall against. Your risk-reward trade-off is much better than mine since I only discovered and started the strategy in August. Again; great strategy, wrong time.

I don't follow. A 40/60 mix of UPRO/TMF from August through November returned 15.29%, and a 55/45 mix of the same returned a nearly identical 15.24%.

August saw a huge bump, end of the month was up 11 percent over start of month. Huge difference to now depending on start date.

Yeah, but that was it. I could've exited end of August with the same gains as I exited in December. I wasn't willing to take the risk any longer with only 11% gain after a prolonged period of hovering at 11% for months.

[willthrill81]

I'm still at the original 40/60 since Feb, although it's drifted to 50/50 and has been there for a couple of months now. I'm up 50% and $40k.

It's a bit easier to tolerate the recent seesaw movements if you have a thick padding of gains to fall against. Your risk-reward trade-off is much better than mine since I only discovered and started the strategy in August. Again; great strategy, wrong time.

I don't follow. A 40/60 mix of UPRO/TMF from August through November returned 15.29%, and a 55/45 mix of the same returned a nearly identical 15.24%.

August saw a huge bump, end of the month was up 11 percent over start of month. Huge difference to now depending on start date.

Yeah, but that was it. I could've exited end of August with the same gains as I exited in December. I wasn't willing to take the risk any longer with only 11% gain after a prolonged period of hovering at 11% for months.

If you can't stick with the strategy despite a 0% return for a few months, then this is definitely not a good strategy for you.

[MotoTrojan]

It's a bit easier to tolerate the recent seesaw movements if you have a thick padding of gains to fall against. Your risk-reward trade-off is much better than mine since I only discovered and started the strategy in August. Again; great strategy, wrong time.

I don't follow. A 40/60 mix of UPRO/TMF from August through November returned 15.29%, and a 55/45 mix of the same returned a nearly identical 15.24%.

August saw a huge bump, end of the month was up 11 percent over start of month. Huge difference to now depending on start date.

Yeah, but that was it. I could've exited end of August with the same gains as I exited in December. I wasn't willing to take the risk any longer with only 11% gain after a prolonged period of hovering at 11% for months.

If you can't stick with the strategy despite a 0% return for a few months, then this is definitely not a good strategy for you.

This. I didn’t exit solely due to the run up, although it was convenient. I fully expected years of double digit underperformance, just as I do with other tilts. That’s what diversification is.

[Gemini]

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

Your objection basically amounts to, “I don’t like this because it’s making too much money”

I have no idea what you’re talking about.

I don't have a clue either. Like Moto I'm putting my faith into diversified SCV tilts. The more I put into this (hedgefundie adventure), the less I can put into funds such as SLYV/VIOV, ISCF or AVDV, or VFMF. I also have no desire to be > 100% equity (or even 100% anymore for that matter since I'm almost 40 now). I'm now just adding a bit of leverage to increase my bond allocation. I think Moto is saying he has more confidence a SCV tilted portfolio will outperform LETF S&P500 with super long bonds. I get the idea of long term bonds but I'll even admit that I'm not sure how much more room it has to run. That plus I already hold mostly intermediate bonds got me thinking I wanted to hold ZN over ZB. Perhaps it doens't provide quite as much protection if equities plummet but its a risk I'm going to take.

40 is the new 30.

[butricksaid]

It's a bit easier to tolerate the recent seesaw movements if you have a thick padding of gains to fall against. Your risk-reward trade-off is much better than mine since I only discovered and started the strategy in August. Again; great strategy, wrong time.

I don't follow. A 40/60 mix of UPRO/TMF from August through November returned 15.29%, and a 55/45 mix of the same returned a nearly identical 15.24%.

August saw a huge bump, end of the month was up 11 percent over start of month. Huge difference to now depending on start date.

Yeah, but that was it. I could've exited end of August with the same gains as I exited in December. I wasn't willing to take the risk any longer with only 11% gain after a prolonged period of hovering at 11% for months.

If you can't stick with the strategy despite a 0% return for a few months, then this is definitely not a good strategy for you.

Wow, insightful. It's almost like that was exactly why I exited as I stated earlier. The risk was not worth the reward so I exited. Did I ever say the strategy was poor? [OT comment removed by admin LadyGeek]

[privatefarmer]

I don't follow. A 40/60 mix of UPRO/TMF from August through November returned 15.29%, and a 55/45 mix of the same returned a nearly identical 15.24%.

August saw a huge bump, end of the month was up 11 percent over start of month. Huge difference to now depending on start date.

Yeah, but that was it. I could've exited end of August with the same gains as I exited in December. I wasn't willing to take the risk any longer with only 11% gain after a prolonged period of hovering at 11% for months.

If you can't stick with the strategy despite a 0% return for a few months, then this is definitely not a good strategy for you.

Wow, insightful. It's almost like that was exactly why I exited as I stated earlier. The risk was not worth the reward so I exited. Did I ever say the strategy was poor? [OT comment removed by admin LadyGeek]

It’s kinda ridiculous to judge any investment strategy over the course of a few months... the s&p had an entire “lost decade” not too long ago, how could anyone possibly stick with that if they expect their investments to not even have a few months with no return?? If that’s the expectation, then you’re only option is like a bank CD or something where you know it’ll steadily go up over time.

[Lee_WSP]

This strategy, from all the data I’ve seen, has largely had shorter underwater periods than being 100% equities. But it’s still extremely common to be underwater for months or even years at a time.

With the exception of '87, '95 & '15, yes, but since we're talking about ~6 major drawdown events, that's a 50% chance of being underwater longer. Therefore, I disagree with your assessment.

[HEDGEFUNDIE]

This strategy, from all the data I’ve seen, has largely had shorter underwater periods than being 100% equities. But it’s still extremely common to be underwater for months or even years at a time.

With the exception of '87, '95 & '15, yes, but since we're talking about ~6 major drawdown events, that's a 50% chance of being underwater longer. Therefore, I disagree with your assessment.

Here are the drawdowns for 55/45 as compared to straight S&P 500:



What I see are moderately sharper drawdowns and generally faster recoveries.

In return you get 21% CAGR since 1982 compared to 11% for the S&P.

[samsdad]

This strategy, from all the data I’ve seen, has largely had shorter underwater periods than being 100% equities. But it’s still extremely common to be underwater for months or even years at a time.

With the exception of '87, '95 & '15, yes, but since we're talking about ~6 major drawdown events, that's a 50% chance of being underwater longer. Therefore, I disagree with your assessment.

Here are the drawdowns for 55/45 as compared to straight S&P 500:



What I see are moderately sharper drawdowns and generally faster recoveries.

In return you get 21% CAGR since 1982 compared to 11% for the S&P.

For those of you who haven't been following this from day 1, there's a big caveat to this data that's been discussed here before ad nauseam, and I feel somewhat obliged to follow up HEDGEFUNDIE's post with the data below from 1955 through mid-2019, in an abundance of caution, just in case you missed it earlier:



I wouldn't have a large amount of money in a variation of this strategy if I felt that the likelihood of 1965-1981 repeating was probable. Moreover, as privatefarmer noted above, the S&P 500 has a history of going nowhere or worse over a decade or more at least.

[caklim00]

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

Your objection basically amounts to, “I don’t like this because it’s making too much money”

I have no idea what you’re talking about.

I don't have a clue either. Like Moto I'm putting my faith into diversified SCV tilts. The more I put into this (hedgefundie adventure), the less I can put into funds such as SLYV/VIOV, ISCF or AVDV, or VFMF. I also have no desire to be > 100% equity (or even 100% anymore for that matter since I'm almost 40 now). I'm now just adding a bit of leverage to increase my bond allocation. I think Moto is saying he has more confidence a SCV tilted portfolio will outperform LETF S&P500 with super long bonds. I get the idea of long term bonds but I'll even admit that I'm not sure how much more room it has to run. That plus I already hold mostly intermediate bonds got me thinking I wanted to hold ZN over ZB. Perhaps it doens't provide quite as much protection if equities plummet but its a risk I'm going to take.

40 is the new 30.

Totally

[guillemot]

HEDGEFUNDIE, did you or can you share your data? All I have so far is the UPRO/TMF daily data from 1986 which is in the original post of the previous thread here.

Thinking about doing this. I was looking at Sharpe ratios using the 1986 data set and it looks like 13% real return for this strategy versus 7% for S&P 500 for about the same risk. I think I have to sign up with those kind of results. I know I really should commit a material amount to this strategy but I don't feel comfortable doing that. I decided on a 2% allocation which for me is $22k. I can save $50k a year. My savings plan looks like: 19k 401k, 8k extra 401k from after tax contributions, 9k 401k employer match, 3k HSA, 6k Roth, 6k self directed. So that would be +1k per month from the self directed portion. But! It turns out that our 401k retirement plan through T Rowe Price includes a self directed brokerage option through Schwab. Because of that I can direct almost all savings to this strategy - the HSA is the only place I wouldn't be able to. Schwab doesn't have any commissions on ETFs and I believe they will allow me to trade UPRO and TMF.

Marginal tax rate is is 27% (22% federal plus 5% state). Should I consider a Roth 401k or continue with traditional?

I have 1% cash for short term needs. The other 97% is invested in a more-or-less classic 80/20...which will not be a great ballast for this if things go south. But that's a topic for years down the road when the funds from this strategy are a greater percentage of the total. I was thinking of stopping when the funds from the strat are 50% of the total, with any excess beyond that invested into other strategies. Which will be around 13 years from now, assuming excellent adventure has 8% greater CAGR than 80/20 over the period.

The last question is forum etiquette. Is it considered rude to post one's progress (contributions and returns)? How often could I do so?

[MotoTrojan]

HEDGEFUNDIE, did you or can you share your data? All I have so far is the UPRO/TMF daily data from 1986 which is in the original post of the previous thread here.

Thinking about doing this. I was looking at Sharpe ratios using the 1986 data set and it looks like 13% real return for this strategy versus 7% for S&P 500 for about the same risk. I think I have to sign up with those kind of results. I know I really should commit a material amount to this strategy but I don't feel comfortable doing that. I decided on a 2% allocation which for me is $22k. I can save $50k a year. My savings plan looks like: 19k 401k, 8k extra 401k from after tax contributions, 9k 401k employer match, 3k HSA, 6k Roth, 6k self directed. So that would be +1k per month from the self directed portion. But! It turns out that our 401k retirement plan through T Rowe Price includes a self directed brokerage option through Schwab. Because of that I can direct almost all savings to this strategy - the HSA is the only place I wouldn't be able to. Schwab doesn't have any commissions on ETFs and I believe they will allow me to trade UPRO and TMF.

Marginal tax rate is is 27% (22% federal plus 5% state). Should I consider a Roth 401k or continue with traditional?

I have 1% cash for short term needs. The other 97% is invested in a more-or-less classic 80/20...which will not be a great ballast for this if things go south. But that's a topic for years down the road when the funds from this strategy are a greater percentage of the total. I was thinking of stopping when the funds from the strat are 50% of the total, with any excess beyond that invested into other strategies. Which will be around 13 years from now, assuming excellent adventure has 8% greater CAGR than 80/20 over the period.

The last question is forum etiquette. Is it considered rude to post one's progress (contributions and returns)? How often could I do so?

Sharpe ratio is high because the long bonds greatly exceeded their expected return. That isn’t the whole story.

[Diego_Quant]

I'm staying in with MotoTrojan's 43/57 UPRO/EDV. 10% of my portfolio, all in Roth space. Up a nice 12.3% since I got in.

The rest of my portfolio is 90/10 with a domestic small-cap value tilt and a mix of ex-US small cap and emerging markets for my intl allocation.

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

That's why I opted to use a target volatility approach rather than a static AA. Rather than using distant historic data to determine the appropriate AA, it uses recent historic data (i.e. prior month's). Some may berate this method, but any decision regarding one's AA is largely driven by historic data.

How do you calculate the allocations for target volatility? Portfolio Visualizer has a 2-day data delay

[willthrill81]

Glad it lives on without me .

Do you still think 43/57 UPRO/EDV is the right mix? From the last EDV peak in June-Aug 2012 ($135) - Portfolio Visualizer suggests 52/48 or even 65/35.

Suggests it for what criteria? Any optimization that only looks at an equity bull will skew towards equity. I liked it, but there are many options and justifications, but only looking at the last decade is a bad start.

That's why I opted to use a target volatility approach rather than a static AA. Rather than using distant historic data to determine the appropriate AA, it uses recent historic data (i.e. prior month's). Some may berate this method, but any decision regarding one's AA is largely driven by historic data.

How do you calculate the allocations for target volatility? Portfolio Visualizer has a 2-day data delay

PV updates their data after the last business day of every month, so I'm using the last month's data to determine the current month's allocation.

[butricksaid]

It’s kinda ridiculous to judge any investment strategy over the course of a few months...

I'm not...? I think it has a lot of merit but I can also be skeptical about my entrance timing and I was uncomfortable with the potential drawdown (below principal) after not getting some more gains built up.

the s&p had an entire “lost decade” not too long ago, how could anyone possibly stick with that if they expect their investments to not even have a few months with no return?? If that’s the expectation, then you’re only option is like a bank CD or something where you know it’ll steadily go up over time.

It's not a binary option, privatefarmer. There's a spectrum of risk tolerance and portfolios with volatility to match like un-leveraged ETFs. I never said I could only handle investments that constantly go up.

I decided that given the limited padding of gains early on plus the risk of early drawdown soon after entering the strategy, that risk was past my threshold.

[MotoTrojan]

It’s kinda ridiculous to judge any investment strategy over the course of a few months...

I'm not...? I think it has a lot of merit but I can also be skeptical about my entrance timing and I was uncomfortable with the potential drawdown (below principal) after not getting some more gains built up.

the s&p had an entire “lost decade” not too long ago, how could anyone possibly stick with that if they expect their investments to not even have a few months with no return?? If that’s the expectation, then you’re only option is like a bank CD or something where you know it’ll steadily go up over time.

It's not a binary option, privatefarmer. There's a spectrum of risk tolerance and portfolios with volatility to match like un-leveraged ETFs. I never said I could only handle investments that constantly go up.

I decided that given the limited padding of gains early on plus the risk of early drawdown soon after entering the strategy, that risk was past my threshold.

Call it what you want but you clearly judged performance over a few months. Needing a cushion of gains to let a strategy ride will relegate you to CDs.

[pepys]

[deleted]

[Crushtheturtle]

How do you calculate the allocations for target volatility? Portfolio Visualizer has a 2-day data delay

I just Google search "UPRO Historical Volatility" and the first result is Alphaquery.com, which displays the 30-day (among others).

then,

(UPRO Target %) = (UPRO Target Volatility) / (UPRO 30-day Historical Volatility)

[MotoTrojan]

It’s kinda ridiculous to judge any investment strategy over the course of a few months...

I'm not...? I think it has a lot of merit but I can also be skeptical about my entrance timing and I was uncomfortable with the potential drawdown (below principal) after not getting some more gains built up.

the s&p had an entire “lost decade” not too long ago, how could anyone possibly stick with that if they expect their investments to not even have a few months with no return?? If that’s the expectation, then you’re only option is like a bank CD or something where you know it’ll steadily go up over time.

It's not a binary option, privatefarmer. There's a spectrum of risk tolerance and portfolios with volatility to match like un-leveraged ETFs. I never said I could only handle investments that constantly go up.

I decided that given the limited padding of gains early on plus the risk of early drawdown soon after entering the strategy, that risk was past my threshold.

Call it what you want but you clearly judged performance over a few months. Needing a cushion of gains to let a strategy ride will relegate you to CDs.

They never said they needed a cushion of gains to let any strategy ride, they specifically said "plus" after that, and then went on to talk about the risks at the current stage. You can't just cut off the "plus".

A cushion is only relevant if there’s a risk of drawdown to begin with. Nobody needs a cushion for CDs. I am not sure your point. The risk never changed. The potential reward may have (hence my exit).

[Walkure]

It’s kinda ridiculous to judge any investment strategy over the course of a few months...

I'm not...? I think it has a lot of merit but I can also be skeptical about my entrance timing and I was uncomfortable with the potential drawdown (below principal) after not getting some more gains built up.

the s&p had an entire “lost decade” not too long ago, how could anyone possibly stick with that if they expect their investments to not even have a few months with no return?? If that’s the expectation, then you’re only option is like a bank CD or something where you know it’ll steadily go up over time.

It's not a binary option, privatefarmer. There's a spectrum of risk tolerance and portfolios with volatility to match like un-leveraged ETFs. I never said I could only handle investments that constantly go up.

I decided that given the limited padding of gains early on plus the risk of early drawdown soon after entering the strategy, that risk was past my threshold.

Call it what you want but you clearly judged performance over a few months. Needing a cushion of gains to let a strategy ride will relegate you to CDs.

They never said they needed a cushion of gains to let any strategy ride, they specifically said "plus" after that, and then went on to talk about the risks at the current stage. You can't just cut off the "plus".

A cushion is only relevant if there’s a risk of drawdown to begin with. Nobody needs a cushion for CDs. I am not sure your point. The risk never changed. The potential reward may have (hence my exit).

I would disagree; a cushion should be irrelevant even for a strategy where there is the risk of a major drawdown. It's up there with the "paper losses aren't real" crowd in terms of a psychological safety blanket, but the fact is the expected CAGRs include the drawdowns.

[MotoTrojan]

I'm not...? I think it has a lot of merit but I can also be skeptical about my entrance timing and I was uncomfortable with the potential drawdown (below principal) after not getting some more gains built up.



It's not a binary option, privatefarmer. There's a spectrum of risk tolerance and portfolios with volatility to match like un-leveraged ETFs. I never said I could only handle investments that constantly go up.

I decided that given the limited padding of gains early on plus the risk of early drawdown soon after entering the strategy, that risk was past my threshold.

Call it what you want but you clearly judged performance over a few months. Needing a cushion of gains to let a strategy ride will relegate you to CDs.

They never said they needed a cushion of gains to let any strategy ride, they specifically said "plus" after that, and then went on to talk about the risks at the current stage. You can't just cut off the "plus".

A cushion is only relevant if there’s a risk of drawdown to begin with. Nobody needs a cushion for CDs. I am not sure your point. The risk never changed. The potential reward may have (hence my exit).

I would disagree; a cushion should be irrelevant even for a strategy where there is the risk of a major drawdown. It's up there with the "paper losses aren't real" crowd in terms of a psychological safety blanket, but the fact is the expected CAGRs include the drawdowns.

I think we agree and you disagree with the other poster. I’m with you on paper losses... my favorite comparison is the retiree with $3M on $500K of contributions. So they only have $500K? And if they sell and rebuy same day it’s $3M?

[langlands]

If you correctly assessed your own risk threshold prior to investing, backing out after a few months when nothing material about the strategy or market conditions have changed is irrational. After all, if it doesn't make sense to stay invested after some minor gains, it made even less sense to have invested in the strategy in the first place. Obviously what's really happened is that butricksaid wasn't completely sure how he felt about the risk of the strategy in the beginning and wanted to test the waters, and has now decided it's not his cup of tea. Pretty reasonable considering how volatile the strategy is- you don't really know how you'll emotionally react to daily 5-10% swings until you've actually experienced it.

[pepys]

[deleted]