HEDGEFUNDIE's excellent adventure Part II: The next journey

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privatefarmer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

Currently, with portfolio margin, using almost exclusively LETFs, they require about 30% equity. That could change at any time though.
langlands
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by langlands »

privatefarmer wrote: Sat Feb 22, 2020 10:47 pm Currently, with portfolio margin, using almost exclusively LETFs, they require about 30% equity. That could change at any time though.
I assume that is for 3x etfs? So for 2x etfs, it's probably more like 20% equity?

Interesting, I didn't know there are two types of margin regulations: portfolio margin and Regulation T margin.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by JBTX »

I just thought I'd leave these here: :wink:

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lexor
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lexor »

JBTX wrote: Sun Feb 23, 2020 12:09 am I just thought I'd leave these here: :wink:

Image


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What am I looking at? What is portfolio 1?
“The miracle of compounding returns is overwhelmed by the tyranny of compounding costs.” -Mr. John C. Bogle
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

lexor wrote: Sun Feb 23, 2020 12:56 am What am I looking at? What is portfolio 1?
Portfolio 1 is 100% UPROSIM (a 3x leveraged ETF like UPRO).

It was a low effort **** post. Not much else to say.
core4portfolio
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by core4portfolio »

JBTX wrote: Sun Feb 23, 2020 12:09 am I just thought I'd leave these here: :wink:
How does this related the strategy of 55/45 ?
Your pics are just 100% UPRO instead of 55% UPRO.

Strategy OP used is allocate some portion to TMF and rebalance instead of just allocate to UPRO only.
Allocation : 80/20 (80% TSM, 20% TBM) | Need to learn fishing sooner
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Hydromod »

JBTX wrote: Sun Feb 23, 2020 12:09 am I just thought I'd leave these here: :wink:
I believe that this information was hashed out ad nauseum in the first thread. But it’s good that you are doing your due diligence on backtesting to become aware of potential pitfalls!
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by BV3273 »

I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 »

BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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lock.that.stock
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lock.that.stock »

BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
You will lose some of the returns compared to quarterly/annual rebalancing and the drawdowns will be more pronounced. Quarterly works best of all 3.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 »

core4portfolio wrote: Sun Feb 23, 2020 2:38 am
JBTX wrote: Sun Feb 23, 2020 12:09 am I just thought I'd leave these here: :wink:
How does this related the strategy of 55/45 ?
Your pics are just 100% UPRO instead of 55% UPRO.

Strategy OP used is allocate some portion to TMF and rebalance instead of just allocate to UPRO only.
Right, nobody is recommending 100% UPRO precisely due to the deep drawdowns. But this is apparently why Vanguard won't allow folks to own leveraged ETFs in their accounts; they're assuming that people might hold only something like UPRO with nothing to counterbalance it.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
BV3273
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by BV3273 »

willthrill81 wrote: Sun Feb 23, 2020 12:30 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
How about a traditional IRA?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 »

BV3273 wrote: Sun Feb 23, 2020 12:38 pm
willthrill81 wrote: Sun Feb 23, 2020 12:30 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
How about a traditional IRA?
That would be a good choice, certainly better than a taxable account. But keep in mind that if this strategy succeeds and you get something like 30% returns for 30 years, your withdrawals could be heavily taxed.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by JBTX »

OK my bad I misunderstood what I was looking at.

Was there any back testing for a similar time period with your balanced leverage portfolio? OK, I am sure it was "hashed out" but from what I went through, which was a lot but not everything, there was never really a good explanation why looking at 1981-2019 when interest rates went down dramatically is a reasonable proxy for a starting point when the 10 year is at 1.5%. The only explanation I was were various versions of "this time it is different"

Why rehash it? This thread rages on and some of us are late to the party. I keep reading in other threads to check out this ingenious strategy over here. Obviously I am highly skeptical, but I try to go where the evidence points me.

I will say in going through it the thread did help understand the concept of risk parity and the theory behind it.
Last edited by JBTX on Sun Feb 23, 2020 12:52 pm, edited 1 time in total.
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lock.that.stock
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lock.that.stock »

willthrill81 wrote: Sun Feb 23, 2020 12:41 pm
BV3273 wrote: Sun Feb 23, 2020 12:38 pm
willthrill81 wrote: Sun Feb 23, 2020 12:30 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
How about a traditional IRA?
That would be a good choice, certainly better than a taxable account. But keep in mind that if this strategy succeeds and you get something like 30% returns for 30 years, your withdrawals could be heavily taxed.
Also worth mentioning the downside - if this strategy fails miserably in an Tax-advantaged account you won’t be able to deduct capital losses from your income or bank them to use against future capital gains.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by BV3273 »

willthrill81 wrote: Sun Feb 23, 2020 12:41 pm
BV3273 wrote: Sun Feb 23, 2020 12:38 pm
willthrill81 wrote: Sun Feb 23, 2020 12:30 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
How about a traditional IRA?
That would be a good choice, certainly better than a taxable account. But keep in mind that if this strategy succeeds and you get something like 30% returns for 30 years, your withdrawals could be heavily taxed.
So ideally I should convert traditional Ira to Roth. Then implement.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by BV3273 »

willthrill81 wrote: Sun Feb 23, 2020 12:41 pm
BV3273 wrote: Sun Feb 23, 2020 12:38 pm
willthrill81 wrote: Sun Feb 23, 2020 12:30 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
How about a traditional IRA?
That would be a good choice, certainly better than a taxable account. But keep in mind that if this strategy succeeds and you get something like 30% returns for 30 years, your withdrawals could be heavily taxed.
How heavily?
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

Taxes are not the end of the world... paying taxes is a privilege and obligation for those who earn money. If you don't pay any, you either are great at tax deferment/avoidance or you made no money.

I don't know about you, but I'd rather make money and figure out how to deduct against it than make no money.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

willthrill81 wrote: Sun Feb 23, 2020 12:30 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
Not if you rebalance by selling shares older than 1 year or shares with losses. This would be very easily done.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 »

BV3273 wrote: Sun Feb 23, 2020 12:57 pm
willthrill81 wrote: Sun Feb 23, 2020 12:41 pm
BV3273 wrote: Sun Feb 23, 2020 12:38 pm
willthrill81 wrote: Sun Feb 23, 2020 12:30 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
How about a traditional IRA?
That would be a good choice, certainly better than a taxable account. But keep in mind that if this strategy succeeds and you get something like 30% returns for 30 years, your withdrawals could be heavily taxed.
How heavily?
Withdrawals from tax-deferred accounts are taxed at ordinary income rates, so under current law, that could be as high as 37% Federal, plus state income taxes.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

willthrill81 wrote: Sun Feb 23, 2020 1:04 pm
BV3273 wrote: Sun Feb 23, 2020 12:57 pm
willthrill81 wrote: Sun Feb 23, 2020 12:41 pm
BV3273 wrote: Sun Feb 23, 2020 12:38 pm
willthrill81 wrote: Sun Feb 23, 2020 12:30 pm

This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
How about a traditional IRA?
That would be a good choice, certainly better than a taxable account. But keep in mind that if this strategy succeeds and you get something like 30% returns for 30 years, your withdrawals could be heavily taxed.
How heavily?
Withdrawals from tax-deferred accounts are taxed at ordinary income rates, so under current law, that could be as high as 37% Federal, plus state income taxes.
If you have that much money your RMD triggers the biggest tax bracket, you've got no actual problems.
Last edited by Lee_WSP on Sun Feb 23, 2020 1:28 pm, edited 1 time in total.
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willthrill81
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 »

Lee_WSP wrote: Sun Feb 23, 2020 1:02 pm
willthrill81 wrote: Sun Feb 23, 2020 12:30 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
Not if you rebalance by selling shares older than 1 year or shares with losses. This would be very easily done.
But when you rebalance, you're typically selling the asset that has gains (and incurring tax liability). If you're paying 0% LTCG and have enough shares that are more than one year old, that's fine, but that's not the case for many here.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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willthrill81
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 »

Lee_WSP wrote: Sun Feb 23, 2020 1:06 pm
willthrill81 wrote: Sun Feb 23, 2020 1:04 pm
BV3273 wrote: Sun Feb 23, 2020 12:57 pm
willthrill81 wrote: Sun Feb 23, 2020 12:41 pm
BV3273 wrote: Sun Feb 23, 2020 12:38 pm

How about a traditional IRA?
That would be a good choice, certainly better than a taxable account. But keep in mind that if this strategy succeeds and you get something like 30% returns for 30 years, your withdrawals could be heavily taxed.
How heavily?
Withdrawals from tax-deferred accounts are taxed at ordinary income rates, so under current law, that could be as high as 37% Federal, plus state income taxes.
If you have that much money your RMD tax is the biggest bracket, you've got no actual problems.
I have no idea what you're talking about because there is no 'RMD tax'. Would you please expound?

Do you disagree that the best account for this strategy for most people is a Roth IRA?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
For taxable, I suggest leaning on the strengths of taxable, which is tax deferral from long term capital gains. Deferring capital gains is a sure thing for any strategy in taxable, so making use of it for your strategy provides better returns for the same level of risk taken.

NTSX is the best for this purpose. It rebalances internally to achieve 90% S&P 500 and 60% treasuries. Internal rebalancing means you don't have to sell as much. It's pretty tax efficient and has 0.2% expense ratio.

Leveraging on the bond side provides cheaper leverage (based on implied borrowing rates for the underlying instruments) and is applied to a less volatile asset than stocks (requiring less rebalancing and causing less volatility decay that effects returns). I'd suggest taking the 1.5x leveraged NTSX and combining it with the 3x leveraged TMF to get the ratio of stocks to bonds that you want.

For 50:50 stocks to bonds and 1.65x leverage overall, you could use 90% NTSX and 10% TMF. This has 82% stocks and a 0.82 correlation to the US stock market.

For 40:60 stocks to bonds and 1.8x leverage overall, you could use 80% NTSX and 20% TMF. This has 72% stocks and a 0.52 correlation to the US stock market, which is an okay amount of equity risk - some might say minimum - for most people still saving (obviously, it gets there by taking on more term / duration risk in bonds, being correlated with that).

For taxable I'd stop at 40:60 stocks to bonds and 1.8x leverage overall, otherwise you're overweighting bonds or you have to leverage equities. Leveraging equities, more than anything, is what requires very frequent rebalancing. It's also inherently more costly to leverage stocks. If you want to leverage stocks in taxable anyway, look at PPLC (1.35x leveraged), which has relatively low volatility for a leveraged stock ETF. But look at NTSX first as your core holding.

One more thing - you could hold exclusively NTSX in taxable and "rebalance" by buying and selling bonds in tax-advantaged, specifically pre-tax like an IRA or 401k (TMF, EDV, or otherwise). You could also hold a position in leveraged stocks in tax-advantaged, for the purpose of rebalancing. That might be the best strategy overall for taxable (using advantaged space for rebalancing).
Last edited by MoneyMarathon on Sun Feb 23, 2020 1:17 pm, edited 1 time in total.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

willthrill81 wrote: Sun Feb 23, 2020 1:07 pm
Lee_WSP wrote: Sun Feb 23, 2020 1:02 pm
willthrill81 wrote: Sun Feb 23, 2020 12:30 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
This is not a good strategy for a taxable account because you will encounter lots of short-term capital gains when you rebalance. You might be able to effectively rebalance with new contributions, but you won't be able to do this once the amounts involved grow to be too large, which is precisely what you're hoping will happen.

Many are implementing this or similar strategies in their Roth IRA, including me.
Not if you rebalance by selling shares older than 1 year or shares with losses. This would be very easily done.
But when you rebalance, you're typically selling the asset that has gains (and incurring tax liability). If you're paying 0% LTCG and have enough shares that are more than one year old, that's fine, but that's not the case for many here.
Ltcg is still lower than stcg. That's all. I'm just saying the tax burden doesn't have to be as bad as stcg.
willthrill81 wrote: Sun Feb 23, 2020 1:08 pm

I have no idea what you're talking about because there is no 'RMD tax'. Would you please expound?

Do you disagree that the best account for this strategy for most people is a Roth IRA?
Typing on my iPad. I'm trying to say that you can control how much you take out and avoid the biggest brackets unless the RMD forces you to withdraw that much, which isn't the end of the world.

I don't think it will really matter. If one needs the deduction today, take the deduction today. We cannot know the future.

If you are in a super low bracket and think you'll become a deca401k millionaire with this strategy, then yes, go Roth if you can pay the taxes.
Last edited by Lee_WSP on Sun Feb 23, 2020 1:27 pm, edited 1 time in total.
LittleBitMore
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LittleBitMore »

JBTX wrote: Sun Feb 23, 2020 12:50 pm OK my bad I misunderstood what I was looking at.

Was there any back testing for a similar time period with your balanced leverage portfolio? OK, I am sure it was "hashed out" but from what I went through, which was a lot but not everything, there was never really a good explanation why looking at 1981-2019 when interest rates went down dramatically is a reasonable proxy for a starting point when the 10 year is at 1.5%. The only explanation I was were various versions of "this time it is different"

Why rehash it? This thread rages on and some of us are late to the party. I keep reading in other threads to check out this ingenious strategy over here. Obviously I am highly skeptical, but I try to go where the evidence points me.

I will say in going through it the thread did help understand the concept of risk parity and the theory behind it.
Yes, it was analyzed. It still didn't look great but the view was that in 1981 monetary policy changed in such a fundamental way that the earlier period is irrelevant. If you don't believe it changed then this obviously isn't a portfolio for you as the pre-1981 period isn't good. Other time periods were looked at where rates were flat and it still outperformed. Obviously what's impossible to tell is how 30 years of rising rates would impact the portfolio as there isn't available history (since 1981 rates have been falling). OR maybe it's not relevant if you believe >6% FED rate will never happen again. :wink:

It's important to go back and read the original discussion as that was when there was a fierce debate over the correct time period. Rehashing will have too many people saying "why are we discussing this" and the skeptics not contributing as much
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by pepys »

[deleted]
Last edited by pepys on Tue Feb 25, 2020 12:23 am, edited 1 time in total.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Hydromod »

BV3273 wrote: Sun Feb 23, 2020 12:56 pm So ideally I should convert traditional Ira to Roth. Then implement.
That's exactly what I did. And I'm very happy to have done so.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

pepys wrote: Sun Feb 23, 2020 1:21 pm
How is it easily done with selling shares at a loss? So far, whenever the shares have been at a loss, that is the side I wanted to rebalance towards.
If they both decrease in value, but one decreases less, both halves would have shares with capital losses. I don't know why it's so hard to conceive of this happening. It has happened and will happen again.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

JBTX wrote: Sun Feb 23, 2020 12:50 pm there was never really a good explanation why looking at 1981-2019 when interest rates went down dramatically is a reasonable proxy for a starting point when the 10 year is at 1.5%. The only explanation I was were various versions of "this time it is different"
You're right. Starting at 1981 definitely is not a "reasonable proxy" for starting at 1.5% and you are not only 100% right, there is zero doubt. I think sometimes people forget what words mean, or just don't understand the math of bonds, but there's no way they're reasonably similar starting points. It's okay if people don't know the math of bonds. That's covered in the previous pages of the two threads too... somewhere.

Some people have a thesis about future interest rates (aka "this time it is different"). To be fair, interest rate "cycles" look like they're as long or longer than human lifetimes, so we don't have a lot of empirical evidence to contradict that thesis, just as we haven't got a lot of numbers (as opposed to narrative) to support it.

If you don't agree with that thesis (I'm not completely sure about it either), the best way to wade in here is to assume that higher rates are a risk & see if there's still anything left of value in the ideas discussed. Every strategy has risks. Experiencing a risk (going through high rates, e.g.) isn't necessarily fatal to results. Someone who considers it a risk should have a portfolio constructed with that taken into consideration. Note that this doesn't mean thriving in all circumstance - often a foolish idea to pursue, with underperformance in what may be more ordinary conditions - so much as making sure that you could get through and see the strategy continue to work on the other side.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by pepys »

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ChrisBenn
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ChrisBenn »

Hydromod wrote: Sun Feb 23, 2020 1:23 pm
BV3273 wrote: Sun Feb 23, 2020 12:56 pm So ideally I should convert traditional Ira to Roth. Then implement.
That's exactly what I did. And I'm very happy to have done so.
This line of discussion seems to imply that there is something specifically about this strategy that advantages a roth over a traditional ira? That decision should be almost orthogonal to the strategy here - i.e. it's primarily driven by your expected tax rate now vs. at retirement, no? The only way I can see that this particular strategy would weight in is if on was projecting RMD's from this strategy would be so great they would throw you into a new tax bracket?

Note that I'm not saying there is anything wrong with converting to a roth; rather I want to understand what aspects of this strategy would make the roth vs. traditional decision any different than for any other strategy?
LittleBitMore
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LittleBitMore »

MoneyMarathon wrote: Sun Feb 23, 2020 1:10 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
For taxable, I suggest leaning on the strengths of taxable, which is tax deferral from long term capital gains. Deferring capital gains is a sure thing for any strategy in taxable, so making use of it for your strategy provides better returns for the same level of risk taken.

NTSX is the best for this purpose. It rebalances internally to achieve 90% S&P 500 and 60% treasuries. Internal rebalancing means you don't have to sell as much. It's pretty tax efficient and has 0.2% expense ratio.

Leveraging on the bond side provides cheaper leverage (based on implied borrowing rates for the underlying instruments) and is applied to a less volatile asset than stocks (requiring less rebalancing and causing less volatility decay that effects returns). I'd suggest taking the 1.5x leveraged NTSX and combining it with the 3x leveraged TMF to get the ratio of stocks to bonds that you want.

For 50:50 stocks to bonds and 1.65x leverage overall, you could use 90% NTSX and 10% TMF. This has 82% stocks and a 0.82 correlation to the US stock market.

For 40:60 stocks to bonds and 1.8x leverage overall, you could use 80% NTSX and 20% TMF. This has 72% stocks and a 0.52 correlation to the US stock market, which is an okay amount of equity risk - some might say minimum - for most people still saving (obviously, it gets there by taking on more term / duration risk in bonds, being correlated with that).

For taxable I'd stop at 40:60 stocks to bonds and 1.8x leverage overall, otherwise you're overweighting bonds or you have to leverage equities. Leveraging equities, more than anything, is what requires very frequent rebalancing. It's also inherently more costly to leverage stocks. If you want to leverage stocks in taxable anyway, look at PPLC (1.35x leveraged), which has relatively low volatility for a leveraged stock ETF. But look at NTSX first as your core holding.

One more thing - you could hold exclusively NTSX in taxable and "rebalance" by buying and selling bonds in tax-advantaged, specifically pre-tax like an IRA or 401k (TMF, EDV, or otherwise). You could also hold a position in leveraged stocks in tax-advantaged, for the purpose of rebalancing. That might be the best strategy overall for taxable (using advantaged space for rebalancing).
Are there alternatives to leveraged s&p 500? NTSX looks appealing but it's only ~500 companies worth of market exposure rather than the broader US. Just feels like between that, PSLDX, and UPRO, I'm taking a lot of exposure to an otherwise limited portion of the US stock market (i.e. there are a lot of large and small companies not included).
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

ChrisBenn wrote: Sun Feb 23, 2020 1:51 pm i.e. it's primarily driven by your expected tax rate now vs. at retirement, no?
If you're not at contribution limits, yes. If you are at contribution limits, no. If you are at the limit...

The way to compare Roth to non-Roth is to put $1000 in the Roth, and to put $1000 in the non-Roth and the tax savings in taxable investments (e.g. $240 or whatever). Then pull the money out at the end. This is because you're using more pre-tax income in the Roth space, and because to invest as much in the non-Roth, you'd have to spill over into taxable.

If the strategy strongly favors tax-advantaged (in terms of the rate of compounding) and you're at contribution limits, then it may favor the Roth simply because it provides you with "more" space (on a pre-tax income basis).

Usually people assume that you're able to put tax-efficient investments in taxable and take advantage of long term capital gains. If that's not true, and if your investment compounds slower in taxable because of capital gains (and taxes on distributions) paid along the way, then it's more complicated than looking at current vs expected future rates.
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

LittleBitMore wrote: Sun Feb 23, 2020 1:58 pm Are there alternatives to leveraged s&p 500? NTSX looks appealing but it's only ~500 companies worth of market exposure rather than the broader US. Just feels like between that, PSLDX, and UPRO, I'm taking a lot of exposure to an otherwise limited portion of the US stock market (i.e. there are a lot of large and small companies not included).
1) There's nothing wrong with using S&P 500 as an investment in the US stock market. The risk, return, and correlation are all near-identical to a total stock market index. The S&P methodology for picking the components of the S&P 500 is good enough to represent the US cap-weighted stock market for all practical purposes.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

2) "Sadly, no" is the simplest answer. The longer answer is "yes, but":

a - The futures market for the S&P 500 is the most robust and liquid. Has an effect on costs.
b - The S&P 500 generally has lower volatility, which is important.
c - The S&P 500 also generally has higher Sharpe, which is also important when leveraging if you don't want 'just more volatility' (like a trader does) but also higher geometric returns over time. It's more important than ever to start with high Sharpe when leveraging, because leverage will stress the geometric returns of the underlying by increasing volatility and adding drag to the returns in the form of borrowing costs, etc. When leverage is applied, the Sharpe will go down.

There are funds that leverage other equities. You probably don't want them. If you could avoid it, you don't even want to leverage the S&P 500 either. At lower levels of total leverage, getting the leverage on the bond side (e.g., NTSX and TMF) is much more efficient. You only start leveraging on the stock side when you're at about 2x or more total leverage, and even then do it sparingly if you can.
ChrisBenn
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ChrisBenn »

MoneyMarathon wrote: Sun Feb 23, 2020 1:59 pm
If you're not at contribution limits, yes. If you are at contribution limits, no. If you are at the limit...
(...)
Agreed - you can get more money (net tax) tax sheltered in a Roth when contributing at the limits as compared to a traditional; but that is part of the standard calculus that applies regarless of your portfolio.

My query was more about the implication that this strategy somehow weighed the roth more than a more traditional investment strategy would. (Note that the portion I quoted was referring to conversions, which wouldn't benefit from the increased tax sheltering rate for contributions.)

The only line of logic I could come up with was that people were expecting RMD's would be great enough to push them in a higher tax bracket always - but I hadn't seen this assumption explicitly acknowledged/explored.
langlands
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by langlands »

ChrisBenn wrote: Sun Feb 23, 2020 2:17 pm
MoneyMarathon wrote: Sun Feb 23, 2020 1:59 pm
If you're not at contribution limits, yes. If you are at contribution limits, no. If you are at the limit...
(...)
Agreed - you can get more money (net tax) tax sheltered in a Roth when contributing at the limits as compared to a traditional; but that is part of the standard calculus that applies regarless of your portfolio.

My query was more about the implication that this strategy somehow weighed the roth more than a more traditional investment strategy would. (Note that the portion I quoted was referring to conversions, which wouldn't benefit from the increased tax sheltering rate for contributions.)

The only line of logic I could come up with was that people were expecting RMD's would be great enough to push them in a higher tax bracket always - but I hadn't seen this assumption explicitly acknowledged/explored.
Yes, I think that's pretty much it. If you think $100K has a good chance of turning into $10 million in 30 years (as HEDGEFUNDIE I believe has stated), then surely you would do this in the Roth so that you get 10 million in tax free gains. Of course, the downside is that you will be penalized severely for withdrawing early, so unfortunately you won't be able to enjoy the fruits of this dramatic investment earlier. Of course this is assuming the strategy will in fact perform that spectacularly.
Last edited by langlands on Sun Feb 23, 2020 2:25 pm, edited 1 time in total.
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

ChrisBenn wrote: Sun Feb 23, 2020 2:17 pm(Note that the portion I quoted was referring to conversions, which wouldn't benefit from the increased tax sheltering rate for contributions.)
The logic is basically the same. The alternative to converting your non-Roth to Roth (paying taxes) is contributing to taxable (with the taxes you saved by not converting). That doesn't mean it's always a good idea, but if starting and ending tax rates were the same, before and after conversion, doing the conversion is then just a way to get more space instead of investing in taxable.

But like you point out, correctly, most people want to optimize for having some taxable income in retirement (and converting too much will usually affect your tax rates in retirement, making them lower).
Hydromod
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Hydromod »

ChrisBenn wrote: Sun Feb 23, 2020 1:51 pm
Hydromod wrote: Sun Feb 23, 2020 1:23 pm
BV3273 wrote: Sun Feb 23, 2020 12:56 pm So ideally I should convert traditional Ira to Roth. Then implement.
That's exactly what I did. And I'm very happy to have done so.
This line of discussion seems to imply that there is something specifically about this strategy that advantages a roth over a traditional ira? That decision should be almost orthogonal to the strategy here - i.e. it's primarily driven by your expected tax rate now vs. at retirement, no? The only way I can see that this particular strategy would weight in is if on was projecting RMD's from this strategy would be so great they would throw you into a new tax bracket?

Note that I'm not saying there is anything wrong with converting to a roth; rather I want to understand what aspects of this strategy would make the roth vs. traditional decision any different than for any other strategy?
For me, I was messing around with planning future decumulation. Our portfolio is almost entirely traditional, and if things go well RMDs will exceed our needs even without the strategy. It shouldn't make much difference in overall taxes doing Roth vs. traditional while we're both alive, but I realized that we have an expected period of ~10 years filing single rather than MFJ and the tax brackets would narrow if one of us died. This would substantially bump taxes on RMDs. So for me it made sense to in general concentrate on increasing the Roth fraction from now on to hedge this scenario.

I only had a small IRA available for investing in the strategy, so I just paid a smallish tax up front to convert and be done with it for good. Gains have already been several times the tax for conversion. I'm hoping/expecting that this pot will largely be for heirs, which means there is room to let it run for a long time, and it is likely to be cleaner to handle as a Roth.
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

ChrisBenn wrote: Sun Feb 23, 2020 1:51 pm
Hydromod wrote: Sun Feb 23, 2020 1:23 pm
BV3273 wrote: Sun Feb 23, 2020 12:56 pm So ideally I should convert traditional Ira to Roth. Then implement.
That's exactly what I did. And I'm very happy to have done so.
This line of discussion seems to imply that there is something specifically about this strategy that advantages a roth over a traditional ira? That decision should be almost orthogonal to the strategy here - i.e. it's primarily driven by your expected tax rate now vs. at retirement, no? The only way I can see that this particular strategy would weight in is if on was projecting RMD's from this strategy would be so great they would throw you into a new tax bracket?

Note that I'm not saying there is anything wrong with converting to a roth; rather I want to understand what aspects of this strategy would make the roth vs. traditional decision any different than for any other strategy?
Agree. There is nothing about this strategy which changes the Roth vs traditional calculus.
Texanbybirth
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Texanbybirth »

HEDGEFUNDIE wrote: Fri Feb 21, 2020 5:44 pm
BioEng wrote: Fri Feb 21, 2020 5:41 pm Did I miss a 1 year update from Hedgefundie? Or is he gonna update end of this month since its 3 months since his last update?
One year update is I’m up 85%, and considering starting my own hedge fund.

Any other questions?
Glad you’re still contributing. If you’re serious about a hedge fund, does that mean your contributions to this thread (eg the allocation weights shift that started part II) will stop? I hope you’ll at least stick around to keep the “adventure” results updated!
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
keanoz
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keanoz »

MoneyMarathon wrote: Sun Feb 23, 2020 1:10 pm
BV3273 wrote: Sun Feb 23, 2020 12:14 pm I’m curious to the folks currently trying out the 55 UPRO/45 TMF.

Would buy and hold work for this? I’m thinking of placing part of my taxable portfolio in these funds and would continue to purchase them on a biweekly basis.
For taxable, I suggest leaning on the strengths of taxable, which is tax deferral from long term capital gains. Deferring capital gains is a sure thing for any strategy in taxable, so making use of it for your strategy provides better returns for the same level of risk taken.

NTSX is the best for this purpose. It rebalances internally to achieve 90% S&P 500 and 60% treasuries. Internal rebalancing means you don't have to sell as much. It's pretty tax efficient and has 0.2% expense ratio.

Leveraging on the bond side provides cheaper leverage (based on implied borrowing rates for the underlying instruments) and is applied to a less volatile asset than stocks (requiring less rebalancing and causing less volatility decay that effects returns). I'd suggest taking the 1.5x leveraged NTSX and combining it with the 3x leveraged TMF to get the ratio of stocks to bonds that you want.

For 50:50 stocks to bonds and 1.65x leverage overall, you could use 90% NTSX and 10% TMF. This has 82% stocks and a 0.82 correlation to the US stock market.

For 40:60 stocks to bonds and 1.8x leverage overall, you could use 80% NTSX and 20% TMF. This has 72% stocks and a 0.52 correlation to the US stock market, which is an okay amount of equity risk - some might say minimum - for most people still saving (obviously, it gets there by taking on more term / duration risk in bonds, being correlated with that).

For taxable I'd stop at 40:60 stocks to bonds and 1.8x leverage overall, otherwise you're overweighting bonds or you have to leverage equities. Leveraging equities, more than anything, is what requires very frequent rebalancing. It's also inherently more costly to leverage stocks. If you want to leverage stocks in taxable anyway, look at PPLC (1.35x leveraged), which has relatively low volatility for a leveraged stock ETF. But look at NTSX first as your core holding.

One more thing - you could hold exclusively NTSX in taxable and "rebalance" by buying and selling bonds in tax-advantaged, specifically pre-tax like an IRA or 401k (TMF, EDV, or otherwise). You could also hold a position in leveraged stocks in tax-advantaged, for the purpose of rebalancing. That might be the best strategy overall for taxable (using advantaged space for rebalancing).
Could you use ntsx+upro for a more aggressive approach?
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HEDGEFUNDIE
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by HEDGEFUNDIE »

Texanbybirth wrote: Sun Feb 23, 2020 3:02 pm
HEDGEFUNDIE wrote: Fri Feb 21, 2020 5:44 pm
BioEng wrote: Fri Feb 21, 2020 5:41 pm Did I miss a 1 year update from Hedgefundie? Or is he gonna update end of this month since its 3 months since his last update?
One year update is I’m up 85%, and considering starting my own hedge fund.

Any other questions?
Glad you’re still contributing. If you’re serious about a hedge fund, does that mean your contributions to this thread (eg the allocation weights shift that started part II) will stop? I hope you’ll at least stick around to keep the “adventure” results updated!
I’ve gotten tired of Bogleheads telling me I can’t possibly beat the markets since “what makes you think you can do better than the professionals?”

If being taken seriously means charging 3 and 30 for my ideas so be it.
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

HEDGEFUNDIE wrote: Sun Feb 23, 2020 3:19 pm I’ve gotten tired of Bogleheads telling me I can’t possibly beat the markets since “what makes you think you can do better than the professionals?”
A few professionals applied these principles in the 1970s - 1990s (at the least, leverage and market neutrality) and made a killing.

http://www.eecs.harvard.edu/cs286r/cour ... on2007.pdf
How does the Kelly-optimal approach do in practice in the securities markets? In a
little-known paper (Thorp, 1971) I discussed the use of the Kelly criterion for portfolio
management. Page 220 mentions that “On November 3, 1969, a private institutional
investor decided to . . . use the Kelly criterion to allocate its assets”. This was actually
a private limited partnership, specializing in convertible hedging, which I managed.
A notable competitor at the time (see Institutional Investor (1998)) was future Nobel
prize winner Harry Markowitz. After 20 months, our record as cited was a gain of 39.9%
versus a gain for the Dow Jones Industrial Average of +4.2%. Markowitz dropped out
after a couple of years, but we liked our results and persisted. What would the future
bring?

It is now May, 1998, twenty eight and a half years since the investment program
began. The partnership and its continuations have compounded at approximately 20%
annually with a standard deviation of about 6% and approximately zero correlation with
the market (“market neutral”). Ten thousand dollars would, tax exempt, now be worth 18
million dollars. To help persuade you that this may not be luck, I estimate that during this
period I have made about $80 billion worth of purchases and sales (“action”, in casino
language) for my investors. This breaks down into something like one and a quarter
million individual “bets” averaging about $65,000 each, with on average hundreds of
“positions” in place at any one time. Over all, it would seem to be a moderately “long
run” with a high probability that the excess performance is more than chance.
If you knew to invest in his partnership or to buy Berkshire Hathaway (which also used leverage - but relatively light leverage), back then, you'd have gotten 100x and then some. Turning $100,000 or even just $10k into $10M has been done with a sound plan and leverage. The partnership above turned $10k into $18M. Berkshire Hathaway had a 2,744,062% return, turning $10k into $27M. Takes a long period of compounding to get eye popping numbers, but if your plan works over a long period of time, it can snowball. Even just buying the S&P 500 and holding it long enough has done pretty well, and every bit of extra annual return just racks up the final numbers faster. It's possible. If the plan is prudent, like that of a Thorp or a Buffett, the right amount of leverage just makes it all go faster.
MoneyMarathon
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MoneyMarathon »

keanoz wrote: Sun Feb 23, 2020 3:06 pm Could you use ntsx+upro for a more aggressive approach?
With a large allocation to UPRO, you want to be able to rebalance quarterly, or possibly with bands. There have been some "flash crashes" and intra-year gyrations that devastate if not rebalanced. If you could keep enough UPRO and other assets in a tax-advantaged account to rebalance with, you could just hold the remainder of the UPRO (the 'bottom dollar' so to speak) in taxable. If you don't mind the taxes, you "could" "just" pay the taxes and go for it, with frequent rebalancing, but you'd need to pencil it all out and be sure it makes sense (it might not) because you're getting lower return for the same volatility as someone else using tax advantaged.

I would suggest NTSX + PPLC if you want a more aggressive stock allocation.
For example, 80% NTSX and 20% PPLC gives you 99% stocks and 48% bonds.
Or 60% NTSX and 40% PPLC gives you 108% stocks and 36% bonds.

Alternatively, NTSX + PPLC + TMF to be able to maintain or increase the total amount of leverage.
For example, 50% NTSX + 40% PPLC + 10% TMF gives you 99% stocks and 60% bonds (total 1.6x leverage).

If you really want to lever up the stock side more, you can limit your annual downside by using a small fraction in UPRO and only taking long term capital gains (usually rebalancing annually). I'd suggest capping it at 20% and no more; it can almost entirely vanish in a year.
For example, 70% NTSX + 20% UPRO + 10% TMF gives you 123% stocks and and 72% bonds (total 1.95x leverage).
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by danielc »

pepys wrote: Wed Feb 19, 2020 12:20 pm For example, here are two reasons for why this research on the typical person likely does not apply to me or some others in this thread:

1) I am not aware of any behavioral studies that look at people who say beforehand that they are pretty sure of how they would react in the case of a large drawdown, and say that they would not panic sell, which is completely different than those sample groups.
To play devil's advocate: Overconfidence bias, and Illusion of control. We are all fabulously bad at guessing a lot of things, including how we would react in X situation. We all think we are above average, and we all have a tendency to imagine other people (esp people who are not members of our "group") as thinking less deeply than we do.
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ThereAreNoGurus
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ThereAreNoGurus »

HEDGEFUNDIE wrote: Sun Feb 23, 2020 3:19 pm
Texanbybirth wrote: Sun Feb 23, 2020 3:02 pm
HEDGEFUNDIE wrote: Fri Feb 21, 2020 5:44 pm
BioEng wrote: Fri Feb 21, 2020 5:41 pm Did I miss a 1 year update from Hedgefundie? Or is he gonna update end of this month since its 3 months since his last update?
One year update is I’m up 85%, and considering starting my own hedge fund.

Any other questions?
Glad you’re still contributing. If you’re serious about a hedge fund, does that mean your contributions to this thread (eg the allocation weights shift that started part II) will stop? I hope you’ll at least stick around to keep the “adventure” results updated!
I’ve gotten tired of Bogleheads telling me I can’t possibly beat the markets since “what makes you think you can do better than the professionals?”
Ignore the noise. :D
Trade the news and you will lose.
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

pepys wrote: Sun Feb 23, 2020 1:36 pm
Lee_WSP wrote: Sun Feb 23, 2020 1:24 pm
pepys wrote: Sun Feb 23, 2020 1:21 pm
How is it easily done with selling shares at a loss? So far, whenever the shares have been at a loss, that is the side I wanted to rebalance towards.
If they both decrease in value, but one decreases less, both halves would have shares with capital losses. I don't know why it's so hard to conceive of this happening. It has happened and will happen again.
Fair enough. I misunderstood your comment, I thought you were saying you could do this at any time.
You can loss harvest when rebalancing too. Upro and tqqq tmf and edv
JBTX
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by JBTX »

MoneyMarathon wrote: Sun Feb 23, 2020 1:35 pm
JBTX wrote: Sun Feb 23, 2020 12:50 pm there was never really a good explanation why looking at 1981-2019 when interest rates went down dramatically is a reasonable proxy for a starting point when the 10 year is at 1.5%. The only explanation I was were various versions of "this time it is different"
You're right. Starting at 1981 definitely is not a "reasonable proxy" for starting at 1.5% and you are not only 100% right, there is zero doubt. I think sometimes people forget what words mean, or just don't understand the math of bonds, but there's no way they're reasonably similar starting points. It's okay if people don't know the math of bonds. That's covered in the previous pages of the two threads too... somewhere.

Some people have a thesis about future interest rates (aka "this time it is different"). To be fair, interest rate "cycles" look like they're as long or longer than human lifetimes, so we don't have a lot of empirical evidence to contradict that thesis, just as we haven't got a lot of numbers (as opposed to narrative) to support it.

If you don't agree with that thesis (I'm not completely sure about it either), the best way to wade in here is to assume that higher rates are a risk & see if there's still anything left of value in the ideas discussed. Every strategy has risks. Experiencing a risk (going through high rates, e.g.) isn't necessarily fatal to results. Someone who considers it a risk should have a portfolio constructed with that taken into consideration. Note that this doesn't mean thriving in all circumstance - often a foolish idea to pursue, with underperformance in what may be more ordinary conditions - so much as making sure that you could get through and see the strategy continue to work on the other side.
Thanks for the response. Personally, I tend to agree with the interest rates will stay low narrative based on secular stagnation, demographics, Fed put, what have you. However I wouldn't bet my retirement portfolio, at any age on a strategy that real historical scenarios would have demolished. I've learned enough over the years that what I think will happen, which tends to converge popular narrative advanced by the "experts", often plays out in completely different ways.
pepys
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by pepys »

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