HEDGEFUNDIE's excellent adventure Part II: The next journey

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

Post by queso »

keith6014 wrote: Fri Oct 25, 2019 6:03 am has hedgefundie recently posted his recent performance?
I'm only 6 weeks in and down about 3.4%. VTSAX is up over the same window. I never learn... :oops:
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

keith6014 wrote: Fri Oct 25, 2019 6:03 am has hedgefundie recently posted his recent performance?
You can just portfoliovisualizer it. We all know exactly what percentage he started, when he started, and when he switched.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

queso wrote: Fri Oct 25, 2019 7:37 am
keith6014 wrote: Fri Oct 25, 2019 6:03 am has hedgefundie recently posted his recent performance?
I'm only 6 weeks in and down about 3.4%. VTSAX is up over the same window. I never learn... :oops:
When did you jump in and at what percentages?
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queso
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by queso »

Lee_WSP wrote: Fri Oct 25, 2019 8:53 am
queso wrote: Fri Oct 25, 2019 7:37 am
keith6014 wrote: Fri Oct 25, 2019 6:03 am has hedgefundie recently posted his recent performance?
I'm only 6 weeks in and down about 3.4%. VTSAX is up over the same window. I never learn... :oops:
When did you jump in and at what percentages?
Approx 6 weeks ago and at the 55/45 pie.
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

queso wrote: Fri Oct 25, 2019 9:10 am
Lee_WSP wrote: Fri Oct 25, 2019 8:53 am
queso wrote: Fri Oct 25, 2019 7:37 am
keith6014 wrote: Fri Oct 25, 2019 6:03 am has hedgefundie recently posted his recent performance?
I'm only 6 weeks in and down about 3.4%. VTSAX is up over the same window. I never learn... :oops:
When did you jump in and at what percentages?
Approx 6 weeks ago and at the 55/45 pie.
Well, it's very volatile, and all you need is a 1% movement in TMF to get back to par.
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queso
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by queso »

Lee_WSP wrote: Fri Oct 25, 2019 9:17 am
queso wrote: Fri Oct 25, 2019 9:10 am
Lee_WSP wrote: Fri Oct 25, 2019 8:53 am
queso wrote: Fri Oct 25, 2019 7:37 am
keith6014 wrote: Fri Oct 25, 2019 6:03 am has hedgefundie recently posted his recent performance?
I'm only 6 weeks in and down about 3.4%. VTSAX is up over the same window. I never learn... :oops:
When did you jump in and at what percentages?
Approx 6 weeks ago and at the 55/45 pie.
Well, it's very volatile, and all you need is a 1% movement in TMF to get back to par.
Yeah, I'm not worried about it. It's a really small position so even if it goes away I won't lose any sleep over it.
dspencer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by dspencer »

MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
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privatefarmer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
I believe I’m the only one putting my entire portfolio into this.
Lee_WSP
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

privatefarmer wrote: Fri Oct 25, 2019 10:48 am
dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
I believe I’m the only one putting my entire portfolio into this.
Your the only one who has confirmed it so far. There are Hundreds or thousands of lurkers. Also there are people on Reddit doing it.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MotoTrojan »

dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
To be clear I was saying I will not be disappointed if I am wrong about the level of outperformance (17% CAGR vs. 10% CAGR, as my variant did from 1982-2018). I will be bummed if it underperforms but I'll survive. It is currently 28% of my total portfolio but it is less than 1 years worth of contributions so that will decline fairly quickly, especially if I limit/halt contributions.

I think your 40/30/30 portfolio sounds good and is closer to risk parity than my 43/57 UPRO/EDV. I wish us both luck!
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MotoTrojan »

privatefarmer wrote: Fri Oct 25, 2019 10:48 am
dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
I believe I’m the only one putting my entire portfolio into this.
And the only one using margin loans to get extra leverage, yowzers! Bold...? crazy...? Time will tell!
dspencer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by dspencer »

MotoTrojan wrote: Fri Oct 25, 2019 12:21 pm
dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
To be clear I was saying I will not be disappointed if I am wrong about the level of outperformance (17% CAGR vs. 10% CAGR, as my variant did from 1982-2018). I will be bummed if it underperforms but I'll survive. It is currently 28% of my total portfolio but it is less than 1 years worth of contributions so that will decline fairly quickly, especially if I limit/halt contributions.

I think your 40/30/30 portfolio sounds good and is closer to risk parity than my 43/57 UPRO/EDV. I wish us both luck!
Gotcha. Understanding the anecdotal nature, today is a good example of why I have changed my allocation. UPRO is up 1.42%, TMF is down 1.42%, EDV is down .54%. At 40/60 that's a solidly down day in a portfolio that is supposed to be bullish on domestic stocks. Shifting some to EDV feels like a good way to be a little more bullish, but also reduce the leverage and expense ratio a bit.

I've considered doing solely UPRO/EDV like you are, but would probably be looking at a 30/70 split.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by dspencer »

privatefarmer wrote: Fri Oct 25, 2019 10:48 am
dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
I believe I’m the only one putting my entire portfolio into this.
You're the only one I can think of that's confirmed that. Lots of people have asked about doing this in taxable which makes me wonder if they want to put in a lot more than they can fit in their retirement space. There are other reasons they could be asking though.
Kbg
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Kbg »

privatefarmer wrote: Fri Oct 25, 2019 10:48 am
dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
I believe I’m the only one putting my entire portfolio into this.
Please don’t, doing so is a horrendously bad idea. The fact that it is a horrendously bad idea is entirely within the data set to be seen and absorbed by anyone. PLEASE just look at the 1955-1981 data and be honest with yourself.

I don’t know your personal details but unless you are A) young and B) aren’t planning on adding anything to your existing holdings then this portfolio with your entire savings is a really, really bad idea.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

Kbg wrote: Fri Oct 25, 2019 2:52 pm
privatefarmer wrote: Fri Oct 25, 2019 10:48 am
dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
I believe I’m the only one putting my entire portfolio into this.
Please don’t, doing so is a horrendously bad idea. The fact that it is a horrendously bad idea is entirely within the data set to be seen and absorbed by anyone. PLEASE just look at the 1955-1981 data and be honest with yourself.

I don’t know your personal details but unless you are A) young and B) aren’t planning on adding anything to your existing holdings then this portfolio with your entire savings is a really, really bad idea.
In his defense (playing devil's advocate), he'd only be underperforming. His margin loans OTOH... I've got nothing.
MotoTrojan
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MotoTrojan »

Kbg wrote: Fri Oct 25, 2019 2:52 pm
privatefarmer wrote: Fri Oct 25, 2019 10:48 am
dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
I believe I’m the only one putting my entire portfolio into this.
Please don’t, doing so is a horrendously bad idea. The fact that it is a horrendously bad idea is entirely within the data set to be seen and absorbed by anyone. PLEASE just look at the 1955-1981 data and be honest with yourself.

I don’t know your personal details but unless you are A) young and B) aren’t planning on adding anything to your existing holdings then this portfolio with your entire savings is a really, really bad idea.
He’s posted more info but there’s a wife and kid involved. His home is his inflation hedge. Was previously 100% small value before moving to using margin to target 3.5x exposure to S&P500/LTT risk-parity. I’m not sure what I can say I think about it without getting in trouble, so I’ll just say it’s bold.
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privatefarmer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

Might be crazy. I also incorporate gold using UGLD. I’m doing the 20-day risk parity look back with UGLD/TMF/UPRO, rebalanced monthly. I then use my margin account at IB to increase the leverage appropriately when the portfolio drops (as it has since early September), so that I’m not “selling off” during drawdowns, to hopefully combat the volatility drag of LETFs. Since 2005 (inception of first gold fund I can find) this strategy would’ve earned about 20% CAGR with about a 45% DD, basically same as OP
effigy98
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by effigy98 »

I was using UGLD, decided to use non leveraged GLDM instead as I do not like using an ETN.
rascott
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by rascott »

dspencer wrote: Fri Oct 25, 2019 1:04 pm
MotoTrojan wrote: Fri Oct 25, 2019 12:21 pm
dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
To be clear I was saying I will not be disappointed if I am wrong about the level of outperformance (17% CAGR vs. 10% CAGR, as my variant did from 1982-2018). I will be bummed if it underperforms but I'll survive. It is currently 28% of my total portfolio but it is less than 1 years worth of contributions so that will decline fairly quickly, especially if I limit/halt contributions.

I think your 40/30/30 portfolio sounds good and is closer to risk parity than my 43/57 UPRO/EDV. I wish us both luck!
Gotcha. Understanding the anecdotal nature, today is a good example of why I have changed my allocation. UPRO is up 1.42%, TMF is down 1.42%, EDV is down .54%. At 40/60 that's a solidly down day in a portfolio that is supposed to be bullish on domestic stocks. Shifting some to EDV feels like a good way to be a little more bullish, but also reduce the leverage and expense ratio a bit.

I've considered doing solely UPRO/EDV like you are, but would probably be looking at a 30/70 split.

Just depends upon your risk tolerance.... I'm looking for something that is higher risk than 100% equities for a side play.

That's far away from risk parity.... but our yield curve issue is such right now, that expected real rates of returns of even long term bonds are near zero. So duration is only the insurance product.... not really a source of expected return. How much insurance one needs/ wants is up to them.

So I have a futures based account with something similar to this strategy. And the I have a market timing account holding TQQQ.
Last edited by rascott on Fri Oct 25, 2019 5:28 pm, edited 1 time in total.
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HEDGEFUNDIE
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by HEDGEFUNDIE »

Kbg wrote: Fri Oct 25, 2019 2:52 pm
privatefarmer wrote: Fri Oct 25, 2019 10:48 am
dspencer wrote: Fri Oct 25, 2019 10:37 am
MotoTrojan wrote: Thu Oct 24, 2019 1:56 pm I still have money invested in my less aggressive variant though, but have more modest goal of 1-3% outperformance over the next 20 years. I will not be disappointed if I am wrong.
You won't be disappointed? I will be disappointed. However, I won't be financially ruined even if it vastly under performs which is key. I think it bears repeating there's a big difference between putting a small wager on a risky bet and putting your entire portfolio into a highly leveraged strategy as some people seem to be doing.

For the record I am at 40 UPRO/30 TMF/30 EDV as of this week. I'm excited to make my backdoor Roth contribution in January.
I believe I’m the only one putting my entire portfolio into this.
Please don’t, doing so is a horrendously bad idea. The fact that it is a horrendously bad idea is entirely within the data set to be seen and absorbed by anyone. PLEASE just look at the 1955-1981 data and be honest with yourself.

I don’t know your personal details but unless you are A) young and B) aren’t planning on adding anything to your existing holdings then this portfolio with your entire savings is a really, really bad idea.
+1
rascott
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by rascott »

privatefarmer wrote: Fri Oct 25, 2019 4:21 pm Might be crazy. I also incorporate gold using UGLD. I’m doing the 20-day risk parity look back with UGLD/TMF/UPRO, rebalanced monthly. I then use my margin account at IB to increase the leverage appropriately when the portfolio drops (as it has since early September), so that I’m not “selling off” during drawdowns, to hopefully combat the volatility drag of LETFs. Since 2005 (inception of first gold fund I can find) this strategy would’ve earned about 20% CAGR with about a 45% DD, basically same as OP

I don't think the strategy is crazy. Having all eggs in the basket might well be..... as it could blow up in a very bad way. More than likely it will not.... but tail risk is something to be aware of. I respect people that take calculated high risk plays... most don't have the stomach for it.
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privatefarmer
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

rascott wrote: Fri Oct 25, 2019 5:26 pm
privatefarmer wrote: Fri Oct 25, 2019 4:21 pm Might be crazy. I also incorporate gold using UGLD. I’m doing the 20-day risk parity look back with UGLD/TMF/UPRO, rebalanced monthly. I then use my margin account at IB to increase the leverage appropriately when the portfolio drops (as it has since early September), so that I’m not “selling off” during drawdowns, to hopefully combat the volatility drag of LETFs. Since 2005 (inception of first gold fund I can find) this strategy would’ve earned about 20% CAGR with about a 45% DD, basically same as OP

I don't think the strategy is crazy. Having all eggs in the basket might well be..... as it could blow up in a very bad way. More than likely it will not.... but tail risk is something to be aware of. I respect people that take calculated high risk plays... most don't have the stomach for it.
Thanks. My house also is a substantial part of my NW and our income is pretty substantial relative to our NW, so hopefully will be able to withstand the volatility.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

I too am an early accumulator as my net worth is tied up in my business. But I'm waiting for the next large dip to go all in on leveraged.
rascott
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by rascott »

privatefarmer wrote: Fri Oct 25, 2019 5:42 pm
rascott wrote: Fri Oct 25, 2019 5:26 pm
privatefarmer wrote: Fri Oct 25, 2019 4:21 pm Might be crazy. I also incorporate gold using UGLD. I’m doing the 20-day risk parity look back with UGLD/TMF/UPRO, rebalanced monthly. I then use my margin account at IB to increase the leverage appropriately when the portfolio drops (as it has since early September), so that I’m not “selling off” during drawdowns, to hopefully combat the volatility drag of LETFs. Since 2005 (inception of first gold fund I can find) this strategy would’ve earned about 20% CAGR with about a 45% DD, basically same as OP

I don't think the strategy is crazy. Having all eggs in the basket might well be..... as it could blow up in a very bad way. More than likely it will not.... but tail risk is something to be aware of. I respect people that take calculated high risk plays... most don't have the stomach for it.
Thanks. My house also is a substantial part of my NW and our income is pretty substantial relative to our NW, so hopefully will be able to withstand the volatility.

If you are young and accumulating... with a good income. The relative risk is low.

Your issue will be how to reassess your overall portfolio 10-20 years from now
samsdad
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by samsdad »

effigy98 wrote: Fri Oct 25, 2019 4:58 pm I was using UGLD, decided to use non leveraged GLDM instead as I do not like using an ETN.
Curious as to why you chose that over the other two obvious alternatives, GLD and IAU? The performance between the three are virtually identical:
https://www.portfoliovisualizer.com/bac ... total3=100

Or, the other leveraged (albeit 2x) gold ETF, UGL?

As an aside, I strongly considered hedging a bit with gold in my version of the excellent adventure but decided to stay put at this time. If I think interest rates are going to steadily increase, I’ll probably switch some or all of my TMF allocation to IEF, though I will confess that smells strongly of market timing.
effigy98
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by effigy98 »

Expense ratio is much less on GLDM and now fidelity does free trades so going for the cheaper with the best spread is nice. There are even a couple cheaper ones (slightly).

I read many bad things about ETNs where it has a higher chance of going to zero, where UPRO and TMF are etfs and are safer. I also like not having leverage on the gold because it tends to stay at the same price for years and years before it moves so time decay over decades would be expensive potentially.
Kbg
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Kbg »

rascott wrote: Fri Oct 25, 2019 5:26 pm
privatefarmer wrote: Fri Oct 25, 2019 4:21 pm Might be crazy. I also incorporate gold using UGLD. I’m doing the 20-day risk parity look back with UGLD/TMF/UPRO, rebalanced monthly. I then use my margin account at IB to increase the leverage appropriately when the portfolio drops (as it has since early September), so that I’m not “selling off” during drawdowns, to hopefully combat the volatility drag of LETFs. Since 2005 (inception of first gold fund I can find) this strategy would’ve earned about 20% CAGR with about a 45% DD, basically same as OP

I don't think the strategy is crazy. Having all eggs in the basket might well be..... as it could blow up in a very bad way. More than likely it will not.... but tail risk is something to be aware of. I respect people that take calculated high risk plays... most don't have the stomach for it.
I don’t either, in fact I’ve been doing something very similar (however I’m more diversified) since 2014 and I am very satisfied with the results...but I’ll say it again, doing this strategy with your entire investable assets is not only a bad idea it is stupid (repeated three times in all caps). Even Hedgefundie agrees. If you have the OR of the thread and someone who has 5+ years experience executing a very similar strategy (and much research before that), both say “not a good idea” I hope that entices him to seriously reconsider what he’s doing. It not only could blow up in a very bad, it is highly likely that it will blow up in a bad way at some point in the future. All one needs is a rising interest rate environment when stocks and bonds will swap their current correlation sign and this strategy is toast.

I’ve learned a lot from this thread and it expanded my knowledge base for some execution level detail (thanks contributors!), but my one criticism of the whole thing is I don’t believe enough serious thought has been given to a rising rate environment and what works and what does not work in one. I have zero idea of what the future holds, but history does tell us how things behave under different circumstances. I personally prefer to go with a robust plan capable of dealing with many possible futures, vs banking on a very long continuation of the recent and not so recent past.

Caveat emptor.
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Steve Reading
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Steve Reading »

Kbg wrote: Fri Oct 25, 2019 10:11 pm but my one criticism of the whole thing is I don’t believe enough serious thought has been given to a rising rate environment and what works and what does not work in one.
I think people in this strategy should be hoping for rising rates. This would let them re-invest at higher yields. Yes, the account value would drop in the short term, but that doesn't matter to a long term investor. A long term (30 years+) investor should be begging for rates to shoot way up right now. Similarly, long term investors should be hoping for stock prices to go down right now (with earnings staying put of course) so we can reinvest dividends at depressed prices.

IMO, the worst thing that could happen for those following this strategy is for rates to keep dropping. Yeah, it'll look pretty awesome right away but that's short sighted. The fundamentals of the strategy long term will look worse.

But every time rates drop, people are extremely happy with their TMFs/EDVs. Rather perplexing to me. I can only assume most following this strategy have much shorter time horizons than my own.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by privatefarmer »

305pelusa wrote: Fri Oct 25, 2019 10:24 pm
Kbg wrote: Fri Oct 25, 2019 10:11 pm but my one criticism of the whole thing is I don’t believe enough serious thought has been given to a rising rate environment and what works and what does not work in one.
I think people in this strategy should be hoping for rising rates. This would let them re-invest at higher yields. Yes, the account value would drop in the short term, but that doesn't matter to a long term investor. A long term (30 years+) investor should be begging for rates to shoot way up right now. Similarly, long term investors should be hoping for stock prices to go down right now (with earnings staying put of course) so we can reinvest dividends at depressed prices.

IMO, the worst thing that could happen for those following this strategy is for rates to keep dropping. Yeah, it'll look pretty awesome right away but that's short sighted. The fundamentals of the strategy long term will look worse.

But every time rates drop, people are extremely happy with their TMFs/EDVs. Rather perplexing to me. I can only assume most following this strategy have much shorter time horizons than my own.
Bingo. And any aggressive strategy hoping for high return is expected to go through large drawdowns. I also hold gold so the 55-81 period wouldn’t have looked as bad. If I weren’t in this strategy I’d be 100% global small value equity, which had probably a 90% DD during the Great Depression.... very bad things can happen to most portfolios which is why we are aggressive while young/poor and conservative when older/wealthier. The strategy I’m invested in would’ve had a 45% DD during the GFC, I fully understand that it could be worse but it’s also very possible (actually probable) that I won’t see even a 45% DD over the next 20-30 years if I were to stick with this that long.

The entire idea of risk parity is to diversify across different risk premiums outside of just equity. The risk parity portfolio is expected to do “moderately” well in all environments. It of course has drawdowns but they are expected to be subdued relative to 100% equities. Thus, the opportunity for leverage presents itself. Leveraging a more “efficient” portfolio to a tolerable amount of risk is my strategy. Hopefully it doesn’t ruin me.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by get_g0ing »

One aspect I didn't see discussed (unless I missed it), that would be interesting (because we have in common the belief in BH philosophy):

Where does this strategy align with BH principles and where does it deviate?

I mean if the Three-Fund is the quintessential BH portfolio (i.e. checking the most principles), then this strategy is clearly different and far from that. But at the same time, it's NOT akin to single stock picking or wild speculation crude oil options. So it' far from that too.

So how close or far is it from the BH principles, where does it adhere and where does it not?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by viewer0 »

Has anyone thought of writing OTM weekly covered call options on these to improve the return a bit ? You need to buy the calls back or roll if it exceeds the strike price.

[Disclaimer : I did not read all the 95 pages ]
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

get_g0ing wrote: Sat Oct 26, 2019 8:45 am Where does this strategy align with BH principles and where does it deviate?
1 Develop a workable plan
Check

2 Invest early and often
Not strategy related

3 Never bear too much or too little risk
Possible. Most Bogleheads are in actuality very risk averse. The problem with this strategy is that it extremely risky and people don't truly understand their risk tolerance until something bad happens. So in this regard, it is hard to say anyone who follows this strategy is taking on too much risk.

4 Diversify
Only if you don't have all your eggs in this strategy.

5 Never try to time the market
Check

6 Use index funds when possible
Check

7 Keep costs low
They are as low as possible for a given level of investment given that we're using leveraged funds. BUT, they're still 30x the costs of other index funds.

8 Minimize taxes
Check

9 Invest with simplicity
Check

10 Stay the course
Not strategy related.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by AlphaLess »

rascott wrote: Fri Oct 18, 2019 7:55 am
AlphaLess wrote: Wed Oct 16, 2019 11:13 pm
rascott wrote: Fri Oct 11, 2019 7:41 am
caklim00 wrote: Thu Oct 10, 2019 10:28 pm Wouldn't 3x Ultra treasury bond future be equivalent to 1x TMF?

Yes...... no vol decay and no expense ratio.... of course the current exposure for one Ultra 30 is $195k... so you'd need a portfolio that is roughly $130k in size ($65k bonds 3x at 50/50 equities/bonds.) Not sure how many here have allocated that kind of size to this.

Then you have issues of keeping the allocation correct. In practice, I believe what one cares about is duration..... so you've got to figure out how much exactly you need and then do some combo of contracts to get the notional exposure/duration combo accurate. For a $100k portfolio = $50k bonds x 3 = $150k desired exposure at 18.5 duration (same as TLT).... roughly one regular 30 year (not Ultra) and one 10 year contract seems to meet the purpose, right now. You've have to recalculate this each qtr and see if what you have still works.
It also comes down to granularity.

If you have just enough of a capital / portfolio to use 1 Ultra 30 and 1 ES, then what are you going to do when you need a rebalance?

I would say that in order to be free to do rebalances, you should probably have 10 Ultra 30 and 10 ES, which would make your portfolio GMV:
- 10 Ultra 30: $1.8MM
- 10 ES: $1.5MM.
- GMV: $3.3MM
- at 3x leverage, then you have a $1.1M capital portfolio.

So with those numbers, you can rebalance in sufficient granularity (e.g., if you need to reduce your treasury exposure by 10%, that is 1 contract).

The other thing is the tax implication of futures, which is different than cash equities.

If you have a $1.1MM ROTH IRA, even better.
1) you don't have to use the Ultra 30 to get you duration exposure. You could use higher relative leverage on a lower duration instrument

2) you can use micro e-minis ($15k each) for the equity side

3) you can use ETFs to fill in the holes with any granular issue.

One just needs to decide if doing all of that is worth the 1% mgmt fee.
(1) unclear,

(2) Good point on micros. Though, micro e-minis don't nearly have the liquidity. But for $15K a contract, it will do.

Micro:
https://www.cmegroup.com/trading/equity ... tures.html
Globex Volume: 197K ($2.9B Notl)

Mini:
https://www.cmegroup.com/trading/equity ... e=20191025
Globex Volume: 1.1MM ($165B Notl),

Fortunately, the spread is the same.

(3) why would you use the ETFs to fill the holes? It's like buying a car to go work, but then taking Uber every day. Why not also rent one from Avis just in case. That way, you have your private car, a rental from Avis, and the option to Uber.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ChrisBenn »

viewer0 wrote: Sat Oct 26, 2019 9:19 am Has anyone thought of writing OTM weekly covered call options on these to improve the return a bit ? You need to buy the calls back or roll if it exceeds the strike price.
[Disclaimer : I did not read all the 95 pages ]
Here's CBOE's index for that strategy on the S&P 500
http://www.cboe.com/products/strategy-b ... -index-bxy
(2% OTM)

You can use their advanced charting option to compare to spx; you would have to import their data into PV as it looks like PV only has CBOE's ATM put write index.

(Should be representative unless part of your thesis is that this strategy on the securities here would be different than on spy)
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by viewer0 »

Thanks @ChrisBenn. Never knew the existence of such an index. Is it basically buying SPY ( or equivalent) + selling 2% OTM call option ?
How can I buy that BXY, for example ?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ChrisBenn »

Yeah, from a quick read of the paper it looks like it's selling rolled montly 2% OTM call options.

You wouldn't buy BXY directly, it's a synthetic index CBOE puts out (they run the options market, so have a vested interest in promoting options usage)

A quick google shows this as an etf that implements the methodology behind the index:
https://www.globalxetfs.com/funds/hspx/

PV has data for that (though only since it's inception, 2014)
https://www.portfoliovisualizer.com/bac ... 0&total3=0

So, while it has been a bull market since it's inception - it did pretty terribly; for that range something like 6% CAGR worse than buy and hold spy.

If you are interested in other options investing strategies, this guy has a pretty extensive set of backtests:
https://spintwig.com/

Spoiler though, buy and hold pretty much always wins.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by dspencer »

305pelusa wrote: Fri Oct 25, 2019 10:24 pm But every time rates drop, people are extremely happy with their TMFs/EDVs. Rather perplexing to me. I can only assume most following this strategy have much shorter time horizons than my own.
I understand your point, but people are happy when the value of their holdings go up. It shouldn't be perplexing.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by dspencer »

rascott wrote: Fri Oct 25, 2019 5:23 pm
Just depends upon your risk tolerance.... I'm looking for something that is higher risk than 100% equities for a side play.

That's far away from risk parity.... but our yield curve issue is such right now, that expected real rates of returns of even long term bonds are near zero. So duration is only the insurance product.... not really a source of expected return. How much insurance one needs/ wants is up to them.

So I have a futures based account with something similar to this strategy. And the I have a market timing account holding TQQQ.
What would you consider to be risk parity with solely UPRO and EDV?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by ruud »

dspencer wrote: Mon Oct 28, 2019 8:34 am What would you consider to be risk parity with solely UPRO and EDV?
According to Portfolio Visualizer it's about 1:2 UPRO:EDV. But that's based on data since 2009 (UPRO inception). Someone could probably do a longer analysis using simulated data.
.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by firebirdparts »

I've been amazed as I have followed UPRO and TMF at how little the total changes. It's very close to parity on how much you lose on one and gain on the other for the last several months.

Whatever that tells you. I guess one thing it tells you is that long term bonds allow interest rates to determine the success of the original strategy, which some clever folks already pointed out. That is the speculative piece that will either make you think you are a dummy or a genius.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

ruud wrote: Mon Oct 28, 2019 9:02 am
dspencer wrote: Mon Oct 28, 2019 8:34 am What would you consider to be risk parity with solely UPRO and EDV?
According to Portfolio Visualizer it's about 1:2 UPRO:EDV. But that's based on data since 2009 (UPRO inception). Someone could probably do a longer analysis using simulated data.
7:3 using simulated data and VEDTX (the mutual fund version of EDV)
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by dspencer »

Lee_WSP wrote: Mon Oct 28, 2019 9:48 am
ruud wrote: Mon Oct 28, 2019 9:02 am
dspencer wrote: Mon Oct 28, 2019 8:34 am What would you consider to be risk parity with solely UPRO and EDV?
According to Portfolio Visualizer it's about 1:2 UPRO:EDV. But that's based on data since 2009 (UPRO inception). Someone could probably do a longer analysis using simulated data.
7:3 using simulated data and VEDTX (the mutual fund version of EDV)
I assume you are saying 7:3 as in EDV:UPRO?
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Steve Reading »

dspencer wrote: Mon Oct 28, 2019 10:10 am
Lee_WSP wrote: Mon Oct 28, 2019 9:48 am
ruud wrote: Mon Oct 28, 2019 9:02 am
dspencer wrote: Mon Oct 28, 2019 8:34 am What would you consider to be risk parity with solely UPRO and EDV?
According to Portfolio Visualizer it's about 1:2 UPRO:EDV. But that's based on data since 2009 (UPRO inception). Someone could probably do a longer analysis using simulated data.
7:3 using simulated data and VEDTX (the mutual fund version of EDV)
I assume you are saying 7:3 as in EDV:UPRO?
I mentioned earlier that all risk party is, is mean variance optimization given the variances and assuming zero correlation and identical returns.

To the extent that we expect higher long term returns from stocks than EDV (not equal) then it is optimal to hold more stocks than bonds than whatever risk parity would tell you.

Something to think about
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 »

rascott wrote: Fri Oct 25, 2019 5:26 pm
privatefarmer wrote: Fri Oct 25, 2019 4:21 pm Might be crazy. I also incorporate gold using UGLD. I’m doing the 20-day risk parity look back with UGLD/TMF/UPRO, rebalanced monthly. I then use my margin account at IB to increase the leverage appropriately when the portfolio drops (as it has since early September), so that I’m not “selling off” during drawdowns, to hopefully combat the volatility drag of LETFs. Since 2005 (inception of first gold fund I can find) this strategy would’ve earned about 20% CAGR with about a 45% DD, basically same as OP

I don't think the strategy is crazy. Having all eggs in the basket might well be..... as it could blow up in a very bad way. More than likely it will not.... but tail risk is something to be aware of. I respect people that take calculated high risk plays... most don't have the stomach for it.
I agree. It doesn't seem much riskier than putting 100% of one's portfolio into one nation's stocks, which many here have done. U.S. stocks dropped in value about 89% during the Great Depression. I have a hard time visualizing this strategy doing even worse than that, though it is, of course, possible.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MotoTrojan »

305pelusa wrote: Mon Oct 28, 2019 10:17 am
dspencer wrote: Mon Oct 28, 2019 10:10 am
Lee_WSP wrote: Mon Oct 28, 2019 9:48 am
ruud wrote: Mon Oct 28, 2019 9:02 am
dspencer wrote: Mon Oct 28, 2019 8:34 am What would you consider to be risk parity with solely UPRO and EDV?
According to Portfolio Visualizer it's about 1:2 UPRO:EDV. But that's based on data since 2009 (UPRO inception). Someone could probably do a longer analysis using simulated data.
7:3 using simulated data and VEDTX (the mutual fund version of EDV)
I assume you are saying 7:3 as in EDV:UPRO?
I mentioned earlier that all risk party is, is mean variance optimization given the variances and assuming zero correlation and identical returns.

To the extent that we expect higher long term returns from stocks than EDV (not equal) then it is optimal to hold more stocks than bonds than whatever risk parity would tell you.

Something to think about
Thought about previously, and acted on :).
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Lee_WSP »

dspencer wrote: Mon Oct 28, 2019 10:10 am
Lee_WSP wrote: Mon Oct 28, 2019 9:48 am
ruud wrote: Mon Oct 28, 2019 9:02 am
dspencer wrote: Mon Oct 28, 2019 8:34 am What would you consider to be risk parity with solely UPRO and EDV?
According to Portfolio Visualizer it's about 1:2 UPRO:EDV. But that's based on data since 2009 (UPRO inception). Someone could probably do a longer analysis using simulated data.
7:3 using simulated data and VEDTX (the mutual fund version of EDV)
I assume you are saying 7:3 as in EDV:UPRO?
That's what the tool says.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by locallyoptimal »

Hi investors,

Novice/lurker here, first time poster.
Thank you HedgeFundie and predecessors for this excellent, simple-to-understand heuristic. Great board here with excellent contributors.

I've been experimenting with HF's original strategy since late July, initially purchased UPRO at ~56 and added more on the way down, for an average price of ~52. Similarly with TMF, my current avg. price is 26.9. At present, my UPRO/TMF ratio is at ~55/45, net gain is ~9%
TMF was up substantially earlier of course, and I sold some at 32.5. If I'd rebalanced more aggressively into UPRO with TMF@~33, I could've done better, but I wasn't paying sufficient attention to market movement.

Clearly I need to automate this to rebalance either at certain ratio triggers, or strictly time based. I'm with TDAMeritrade using their TOS client.
1. I will admit I've only skimmed through this massive thread; is Motif the broker of choice for this strategy?
2. Is there consensus on the optimal ratio for the next few months?
TMF is presumably reverting to the mean, and UPRO is spiking higher, are folks tilting towards TMF, capturing UPRO gains? Or perhaps there's some anticipation of a Santa Claus rally/volatility reduction, and a further drop in TMF?
It's "timing the market" I know, but I'd be very interested in current views. Thanks for reading!
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by MotoTrojan »

locallyoptimal wrote: Mon Oct 28, 2019 3:09 pm Hi investors,

Novice/lurker here, first time poster.
Thank you HedgeFundie and predecessors for this excellent, simple-to-understand heuristic. Great board here with excellent contributors.

I've been experimenting with HF's original strategy since late July, initially purchased UPRO at ~56 and added more on the way down, for an average price of ~52. Similarly with TMF, my current avg. price is 26.9. At present, my UPRO/TMF ratio is at ~55/45, net gain is ~9%
TMF was up substantially earlier of course, and I sold some at 32.5. If I'd rebalanced more aggressively into UPRO with TMF@~33, I could've done better, but I wasn't paying sufficient attention to market movement.

Clearly I need to automate this to rebalance either at certain ratio triggers, or strictly time based. I'm with TDAMeritrade using their TOS client.
1. I will admit I've only skimmed through this massive thread; is Motif the broker of choice for this strategy?
2. Is there consensus on the optimal ratio for the next few months?
TMF is presumably reverting to the mean, and UPRO is spiking higher, are folks tilting towards TMF, capturing UPRO gains? Or perhaps there's some anticipation of a Santa Claus rally/volatility reduction, and a further drop in TMF?
It's "timing the market" I know, but I'd be very interested in current views. Thanks for reading!
Daily rebalance has the best performance if you ignore trading costs (which can't really big ignored). Beyond that it didn't make much difference monthly, quarterly, or annually. I went with quarterly myself. Monthly is a bit too fast for me and increases the drawdown by catching a falling knife.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by drock »

locallyoptimal wrote: Mon Oct 28, 2019 3:09 pm Hi investors,

Novice/lurker here, first time poster.
Thank you HedgeFundie and predecessors for this excellent, simple-to-understand heuristic. Great board here with excellent contributors.

I've been experimenting with HF's original strategy since late July, initially purchased UPRO at ~56 and added more on the way down, for an average price of ~52. Similarly with TMF, my current avg. price is 26.9. At present, my UPRO/TMF ratio is at ~55/45, net gain is ~9%
TMF was up substantially earlier of course, and I sold some at 32.5. If I'd rebalanced more aggressively into UPRO with TMF@~33, I could've done better, but I wasn't paying sufficient attention to market movement.

Clearly I need to automate this to rebalance either at certain ratio triggers, or strictly time based. I'm with TDAMeritrade using their TOS client.
1. I will admit I've only skimmed through this massive thread; is Motif the broker of choice for this strategy?
2. Is there consensus on the optimal ratio for the next few months?
TMF is presumably reverting to the mean, and UPRO is spiking higher, are folks tilting towards TMF, capturing UPRO gains? Or perhaps there's some anticipation of a Santa Claus rally/volatility reduction, and a further drop in TMF?
It's "timing the market" I know, but I'd be very interested in current views. Thanks for reading!
I think you're likely to get a range of answers to both of your questions. I don't think there is one "right" brokerage to do this with. Especially now that many have gone to $0 trading fees. In the recent past a lot of folks had been using M1 or folioinvesting or similar places that allowed for periodic rebalancing with no fee and with the click of a few buttons. The fee aspect as I mentioned is no longer much of a thing so the best broker for each individual depends on too many factors to list.

On the market timing aspect I believe OP is still only doing quarterly rebalancing to 55% upro and 45% tmf with no market timing involved. Other folks have branched out into using various other systems using vol targeting, trend following (momentum) or other variable approaches. This again becomes a personal preference. I personally believe that if you are going to run an alternative to the plane jane periodic rebalancing it should be because you have a system whose data you understand and believe in that you think will perform better and you have the skills and psychology to be able to stick to the system.

The quarterly rebalanced system with no market timing has pretty robust back test data to evaluate its performance on thanks to a lot of the highly knowledgeable and skilled folks on the threads that have run that data. It is also a very easy system mechanically to employ. Thus for novice traders, one might suggest that if you are going to try this experiment out, it could be better to keep it simple at least in the beginning.

Just my $.02 on it.
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by locallyoptimal »

drock wrote: Mon Oct 28, 2019 5:06 pm I don't think there is one "right" brokerage to do this with. Especially now that many have gone to $0 trading fees. In the recent past a lot of folks had been using M1 or folioinvesting or similar places that allowed for periodic rebalancing with no fee and with the click of a few buttons. The fee aspect as I mentioned is no longer much of a thing so the best broker for each individual depends on too many factors to list.
Thanks, that's a reasonable take.
I had wondered if people had automated this strategy using any of the approaches you mentioned, and which platform was conducive to such scripting or automation. For example, if someone invented a system which rebalances automatically to 55/45 if UPRO/TMF achieves 60/40, or other programmable thresholds. As you say, with $0 commissions the downside is presumably just tracking/verifying the transactions for taxes.
On the market timing aspect I believe OP is still only doing quarterly rebalancing to 55% upro and 45% tmf with no market timing involved.
Do you know if the various backtests show sensitivity to initial conditions at the point of entry, and when exactly the "quarter" boundaries might be? I can see say Jan/Apr/Jul/Oct. differing from some random start date + n*3 months, given that the market is known to be somewhat seasonal. Probably a second-order effect I'd guess.

Thank you for your insights!
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