HEDGEFUNDIE's excellent adventure Part II: The next journey

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keith6014
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 »

Steve Reading wrote: Wed Jan 13, 2021 7:40 pm
keith6014 wrote: Wed Jan 13, 2021 5:59 pm Its been very UGLY and once I recoup my losses on TMF, I think I will do 20 TMF and 25 cash.
Let me get this right. You’re going to hold both UPRO and cash simultaneously?
TQQQ(~55),TMF(~20), and cash(~25). Not a quantitive but qualitative reason. Ofcourse once my TMF position recovers.
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Steve Reading
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Steve Reading »

keith6014 wrote: Wed Jan 13, 2021 9:59 pm
Steve Reading wrote: Wed Jan 13, 2021 7:40 pm
keith6014 wrote: Wed Jan 13, 2021 5:59 pm Its been very UGLY and once I recoup my losses on TMF, I think I will do 20 TMF and 25 cash.
Let me get this right. You’re going to hold both UPRO and cash simultaneously?
TQQQ(~55),TMF(~20), and cash(~25). Not a quantitive but qualitative reason. Ofcourse once my TMF position recovers.
Understood!
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
ohboy!
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ohboy! »

Redditor on their 3 fund leveraged portfolio. Uses QQQ. Includes “2x VIX” TVIX.

https://www.reddit.com/r/options/commen ... ame=iossmf
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

Using TVIX is a really crazy idea. It's got -5.0 beta vs the SPX give or take.
IPS: 100/0 + EF. The US market always recovers. It’s never different this time. Investing is a simple game of rinse and repeat.
perfectuncertainty
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by perfectuncertainty »

Impatience wrote: Wed Jan 13, 2021 6:01 pm Good to see yields retrace today. Doubt it will last but I still expect them to rise less than most around here expect. I also have zero concern for inflation ... inflation is a ghost of the past.
keith6014 wrote: Wed Jan 13, 2021 5:59 pm
perfectuncertainty wrote: Wed Jan 13, 2021 2:01 pm
firebirdparts wrote: Wed Jan 13, 2021 1:08 pm Finally TMF getting a little relief today. Been ugly.
Image
The new Administration is proposing their COVID relief bill on Thursday. We shall see how the market reacts.
And I hope you called the bottom. Its been very UGLY and once I recoup my losses on TMF, I think I will do 20 TMF and 25 cash.
Ugly for all of a month - so what? Trying to trade and adjust this strategy actively will only eat away at your gains over time.
My account says different. It's not an indicator it’s a statistical model.
SCraw
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by SCraw »

Hi all. I’m looking into 3x leveraged ITTs (5-10yr treasuries) vs LTTs (20+) for the strategy (55/45), and it looks like ITTs actually outperform slightly 1955-2018 (Since 2018 it looks like the LTT portfolio leaves you with 3.5% more money), but have underperformed in every decade since the 80s. In the 40/60 case, ITTs perform much better than LTTs. Some of that is because 3x LTTs are sky high right now, but 3x ITTs have pretty much returned to earth. I still don’t think ITTs deliver what LTTs do, but I wouldn’t be too upset if I were forced to use TYD over TMF.

This is all yearly rebalancing.

If anyone’s interested, here’s the performance.

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

Post by fallingeggs »

firebirdparts wrote: Tue Jan 12, 2021 12:26 am I admit I don't understand why people would be willing counterparties to UPRO. I admit it.
The world's global banks are the counterparty to these LETFs. They borrow money to purchase some multiple of the S&P500 as a hedge (simplistic, of course, because the bank doesn't just hedge its UPRO exposure individually, but every stock it owns in aggregate). Where does the hedge come from? From anyone selling on the market. Who's lending the money to the bank (who lends it to those purchasing UPRO)? Basically anyone investing in a money market fund. The banks are nearly economically flat on the trade (they earn small funding spread).

In theory, if one looks at the entire world's exposure on the S&P500, it could be something above 100%, in which case, there would be someone economically on the wrong side of the leveraged longs. I'd think this is a small group of hedge funds taking hourly short positions. One couldn't actually buy-and-hold the inverse of UPRO very long...

Buying UPRO is just like waking up every morning, borrowing twice your capital, buying SPY and selling/paying back everything at the end of the day. The people "losing" are those selling you their shares. But they aren't necessarily losers because, perhaps, they are selling shares to fund their retirement, so don't care that SPY increases during the day.
LeverageWBeverage
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LeverageWBeverage »

Does anyone know if Portfolio Visualizer includes reinvested dividends when comparing "VANGUARD 500 Index Investor" or if it is just looking purely at price over time? This would make a huge difference in return.
jarjarM
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

LeverageWBeverage wrote: Fri Jan 15, 2021 2:09 pm Does anyone know if Portfolio Visualizer includes reinvested dividends when comparing "VANGUARD 500 Index Investor" or if it is just looking purely at price over time? This would make a huge difference in return.
It includes dividend reinvestment.
LeverageWBeverage
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by LeverageWBeverage »

jarjarM wrote: Fri Jan 15, 2021 2:10 pm
LeverageWBeverage wrote: Fri Jan 15, 2021 2:09 pm Does anyone know if Portfolio Visualizer includes reinvested dividends when comparing "VANGUARD 500 Index Investor" or if it is just looking purely at price over time? This would make a huge difference in return.
It includes dividend reinvestment.
Thank you.
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coingaroo
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by coingaroo »

I'm getting increasingly uncomfortable with TMF's straight line down. But I am going to stay the course: the stock and bond portfolio have been working well for decades; and investment outcomes should not be measured on a timeframe of months.
Mickelous
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Mickelous »

Too bad there is no 3x VT.
langlands
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by langlands »

coingaroo wrote: Mon Nov 09, 2020 8:40 am Direxion says the annual report will be published around the end of the month.

Very keen to see what the financing spread they have been paying.
Hey, just wanted to ask if the TMF spread did normalize. I seem to remember you saying it was abnormally high in April last year? Was it a fluke or is the TMF borrow still high?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by NMBob »

coingaroo wrote: Sun Jan 17, 2021 6:45 am I'm getting increasingly uncomfortable with TMF's straight line down. But I am going to stay the course: the stock and bond portfolio have been working well for decades; and investment outcomes should not be measured on a timeframe of months.


looks to me like Hedgefundies plan is working pretty much as planned.

tmf did its job when the covid market crashed. now its price is somewhat working its way back to where it was pre covid. I see that as a good thing for the long term use of the hea portfolio. And then despite this, the total portfolio, even if you measure it in months, is outperforming the sp500, and that is for the last 4, 3,2 and 1 months periods despite tmf fall from its covid burst.


sep20 -dec 20 sp500 7.8% / hea 8.3%
oct20 - dec20 sp500 12.1 / hea 16.7
nov20-dec20 sp500 15.1 / hea 28.4
dec20-dec 20 sp500 3.84 / hea 5.08
Tingting1013
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Tingting1013 »

NMBob wrote: Sun Jan 17, 2021 1:58 pm
coingaroo wrote: Sun Jan 17, 2021 6:45 am I'm getting increasingly uncomfortable with TMF's straight line down. But I am going to stay the course: the stock and bond portfolio have been working well for decades; and investment outcomes should not be measured on a timeframe of months.


looks to me like Hedgefundies plan is working pretty much as planned.

tmf did its job when the covid market crashed. now its price is somewhat working its way back to where it was pre covid. I see that as a good thing for the long term use of the hea portfolio. And then despite this, the total portfolio, even if you measure it in months, is outperforming the sp500, and that is for the last 4, 3,2 and 1 months periods despite tmf fall from its covid burst.


sep20 -dec 20 sp500 7.8% / hea 8.3%
oct20 - dec20 sp500 12.1 / hea 16.7
nov20-dec20 sp500 15.1 / hea 28.4
dec20-dec 20 sp500 3.84 / hea 5.08
People complain when TMF continually rises

People complain when TMF continually drops

Just can’t win with you guys....
Dovahkiin
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Dovahkiin »

moontower wrote: Mon Jan 11, 2021 10:09 pm The problem with this "strategy" of leverage isnt the theory, its actually quite sound. The FLAW is the illusion of the perfect instrument, it doesnt exist. There's decay and these leveraged finds will all eventually BLOW UP. I lost 90% of my money in XIV and it wasnt even leveraged. It was an inverse of market volativlity, the VIX, and as volatility fell after 2009 crisis, it just keep rising and rising until it exploded and lost 90% of its value overnight, NEVER to come back. So thats the part i think is just irresponsible about putting longterm money in a 3x ETF, it's just not sustainable over time. All this backtesting is an illusion. PIMCO has some of the best managers in the business and their PSLDX attempts to do 2x of the SPY but over time decay and expenses add up and after taxes it only beats the SPY by a few points, impressive but you'll never get those pie in the sky increases over the market. Its like perpetual motion, leverage without high friction costs and high risk of implosion in market crashes, just doesnt exist.
I traded XIV and SVXY. You're mistaken - it was leveraged and leveraged to the hilt. It tried to track the daily 1x INVERSE of the VIX futures - it was selling it short. Every short selling fund is leveraged - period. Short selling is UNLIMITED LOSSES for a FINITE GAIN. Trying to track a daily 1x INVERSE was really hard too - they had to sell a ton of contracts and still had tracking error because of that. The newer 0.5x inverse has much less tracking error but it's still short selling, just less contracts per cash.

What had happened was XIV and SVXY became a very crowded trade. Their AUM blew up to astronomical proportions to the total volume of the VIX futures. Essentially XIV and SVXY was responsible for over 80% of the daily volume! Imagine short selling VIX as being an insurance product - people buying the vix futures use it to hedge against a stock market crash/etc. Now imagine that ratio of more people wanting to sell insurance - more and more contracts got created at lower and lower prices, as both ETFs kept shooting up in NAV when realized volatility was less than the vix, and so on.

It got to a match point that upward spikes in the vix future started making XIV and SVXY having to buyback contracts to cover... What happens when you have a ton of shorts buying back to cover all a sudden? A short squeeze. Suddenly you had 80% of the market trying to buy back to cover and BOOM - 90% loss.

Ironically SVXY survived unlike VIX as the SVXY manager went home 15 minutes early that fated night and didn't buy back any futures. They sure took one hell of a beating but their fund survived unlike XIV - which was a credit ETN but Credit Suisse hedged by short selling vix futures instead of keeping it as a pure liability on X close date to pay out the fund per X shares.
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

Dovahkiin wrote: Sun Jan 17, 2021 2:55 pm Ironically SVXY survived unlike VIX as the SVXY manager went home 15 minutes early that fated night and didn't buy back any futures. They sure took one hell of a beating but their fund survived unlike XIV - which was a credit ETN but Credit Suisse hedged by short selling vix futures instead of keeping it as a pure liability on X close date to pay out the fund per X shares.
Right, XIV was an ETN - it never held vix futures, just derived the price based on the indicative value. XIV didn't have an option to delay the timing of rebalancing like SVXY did, intentionally or otherwise.
IPS: 100/0 + EF. The US market always recovers. It’s never different this time. Investing is a simple game of rinse and repeat.
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Nicolas Perrault
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Nicolas Perrault »

keith6014 wrote: Wed Jan 13, 2021 9:59 pm
Steve Reading wrote: Wed Jan 13, 2021 7:40 pm
keith6014 wrote: Wed Jan 13, 2021 5:59 pm Its been very UGLY and once I recoup my losses on TMF, I think I will do 20 TMF and 25 cash.
Let me get this right. You’re going to hold both UPRO and cash simultaneously?
TQQQ(~55),TMF(~20), and cash(~25). Not a quantitive but qualitative reason. Ofcourse once my TMF position recovers.
Can you explain why you are both long cash (25% cash) and short cash (55% TQQQ and 20% TMF = -150% short cash)? Why not get rid of the cash by deleveraging, e.g. 80% QLD (2X Nasdaq, instead of TQQQ = 3X Nasdaq). Because fees are lower, this should result in higher returns. After all, your strategy pays interest to borrow 150% cash, and then puts 25% of that cash under the mattress. Why not just borrow 125% cash instead?

Indeed, using PV, you get both higher returns and lower risk. (For the record: I do not recommend this portfolio.)

Image
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Nicolas Perrault
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Nicolas Perrault »

Marseille07 wrote: Tue Jan 12, 2021 11:59 am
willthrill81 wrote: Tue Jan 12, 2021 11:29 am
kim.gold wrote: Tue Jan 12, 2021 11:05 am TMF 15% down in 7 days. How is everyone doing? Frustrating to be more than 5% down when the market went 2% up.
15% in 7 days is nothing. UPRO lost 77% between 2/19/20 and 3/23/20.
A bigger concern isn't 15% vs 77% but that SPX down -0.15% and TMF going -2%. Not working as a hedge right now.
If you want a perfect UPRO hedge, you could try SPXU (UltraPro Short S&P 500, S&P -3X). If you actually do try 55% UPRO/45% SPXU, tell us how it works out :beer
typical.investor
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by typical.investor »

noraz123 wrote: Tue Jan 12, 2021 1:11 pm Has any tried adding an international to this? I am not sure that there are too many leveraged internation ETFs, and it seems Direxion's closed its 3x leveraged international ETF - DZK.


I have a small amount in HFEA, using UPRO and TMF+EDV. I am wondering if I added a leveraged international component and maintained risk parity of the asset classes (S&P 500, LTT and international) would help to reduce the risk while still using leverage.

Thoughts?
Yes, I used DZK until it closed. Then shifted DZK to EDC (Direxion Daily MSCI Em Mkts Bull 3X ETF).

I think it doesn't backtest real well, but since 4.2019 when I got in 50%/50% UPRO/TMF returned about 59% and 50%/50% UPRO/EDC about 55%. The DZK returns were less though.

Anyway, I went to 70% equities (UPRO/EDC) and 30% TMF in March when equities crash. Seeing the huge, huge run up in TMF and draw down in UPRO/EDC was too much to resist.

I'll keep it like this until QE ends and rates have gone up a little then rebalance back.

I'm not sure that international reduces risk though. If stagflation happens, TMF is going to be hurt and the long duration will make it sticky. EDC is quite volatile and really needs a safe asset to counter balance. If TMF doesn't provide that ...

I really don't think there is a sure fire way to eliminate the risk on this strategy ... other than being able and committed to reset your leverage on big drops - either by selling TMF if only equities drop, or by adding new funds if both do.
Marseille07
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Marseille07 »

Nicolas Perrault wrote: Sun Jan 17, 2021 10:58 pm
Marseille07 wrote: Tue Jan 12, 2021 11:59 am
willthrill81 wrote: Tue Jan 12, 2021 11:29 am
kim.gold wrote: Tue Jan 12, 2021 11:05 am TMF 15% down in 7 days. How is everyone doing? Frustrating to be more than 5% down when the market went 2% up.
15% in 7 days is nothing. UPRO lost 77% between 2/19/20 and 3/23/20.
A bigger concern isn't 15% vs 77% but that SPX down -0.15% and TMF going -2%. Not working as a hedge right now.
If you want a perfect UPRO hedge, you could try SPXU (UltraPro Short S&P 500, S&P -3X). If you actually do try 55% UPRO/45% SPXU, tell us how it works out :beer
I think some people do a delta-neutral trade of shorting both UPRO and SPXU. I don't think it's *that* profitable but I could be mistaken.
IPS: 100/0 + EF. The US market always recovers. It’s never different this time. Investing is a simple game of rinse and repeat.
keith6014
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 »

Nicolas Perrault wrote: Sun Jan 17, 2021 4:11 pm
keith6014 wrote: Wed Jan 13, 2021 9:59 pm
Steve Reading wrote: Wed Jan 13, 2021 7:40 pm
keith6014 wrote: Wed Jan 13, 2021 5:59 pm Its been very UGLY and once I recoup my losses on TMF, I think I will do 20 TMF and 25 cash.
Let me get this right. You’re going to hold both UPRO and cash simultaneously?
TQQQ(~55),TMF(~20), and cash(~25). Not a quantitive but qualitative reason. Ofcourse once my TMF position recovers.
Can you explain why you are both long cash (25% cash) and short cash (55% TQQQ and 20% TMF = -150% short cash)? Why not get rid of the cash by deleveraging, e.g. 80% QLD (2X Nasdaq, instead of TQQQ = 3X Nasdaq). Because fees are lower, this should result in higher returns. After all, your strategy pays interest to borrow 150% cash, and then puts 25% of that cash under the mattress. Why not just borrow 125% cash instead?

Indeed, using PV, you get both higher returns and lower risk. (For the record: I do not recommend this portfolio.)

Image
Yes, I am holding cash and upro simultaneously. I hold it for days where UPRO and TMF simultaneously go down and I apply cash.
EfficientInvestor
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by EfficientInvestor »

Volatility decay took quite a bite out of the returns of a LETF portfolio in 2020. Based on this PV backtest, a 50/50 UPRO/TMF portfolio had a return of 25.84% in 2020. In comparison, a similar portfolio implemented with futures contracts had a return in excess of 50%. Note that the 53.79% shown in this backtest is an approximation of what a futures portfolio would have returned. Even if you take into account any cash drag not reflected in the backtest, it is safe to say the return would have been at least 50%. Does 2020 have anyone reconsidering the use of LETFs for the implementation of leveraged portfolios?
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Steve Reading
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Steve Reading »

EfficientInvestor wrote: Mon Jan 18, 2021 11:31 am Volatility decay took quite a bite out of the returns of a LETF portfolio in 2020. Based on this PV backtest, a 50/50 UPRO/TMF portfolio had a return of 25.84% in 2020. In comparison, a similar portfolio implemented with futures contracts had a return in excess of 50%. Note that the 53.79% shown in this backtest is an approximation of what a futures portfolio would have returned. Even if you take into account any cash drag not reflected in the backtest, it is safe to say the return would have been at least 50%. Does 2020 have anyone reconsidering the use of LETFs for the implementation of leveraged portfolios?
You'll want to make sure you have "rebalance quarterly" selected I believe.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by EfficientInvestor »

Steve Reading wrote: Mon Jan 18, 2021 11:36 am You'll want to make sure you have "rebalance quarterly" selected I believe.
I generally only rebalance annually, especially in a taxable account.

edit/addition - However, with futures contracts, it doesn't matter when you rebalance since you have daily settlements (taxable events) anyway. But if I were implementing with LETFs, I would tend to only want to rebalance once per year in a taxable account for tax purposes.
Last edited by EfficientInvestor on Mon Jan 18, 2021 11:44 am, edited 1 time in total.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by EfficientInvestor »

Steve Reading wrote: Mon Jan 18, 2021 11:36 am You'll want to make sure you have "rebalance quarterly" selected I believe.
I just updated to quarterly rebalance and see that the LETF performance is much improved. But is that because quarterly rebalance is really that much better or because the COVID dip happened in March and the rebalance at the end of March saved the LETF portfolio's bacon?
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Steve Reading
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Steve Reading »

EfficientInvestor wrote: Mon Jan 18, 2021 11:38 am
Steve Reading wrote: Mon Jan 18, 2021 11:36 am You'll want to make sure you have "rebalance quarterly" selected I believe.
I generally only rebalance annually, especially in a taxable account.
Gotcha. Judging by the returns of 55%+ that many posted here for 2020, I'm assuming many just use the OG HF strategy with quarterly rebalance.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bluerafters »

What's the smallest amount of cash you could realistically use to start this over at M1?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by totality »

keith6014 wrote: Mon Jan 18, 2021 9:23 am Yes, I am holding cash and upro simultaneously. I hold it for days where UPRO and TMF simultaneously go down and I apply cash.
Hmm, even so, I find this strategy confusing...you are still, at times, borrowing cash while holding cash. My intuition is that paying the cost of borrowing while doing nothing with the cash will be a drag on returns.

(But this stuff is over my head, I am just a simple long-only un-leveraged investor.)
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by queso »

bluerafters wrote: Mon Jan 18, 2021 3:07 pm What's the smallest amount of cash you could realistically use to start this over at M1?
In a taxable account I think you can start with as little as $100.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 »

queso wrote: Mon Jan 18, 2021 3:42 pm
bluerafters wrote: Mon Jan 18, 2021 3:07 pm What's the smallest amount of cash you could realistically use to start this over at M1?
In a taxable account I think you can start with as little as $100.
I don't think that anyone should use this strategy in a taxable account though.
“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
keith6014
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 »

willthrill81 wrote: Mon Jan 18, 2021 3:47 pm
queso wrote: Mon Jan 18, 2021 3:42 pm
bluerafters wrote: Mon Jan 18, 2021 3:07 pm What's the smallest amount of cash you could realistically use to start this over at M1?
In a taxable account I think you can start with as little as $100.
I don't think that anyone should use this strategy in a taxable account though.
IRAs have a capacity problem. I can't put too much money in it. I put PSLDX in my IRAs. I am doing this strategy in taxable. I buy and hold for 1 year with monthly cashflow. After 1 year, I will liquide whatever I can to rebalance. Still need to wait 5 more months to hit the 1 year mark for me in taxable.
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willthrill81
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 »

keith6014 wrote: Mon Jan 18, 2021 4:04 pm
willthrill81 wrote: Mon Jan 18, 2021 3:47 pm
queso wrote: Mon Jan 18, 2021 3:42 pm
bluerafters wrote: Mon Jan 18, 2021 3:07 pm What's the smallest amount of cash you could realistically use to start this over at M1?
In a taxable account I think you can start with as little as $100.
I don't think that anyone should use this strategy in a taxable account though.
IRAs have a capacity problem. I can't put too much money in it. I put PSLDX in my IRAs. I am doing this strategy in taxable. I buy and hold for 1 year with monthly cashflow. After 1 year, I will liquide whatever I can to rebalance. Still need to wait 5 more months to hit the 1 year mark for me in taxable.
It's feasible to do that, but the tax drag seems likely to be significant unless you're paying 0% LTCG.
“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 bluerafters »

keith6014 wrote: Mon Jan 18, 2021 4:04 pm
willthrill81 wrote: Mon Jan 18, 2021 3:47 pm
queso wrote: Mon Jan 18, 2021 3:42 pm
bluerafters wrote: Mon Jan 18, 2021 3:07 pm What's the smallest amount of cash you could realistically use to start this over at M1?
In a taxable account I think you can start with as little as $100.
I don't think that anyone should use this strategy in a taxable account though.
IRAs have a capacity problem. I can't put too much money in it. I put PSLDX in my IRAs. I am doing this strategy in taxable. I buy and hold for 1 year with monthly cashflow. After 1 year, I will liquide whatever I can to rebalance. Still need to wait 5 more months to hit the 1 year mark for me in taxable.
Interesting. Are these contributions a standard amount that are spread weekly/bi-weekly via pay period? Or just whatever/whenever you have spare cashflow?
White Oak
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by White Oak »

willthrill81 wrote: Mon Jan 18, 2021 3:47 pm I don't think that anyone should use this strategy in a taxable account though.
Maybe so. I'll let you know if it was a mistake in 5 to 10 years. ;)

I am invested in this strategy in both my IRAs and taxable accounts. Monthly contributions go toward the underweight asset, and I rebalance roughly quarterly using the IRAs. This tends toward having more TMF in my traditional IRA, and more UPRO in taxable, which isn't the worst thing.

I'll be donating appreciated UPRO shares to my DAF to help rebalance.

In addition, having UPRO in taxable allows for significant TLH.
keith6014
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by keith6014 »

bluerafters wrote: Mon Jan 18, 2021 4:29 pm
keith6014 wrote: Mon Jan 18, 2021 4:04 pm
willthrill81 wrote: Mon Jan 18, 2021 3:47 pm
queso wrote: Mon Jan 18, 2021 3:42 pm
bluerafters wrote: Mon Jan 18, 2021 3:07 pm What's the smallest amount of cash you could realistically use to start this over at M1?
In a taxable account I think you can start with as little as $100.
I don't think that anyone should use this strategy in a taxable account though.
IRAs have a capacity problem. I can't put too much money in it. I put PSLDX in my IRAs. I am doing this strategy in taxable. I buy and hold for 1 year with monthly cashflow. After 1 year, I will liquide whatever I can to rebalance. Still need to wait 5 more months to hit the 1 year mark for me in taxable.
Interesting. Are these contributions a standard amount that are spread weekly/bi-weekly via pay period? Or just whatever/whenever you have spare cashflow?
I've been doing fixed amount monthly. But last 2 months I didn't because of the melt up. This month I am down, so I will do 2x the contribution. My timing is, I wait for a losing month and then put the money in.
Tingting1013
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Tingting1013 »

White Oak wrote: Mon Jan 18, 2021 4:37 pm I'll be donating appreciated UPRO shares to my DAF to help rebalance.
This only works for lots aged >1 year, correct?
Mickelous
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Mickelous »

People that mention tax drag, maybe you are selling shifting 20-30 percent of your portfolio a year on average, has anyone actually done the tax drag calculations with lowest taxes algorithm?

How much cagr do you lose per year?
White Oak
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by White Oak »

Tingting1013 wrote: Mon Jan 18, 2021 6:01 pm
White Oak wrote: Mon Jan 18, 2021 4:37 pm I'll be donating appreciated UPRO shares to my DAF to help rebalance.
This only works for lots aged >1 year, correct?
Yes, that's correct.
DMoogle
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by DMoogle »

Mickelous wrote: Mon Jan 18, 2021 6:29 pm People that mention tax drag, maybe you are selling shifting 20-30 percent of your portfolio a year on average, has anyone actually done the tax drag calculations with lowest taxes algorithm?

How much cagr do you lose per year?
I'm curious about this too. I mean, the tax has to be paid eventually. Obviously there's substantial value in putting it off until the end... but has anyone actually done the comparison for this particular strategy?
jarjarM
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

DMoogle wrote: Mon Jan 18, 2021 8:18 pm
Mickelous wrote: Mon Jan 18, 2021 6:29 pm People that mention tax drag, maybe you are selling shifting 20-30 percent of your portfolio a year on average, has anyone actually done the tax drag calculations with lowest taxes algorithm?

How much cagr do you lose per year?
I'm curious about this too. I mean, the tax has to be paid eventually. Obviously there's substantial value in putting it off until the end... but has anyone actually done the comparison for this particular strategy?
Don’t have the data in front of me and too lazy to open the laptop, but using PV, rebalance quarterly vs annually will cost 7% CAGR since the beginning of UPRO. If one rebalance quarterly and then do TLH with a partner (SPXL) then maybe there’s a bit better tax ramifications but that require a closer look (my suspicions is that one will still end up with 5-10% CAGR hit depending on one’s tax bracket)
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cos
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by cos »

jarjarM wrote: Mon Jan 18, 2021 8:38 pm
DMoogle wrote: Mon Jan 18, 2021 8:18 pm
Mickelous wrote: Mon Jan 18, 2021 6:29 pm People that mention tax drag, maybe you are selling shifting 20-30 percent of your portfolio a year on average, has anyone actually done the tax drag calculations with lowest taxes algorithm?

How much cagr do you lose per year?
I'm curious about this too. I mean, the tax has to be paid eventually. Obviously there's substantial value in putting it off until the end... but has anyone actually done the comparison for this particular strategy?
Don’t have the data in front of me and too lazy to open the laptop, but using PV, rebalance quarterly vs annually will cost 7% CAGR since the beginning of UPRO. If one rebalance quarterly and then do TLH with a partner (SPXL) then maybe there’s a bit better tax ramifications but that require a closer look (my suspicions is that one will still end up with 5-10% CAGR hit depending on one’s tax bracket)
Dovahkiin posted an excellent analysis upthread revealing how this strategy remains feasible in taxable despite the tax drag: viewtopic.php?p=5073214#p5073214
jarjarM
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

cos wrote: Tue Jan 19, 2021 3:38 am
jarjarM wrote: Mon Jan 18, 2021 8:38 pm
DMoogle wrote: Mon Jan 18, 2021 8:18 pm
Mickelous wrote: Mon Jan 18, 2021 6:29 pm People that mention tax drag, maybe you are selling shifting 20-30 percent of your portfolio a year on average, has anyone actually done the tax drag calculations with lowest taxes algorithm?

How much cagr do you lose per year?
I'm curious about this too. I mean, the tax has to be paid eventually. Obviously there's substantial value in putting it off until the end... but has anyone actually done the comparison for this particular strategy?
Don’t have the data in front of me and too lazy to open the laptop, but using PV, rebalance quarterly vs annually will cost 7% CAGR since the beginning of UPRO. If one rebalance quarterly and then do TLH with a partner (SPXL) then maybe there’s a bit better tax ramifications but that require a closer look (my suspicions is that one will still end up with 5-10% CAGR hit depending on one’s tax bracket)
Dovahkiin posted an excellent analysis upthread revealing how this strategy remains feasible in taxable despite the tax drag: viewtopic.php?p=5073214#p5073214
Thanks, I missed that excellent analysis by dovahkiin. So the tax hit isn’t that bad, if on is in 15% LT or 30%ST tax bracket. Lot smaller than I thought. Then in that case, there’s no reason for annual rebalance since the back test would show that longer rebalance period really degrades the performance of this strategy. :beer
bluerafters
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by bluerafters »

cos wrote: Tue Jan 19, 2021 3:38 am
jarjarM wrote: Mon Jan 18, 2021 8:38 pm
DMoogle wrote: Mon Jan 18, 2021 8:18 pm
Mickelous wrote: Mon Jan 18, 2021 6:29 pm People that mention tax drag, maybe you are selling shifting 20-30 percent of your portfolio a year on average, has anyone actually done the tax drag calculations with lowest taxes algorithm?

How much cagr do you lose per year?
I'm curious about this too. I mean, the tax has to be paid eventually. Obviously there's substantial value in putting it off until the end... but has anyone actually done the comparison for this particular strategy?
Don’t have the data in front of me and too lazy to open the laptop, but using PV, rebalance quarterly vs annually will cost 7% CAGR since the beginning of UPRO. If one rebalance quarterly and then do TLH with a partner (SPXL) then maybe there’s a bit better tax ramifications but that require a closer look (my suspicions is that one will still end up with 5-10% CAGR hit depending on one’s tax bracket)
Dovahkiin posted an excellent analysis upthread revealing how this strategy remains feasible in taxable despite the tax drag: viewtopic.php?p=5073214#p5073214
Thanks for that link, as this is looking to go into taxable. I already have a Roth and I have the 2021 maximum contribution set aside. I could open another Roth and split that into the second for this insane adventure. If I remember correctly, I can only have $6000 per year TOTAL but I could split it into different Roth accounts? I'm not sure it's worth it to dilute the contribution.

I actually stumbled on this thread externally, no affiliation:

https://www.optimizedportfolio.com/hedg ... adventure/
NMBob
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by NMBob »

from the link on taxable account use going back earlier in this thread .."Currently "lowest tax" is not supported by any brokerage and will require matching tax lots manually"...

at schwab you have choices on computer picking the lots of stocks/etfs to sell and those include "highest cost" or "tax lot optimizer". However, this requires you to pick the number of lots to sell and is not simply a rebalance portfolio button that might be the issue.

at merrill edge you can manually select the tax lots by setting the lots in order by loss/gain per share. when selling you use select specific shares, when that page comes up, you can hit the top of the cost per share column and it will then put your share lots in order by highest cost per share and on the far right column you have the unrealized gain / loss column to know what the gain or loss is. there also is a "holding period " column you can sort with.
Last edited by NMBob on Tue Jan 19, 2021 12:29 pm, edited 1 time in total.
Tingting1013
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Tingting1013 »

NMBob wrote: Tue Jan 19, 2021 12:00 pm from the link on taxable account use going back earlier in this thread .."Currently "lowest tax" is not supported by any brokerage and will require matching tax lots manually"...
M1 Finance will automatically account for lowest tax lots when rebalancing
DMoogle
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by DMoogle »

What are people's thoughts on 43% UPRO/57% EDV vs. 100% NTSX? Seem similar in theory. UPRO/EDV is essentially 186% leverage and 69% weighted toward equities, whereas NTSX is 150%, but lower expense ratio and 60% equities.

Right now I'm doing 55% UPRO/45% TMF in tax-advantaged, and mostly NTSX and overweighted VXUS in taxable. Thinking about doing some UPRO/TMF in taxable (in addition to keeping a good portion of VXUS), but not sure if I want that much risk.
RonSea
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by RonSea »

DMoogle wrote: Tue Jan 19, 2021 12:48 pm What are people's thoughts on 43% UPRO/57% EDV vs. 100% NTSX? Seem similar in theory. UPRO/EDV is essentially 186% leverage and 69% weighted toward equities, whereas NTSX is 150%, but lower expense ratio and 60% equities.

Right now I'm doing 55% UPRO/45% TMF in tax-advantaged, and mostly NTSX and overweighted VXUS in taxable. Thinking about doing some UPRO/TMF in taxable (in addition to keeping a good portion of VXUS), but not sure if I want that much risk.
The bond holdings in NTSX are very different than EDV. EDV are entirely 25+ year bonds while NTSX holds mostly shorter 3-10 year bonds.

Considering NTSX's tax efficiency I think you could combine the three to make a decent portfolio for taxable. Ex. https://www.portfoliovisualizer.com/bac ... tion8_2=57

You can then decrease the leverage by adding NTSX and removing UPRO/TMF (or vice-versa to increase leverage).
jarjarM
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by jarjarM »

I know most (if not all) of the discussions in this thread is about how to leverage up, how to rebalance, what is the risk-off position (TMF vs EDV) or the risk-on position (UPRO vs TQQQ). Have anyone thought about how to wind down this strategy, especially in the taxable? At what point does one start to deleverage? Just curious... :beer
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cos
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by cos »

jarjarM wrote: Tue Jan 19, 2021 8:09 pm I know most (if not all) of the discussions in this thread is about how to leverage up, how to rebalance, what is the risk-off position (TMF vs EDV) or the risk-on position (UPRO vs TQQQ). Have anyone thought about how to wind down this strategy, especially in the taxable? At what point does one start to deleverage? Just curious... :beer
Dovahkiin had you beat on this one, too: viewtopic.php?p=5167821#p5167821
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