HEDGEFUNDIE's excellent adventure Part II: The next journey

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

Post by pepys » Fri Feb 07, 2020 4:35 pm

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Last edited by pepys on Tue Feb 25, 2020 12:32 am, edited 1 time in total.

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

Post by goosfrabba » Fri Feb 07, 2020 4:46 pm

dave_k wrote:
Fri Feb 07, 2020 4:18 pm
I'm splitting it between a traditional IRA and a Roth IRA at Fidelity. I got some free trades for contributions, but they have since gone to free trades for all US ETFs and stocks I believe. I wouldn't do it in a taxable brokerage account because of tax drag and gains generated by rebalancing. Roth is ideal for this.
So do you just contribute evenly to the two and the tax stuff will work out later when it has to? I came into a fair amount of money at some point and have invested in a standard brokerage account for several years. I don't make enough money currently to contribute to a 401k and a Roth IRA so I chose the 401k because of company matching. I can certainly move money from my brokerage to Fidelity for this purpose and just contribute to both at the time, just trying to make note of what needs to be done

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

Post by Lee_WSP » Fri Feb 07, 2020 4:56 pm

goosfrabba wrote:
Fri Feb 07, 2020 4:46 pm
dave_k wrote:
Fri Feb 07, 2020 4:18 pm
I'm splitting it between a traditional IRA and a Roth IRA at Fidelity. I got some free trades for contributions, but they have since gone to free trades for all US ETFs and stocks I believe. I wouldn't do it in a taxable brokerage account because of tax drag and gains generated by rebalancing. Roth is ideal for this.
So do you just contribute evenly to the two and the tax stuff will work out later when it has to? I came into a fair amount of money at some point and have invested in a standard brokerage account for several years. I don't make enough money currently to contribute to a 401k and a Roth IRA so I chose the 401k because of company matching. I can certainly move money from my brokerage to Fidelity for this purpose and just contribute to both at the time, just trying to make note of what needs to be done
Just an FYI, but you can sell assets in taxable so you can fund the Roth. It may be worth it. In fact, it's probably worth it.

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

Post by dave_k » Fri Feb 07, 2020 4:59 pm

goosfrabba wrote:
Fri Feb 07, 2020 4:46 pm
dave_k wrote:
Fri Feb 07, 2020 4:18 pm
I'm splitting it between a traditional IRA and a Roth IRA at Fidelity. I got some free trades for contributions, but they have since gone to free trades for all US ETFs and stocks I believe. I wouldn't do it in a taxable brokerage account because of tax drag and gains generated by rebalancing. Roth is ideal for this.
So do you just contribute evenly to the two and the tax stuff will work out later when it has to? ...
Basically, yes. I manage the two evenly to keep it simple (one initial contribution for me, then quarterly rebalancing). Both will grow tax free the same way, but the traditional will require taxes to be paid when withdrawing. I'll worry about that down the road when I need to withdraw. The main reason it's not all in the Roth is because there wasn't as much in there as I wanted to do this with (about 5% of investible assets).

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

Post by goosfrabba » Fri Feb 07, 2020 5:08 pm

Lee_WSP wrote:
Fri Feb 07, 2020 4:56 pm
goosfrabba wrote:
Fri Feb 07, 2020 4:46 pm
dave_k wrote:
Fri Feb 07, 2020 4:18 pm
I'm splitting it between a traditional IRA and a Roth IRA at Fidelity. I got some free trades for contributions, but they have since gone to free trades for all US ETFs and stocks I believe. I wouldn't do it in a taxable brokerage account because of tax drag and gains generated by rebalancing. Roth is ideal for this.
So do you just contribute evenly to the two and the tax stuff will work out later when it has to? I came into a fair amount of money at some point and have invested in a standard brokerage account for several years. I don't make enough money currently to contribute to a 401k and a Roth IRA so I chose the 401k because of company matching. I can certainly move money from my brokerage to Fidelity for this purpose and just contribute to both at the time, just trying to make note of what needs to be done
Just an FYI, but you can sell assets in taxable so you can fund the Roth. It may be worth it. In fact, it's probably worth it.
I have the 6k cash on hand to max out the Roth for the year. It seems like using a standard brokerage just offers too much downside with balancing at least, so I am looking at 6k into the Roth and then an unknown amount into a traditional IRA for the rest. Rinse and repeat yearly.

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

Post by uberaeth » Fri Feb 07, 2020 7:10 pm

goosfrabba wrote:
Fri Feb 07, 2020 4:08 pm
I have been lurking for a while and read through several hundred of the responses without finding an answer to two questions:

A tax exempt account is obviously ideal for this strategy because of rebalancing, but there is a yearly contribution limit to a Roth IRA of $6k. For those of you investing more than that, are you just running in a standard brokerage account?

The second and simpler question is that I invest through Wells Fargo because my checking and savings are there and they offered 100 free trades a year when most places were still pay to trade. None of their investment accounts allow purchase of TMF. Where are you all trading?
A lot of people on here are using M1 Finance, at least I am. It allows you to set your desired allocation and then just press one button to rebalance. The downside is that trades only happen once a day, but since I'm only rebalancing quarterly or monthly, it's not a big deal to me.

thwang99
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by thwang99 » Sat Feb 08, 2020 9:21 pm

Hi all, not sure if this has been asked before, but when doing the 3 month rebalancing, I found rebalancing on start of Jan, April, July, Oct is the best.

If I rebalance start of Fed, May, etc, or March, April, etc... results in a backtest since the start of UPRO are significantly worse on both cases. Does anyone know why this is? - Tony

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

Post by Lee_WSP » Sat Feb 08, 2020 10:17 pm

thwang99 wrote:
Sat Feb 08, 2020 9:21 pm
Hi all, not sure if this has been asked before, but when doing the 3 month rebalancing, I found rebalancing on start of Jan, April, July, Oct is the best.

If I rebalance start of Fed, May, etc, or March, April, etc... results in a backtest since the start of UPRO are significantly worse on both cases. Does anyone know why this is? - Tony
Sequence of returns risk.

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

Post by Hydromod » Sat Feb 08, 2020 10:26 pm

Middle of the month is even worse...

thwang99
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by thwang99 » Sat Feb 08, 2020 10:50 pm

Hydromod wrote:
Sat Feb 08, 2020 10:26 pm
Middle of the month is even worse...
Thanks Lee_WSP, Hydromod. Yes I just tried middle of month and it was bad too. I guess start of quarter that is generally agreed upon is best, though from my intuition it would seem some days may be better some worse in a backtest just due to randomness.

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

Post by am » Sat Feb 08, 2020 11:37 pm

Just an aside but what would kill this strategy? Rising interest rates and dropping stocks, maybe rising inflation, loss of treasuries as safe haven, both treasuries and stocks going down over prolonged period, did I miss any?

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

Post by Lee_WSP » Sun Feb 09, 2020 12:31 am

am wrote:
Sat Feb 08, 2020 11:37 pm
Just an aside but what would kill this strategy? Rising interest rates and dropping stocks, maybe rising inflation, loss of treasuries as safe haven, both treasuries and stocks going down over prolonged period, did I miss any?
Rising rates is the most likely.

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

Post by firebirdparts » Sun Feb 09, 2020 12:38 am

That's right. When interest rates rise, initially, stocks and bonds will both drop.
A fool and your money are soon partners

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

Post by privatefarmer » Sun Feb 09, 2020 12:58 am

Which is why a true risk parity portfolio would include gold or commodities.

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

Post by Hydromod » Sun Feb 09, 2020 1:03 am

thwang99 wrote:
Sat Feb 08, 2020 10:50 pm
Hydromod wrote:
Sat Feb 08, 2020 10:26 pm
Middle of the month is even worse...
Thanks Lee_WSP, Hydromod. Yes I just tried middle of month and it was bad too. I guess start of quarter that is generally agreed upon is best, though from my intuition it would seem some days may be better some worse in a backtest just due to randomness.
I’ve seen that some parts of months tend to be systematically better for bonds and other parts for equities. It appears that the turn of the month has tended to work well for rebalancing as a result. There may have been a quarter thing going on too, with dividends or some such. Who knows if it will continue, but I think it can’t hurt to assume it will just in case.

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

Post by ginrummy » Sun Feb 09, 2020 2:25 am

privatefarmer wrote:
Sun Feb 09, 2020 12:58 am
Which is why a true risk parity portfolio would include gold or commodities.
I haven’t been following the discussion but I’m back into this trade and have subbed out SPY and TLT in Dalio’s all weather.

I don’t know if I’d be willing to go 3x on gold and commodities but nice to have the leverage on the higher allocations.

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

Post by am » Sun Feb 09, 2020 8:49 am

privatefarmer wrote:
Sun Feb 09, 2020 12:58 am
Which is why a true risk parity portfolio would include gold or commodities.
Do you think having 3x gold in this adventure on top of upro and tmf would help with rising rates? It seems like rates will never go up but before you know it will happen, perhaps inflation will shoot up out of nowhere?

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

Post by jeffreyalan » Sun Feb 09, 2020 9:34 am

willthrill81 wrote:
Fri Jan 24, 2020 11:03 am
ThereAreNoGurus wrote:
Fri Jan 24, 2020 12:26 am
willthrill81 wrote:
Thu Jan 23, 2020 9:23 pm
Here's the link to the model in PV: https://www.portfoliovisualizer.com/tes ... tion2_1=20
Sorry, haven't read the entire thread, but...

It sounds like you have real money in this. What percent of your portfolio is it?

So are you using PV to trigger your next trading move, rather than calculating it yourself? And then you execute orders the next day?
Right now, only 6% of my portfolio is in this.

Yes, I use PV to determine what the next month's allocation should be and then execute it in M1 Finance.
So i ran it today and it gave me data for Feb 7th which was about 76.58% UPRO. I am still in the accumulation stages of life so I am adding funds to M1 several times per month. Would it therefore be better to run the visualizer each time that i make a purchase in order to take advantage of the most recent movements or would that be too much tinkering or listening to short term noise?

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

Post by privatefarmer » Sun Feb 09, 2020 9:47 am

am wrote:
Sun Feb 09, 2020 8:49 am
privatefarmer wrote:
Sun Feb 09, 2020 12:58 am
Which is why a true risk parity portfolio would include gold or commodities.
Do you think having 3x gold in this adventure on top of upro and tmf would help with rising rates? It seems like rates will never go up but before you know it will happen, perhaps inflation will shoot up out of nowhere?
It’s what I’m doing. Despite the volatility, the overall portfolio has tracked pretty well with what you’d expect a 3x risk parity portfolio would do. In the long run, gold is most likely a drag on performance but offers some insurance against stagflation.

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

Post by Lee_WSP » Sun Feb 09, 2020 10:01 am

am wrote:
Sun Feb 09, 2020 8:49 am
privatefarmer wrote:
Sun Feb 09, 2020 12:58 am
Which is why a true risk parity portfolio would include gold or commodities.
Do you think having 3x gold in this adventure on top of upro and tmf would help with rising rates? It seems like rates will never go up but before you know it will happen, perhaps inflation will shoot up out of nowhere?
Unless you have a better alternative that doesn't correlate nearly 1:1 with the stock market, 2x gold is the best bet I know of.

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willthrill81
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 » Sun Feb 09, 2020 10:49 am

jeffreyalan wrote:
Sun Feb 09, 2020 9:34 am
willthrill81 wrote:
Fri Jan 24, 2020 11:03 am
ThereAreNoGurus wrote:
Fri Jan 24, 2020 12:26 am
willthrill81 wrote:
Thu Jan 23, 2020 9:23 pm
Here's the link to the model in PV: https://www.portfoliovisualizer.com/tes ... tion2_1=20
Sorry, haven't read the entire thread, but...

It sounds like you have real money in this. What percent of your portfolio is it?

So are you using PV to trigger your next trading move, rather than calculating it yourself? And then you execute orders the next day?
Right now, only 6% of my portfolio is in this.

Yes, I use PV to determine what the next month's allocation should be and then execute it in M1 Finance.
So i ran it today and it gave me data for Feb 7th which was about 76.58% UPRO. I am still in the accumulation stages of life so I am adding funds to M1 several times per month. Would it therefore be better to run the visualizer each time that i make a purchase in order to take advantage of the most recent movements or would that be too much tinkering or listening to short term noise?
Too much tinkering. Rebalancing once per month is fine.
“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

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

Post by sfmurph » Sun Feb 09, 2020 1:32 pm

Is anyone using Interactive Brokers for this? It seems that at least UPRO is "hard-to-borrow" and IBKR has a Stock Yield Enhancement Program that pays out half of the interest gained from lending out shares. Seeing as this is a buy-and-hold strategy, I wonder what that is paying.

mroe800
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by mroe800 » Sun Feb 09, 2020 1:45 pm

willthrill81 wrote:
Sun Feb 09, 2020 10:49 am
jeffreyalan wrote:
Sun Feb 09, 2020 9:34 am
So i ran it today and it gave me data for Feb 7th which was about 76.58% UPRO. I am still in the accumulation stages of life so I am adding funds to M1 several times per month. Would it therefore be better to run the visualizer each time that i make a purchase in order to take advantage of the most recent movements or would that be too much tinkering or listening to short term noise?
Too much tinkering. Rebalancing once per month is fine.
I pondered this myself. If adding new money do you use the opportunity to add new money towards a position out of balance or just go with the signal you had at the end of the previous month?

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willthrill81
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 » Sun Feb 09, 2020 2:28 pm

mroe800 wrote:
Sun Feb 09, 2020 1:45 pm
willthrill81 wrote:
Sun Feb 09, 2020 10:49 am
jeffreyalan wrote:
Sun Feb 09, 2020 9:34 am
So i ran it today and it gave me data for Feb 7th which was about 76.58% UPRO. I am still in the accumulation stages of life so I am adding funds to M1 several times per month. Would it therefore be better to run the visualizer each time that i make a purchase in order to take advantage of the most recent movements or would that be too much tinkering or listening to short term noise?
Too much tinkering. Rebalancing once per month is fine.
I pondered this myself. If adding new money do you use the opportunity to add new money towards a position out of balance or just go with the signal you had at the end of the previous month?
I would just go with the most recent signal's AA.
“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

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

Post by Hydromod » Sun Feb 09, 2020 3:02 pm

willthrill81 wrote:
Sun Feb 09, 2020 2:28 pm
mroe800 wrote:
Sun Feb 09, 2020 1:45 pm
willthrill81 wrote:
Sun Feb 09, 2020 10:49 am
jeffreyalan wrote:
Sun Feb 09, 2020 9:34 am
So i ran it today and it gave me data for Feb 7th which was about 76.58% UPRO. I am still in the accumulation stages of life so I am adding funds to M1 several times per month. Would it therefore be better to run the visualizer each time that i make a purchase in order to take advantage of the most recent movements or would that be too much tinkering or listening to short term noise?
Too much tinkering. Rebalancing once per month is fine.
I pondered this myself. If adding new money do you use the opportunity to add new money towards a position out of balance or just go with the signal you had at the end of the previous month?
I would just go with the most recent signal's AA.
Now you just confused me willthrill81. It looks like you are saying to use the most recent signal, which to me means using the data up to the present day. Just before you said to not rerun the visualizer. I presume you meant to update the target allocation once a month.

I'd probably just update the asset allocation once a month and let M1 autobalance by applying new funds to the underweight fund. Maybe rebalance monthly when you update the asset allocation if the balance is far out of whack. But I don't think that it's necessarily time to rebalance unless the balance is more than 10 to 15 percent out, which should take longer than a month.

If one is manually transferring funds, you could redo the asset allocation each time, but again it shouldn't make too much difference. These things take a while to change, especially if you use a three-month lookback.

Personally I have a little Google Sheets spreadsheet that automatically downloads the recent fund history and calculates adaptively allocated weights whenever it is opened. So it takes less time to figure out the current weights than it does to update them in M1.

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willthrill81
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by willthrill81 » Sun Feb 09, 2020 3:27 pm

Hydromod wrote:
Sun Feb 09, 2020 3:02 pm
willthrill81 wrote:
Sun Feb 09, 2020 2:28 pm
mroe800 wrote:
Sun Feb 09, 2020 1:45 pm
willthrill81 wrote:
Sun Feb 09, 2020 10:49 am
jeffreyalan wrote:
Sun Feb 09, 2020 9:34 am
So i ran it today and it gave me data for Feb 7th which was about 76.58% UPRO. I am still in the accumulation stages of life so I am adding funds to M1 several times per month. Would it therefore be better to run the visualizer each time that i make a purchase in order to take advantage of the most recent movements or would that be too much tinkering or listening to short term noise?
Too much tinkering. Rebalancing once per month is fine.
I pondered this myself. If adding new money do you use the opportunity to add new money towards a position out of balance or just go with the signal you had at the end of the previous month?
I would just go with the most recent signal's AA.
Now you just confused me willthrill81. It looks like you are saying to use the most recent signal, which to me means using the data up to the present day. Just before you said to not rerun the visualizer. I presume you meant to update the target allocation once a month.
Yes, that's what I meant. I apologize for the confusion.
“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

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

Post by Maker » Sun Feb 09, 2020 6:11 pm

Hi,

first of all I want to thank you all for these two fantastic threads -- it has been a great read.

I'm only a novice, so please keep in mind the notes and questions below are from someone inexperienced.

One of the main drawbacks of this strategy, as an European, is geographic risk. While the S&P 500 has had a fantastic decade, I would feel much better about using leverage on a globally diversified index such as VT, as well as a global aggregate bond index instead of treasuries. I know some of you have been able to simulate this strategy on past data, can anyone point me towards resources helping me do the same with this more diversified strategy? I tried using portfolio visualizer, but it's limited to a Jan 2019 start as that is when Vanguard's Total World Bond ETF was initially offered. Any help would be appreciated.

I would also love to know if any European is currently using this strategy. When I last looked into it, the only harmonized 3x leveraged funds were WisdomTree's, which are ETNs. This makes the strategy unappealing to me, as I would incur further risk (in this case, counter-party risk) without any reward. If any European wants to chime in I would appreciate that as well.

Overall, as a young investor with an appetite for returns (and thus risks) I'm extremely interested in this strategy, especially with a focus on using DCA as I have many years both to stomach losses as well as to average them down. The geographic risk and counter-party risk currently make me prefer an unleveraged approach (I'm currently 100% SWRD, a MSCI World fund, but I'll soon add a share of MSCI EMIM), though if there were other accessible ways to obtain leverage in a similarly passive way I would love to hear them .

Ideas? Criticisms? Everything is appreciated.
Thanks!

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

Post by privatefarmer » Sun Feb 09, 2020 11:49 pm

sfmurph wrote:
Sun Feb 09, 2020 1:32 pm
Is anyone using Interactive Brokers for this? It seems that at least UPRO is "hard-to-borrow" and IBKR has a Stock Yield Enhancement Program that pays out half of the interest gained from lending out shares. Seeing as this is a buy-and-hold strategy, I wonder what that is paying.
Yeah ive been using IB for this. They seem to pay more in Roth accounts vs my brokerage account, they don’t lend as much in my brokerage account probably for tax reasons. I’ve averaged about 0.1%/year in extra income in my Roth accounts from their security lending program, better than nothing.

hilink73
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hilink73 » Mon Feb 10, 2020 2:34 pm

sfmurph wrote:
Sun Feb 09, 2020 1:32 pm
Is anyone using Interactive Brokers for this? It seems that at least UPRO is "hard-to-borrow" and IBKR has a Stock Yield Enhancement Program that pays out half of the interest gained from lending out shares. Seeing as this is a buy-and-hold strategy, I wonder what that is paying.
Yes, using IB.

Not sure, if I'm on this program, though.

hilink73
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by hilink73 » Mon Feb 10, 2020 2:38 pm

Maker wrote:
Sun Feb 09, 2020 6:11 pm
Hi,

first of all I want to thank you all for these two fantastic threads -- it has been a great read.

I'm only a novice, so please keep in mind the notes and questions below are from someone inexperienced.

One of the main drawbacks of this strategy, as an European, is geographic risk. While the S&P 500 has had a fantastic decade, I would feel much better about using leverage on a globally diversified index such as VT, as well as a global aggregate bond index instead of treasuries. I know some of you have been able to simulate this strategy on past data, can anyone point me towards resources helping me do the same with this more diversified strategy? I tried using portfolio visualizer, but it's limited to a Jan 2019 start as that is when Vanguard's Total World Bond ETF was initially offered. Any help would be appreciated.

I would also love to know if any European is currently using this strategy. When I last looked into it, the only harmonized 3x leveraged funds were WisdomTree's, which are ETNs. This makes the strategy unappealing to me, as I would incur further risk (in this case, counter-party risk) without any reward. If any European wants to chime in I would appreciate that as well.

Overall, as a young investor with an appetite for returns (and thus risks) I'm extremely interested in this strategy, especially with a focus on using DCA as I have many years both to stomach losses as well as to average them down. The geographic risk and counter-party risk currently make me prefer an unleveraged approach (I'm currently 100% SWRD, a MSCI World fund, but I'll soon add a share of MSCI EMIM), though if there were other accessible ways to obtain leverage in a similarly passive way I would love to hear them .

Ideas? Criticisms? Everything is appreciated.
Thanks!
Swiss here.

I'm in UPRO/TMF with target volatility.

Also, I do have a globally diversified ETF portfolio (LCB and SCV) with quite some emerging markets tilt.

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

Post by muzima » Mon Feb 10, 2020 4:45 pm

Maker wrote:
Sun Feb 09, 2020 6:11 pm
Hi,

first of all I want to thank you all for these two fantastic threads -- it has been a great read.

I'm only a novice, so please keep in mind the notes and questions below are from someone inexperienced.

One of the main drawbacks of this strategy, as an European, is geographic risk. While the S&P 500 has had a fantastic decade, I would feel much better about using leverage on a globally diversified index such as VT, as well as a global aggregate bond index instead of treasuries. I know some of you have been able to simulate this strategy on past data, can anyone point me towards resources helping me do the same with this more diversified strategy? I tried using portfolio visualizer, but it's limited to a Jan 2019 start as that is when Vanguard's Total World Bond ETF was initially offered. Any help would be appreciated.

I would also love to know if any European is currently using this strategy. When I last looked into it, the only harmonized 3x leveraged funds were WisdomTree's, which are ETNs. This makes the strategy unappealing to me, as I would incur further risk (in this case, counter-party risk) without any reward. If any European wants to chime in I would appreciate that as well.

Overall, as a young investor with an appetite for returns (and thus risks) I'm extremely interested in this strategy, especially with a focus on using DCA as I have many years both to stomach losses as well as to average them down. The geographic risk and counter-party risk currently make me prefer an unleveraged approach (I'm currently 100% SWRD, a MSCI World fund, but I'll soon add a share of MSCI EMIM), though if there were other accessible ways to obtain leverage in a similarly passive way I would love to hear them .

Ideas? Criticisms? Everything is appreciated.
Thanks!
European and very interested.
I am using the Amundi etf leveraged msci USA, which is 2x. So far so good. Having a hard time with bonds though. There is nothing like edv available. Or at least I could not find it.
Cannot utilize USA based funds due to regulations. Plus non ucits etf are hit with high taxes compared to UCITS

element2055
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by element2055 » Tue Feb 11, 2020 6:19 am

I have been following this strategy for the last 6 months and please to report that it's been going well. Thank you everyone who contributed to this thread. I have a question that I would like to clarify.
What is the downside to running a modified version with 20% TQQQ 35% UPRO and 45 % TMF? My understanding TQQQ with UPRO is not recommended because of its increased volatility? I believe that Big Tech will continue to add more value and grow faster as they venture to adjacent industries like health and banking,

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

Post by MotoTrojan » Tue Feb 11, 2020 7:58 am

element2055 wrote:
Tue Feb 11, 2020 6:19 am
I have been following this strategy for the last 6 months and please to report that it's been going well. Thank you everyone who contributed to this thread. I have a question that I would like to clarify.
What is the downside to running a modified version with 20% TQQQ 35% UPRO and 45 % TMF? My understanding TQQQ with UPRO is not recommended because of its increased volatility? I believe that Big Tech will continue to add more value and grow faster as they venture to adjacent industries like health and banking,
More volatility. Potentially less imperfectly correlated with treasuries (one could argue there’s good reason for bonds to do well when total market is in the dumps, but not so much if only a sector is).

Just hold more QQQ elsewhere if you think it’ll outperform. UPRO has plenty of horsepower.

User avatar
lock.that.stock
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lock.that.stock » Tue Feb 11, 2020 8:34 am

element2055 wrote:
Tue Feb 11, 2020 6:19 am
I have been following this strategy for the last 6 months and please to report that it's been going well. Thank you everyone who contributed to this thread. I have a question that I would like to clarify.
What is the downside to running a modified version with 20% TQQQ 35% UPRO and 45 % TMF? My understanding TQQQ with UPRO is not recommended because of its increased volatility? I believe that Big Tech will continue to add more value and grow faster as they venture to adjacent industries like health and banking,
Higher volatility with TQQQ. However based on the allocation you are suggesting the volatility may not be that much higher than 55/45 UPRO/TMF and can boost the returns. You really start to feel the volatility of TQQQ when your allocation goes over 50% IMO.

Ls2g09
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Ls2g09 » Tue Feb 11, 2020 9:16 am

Maker wrote:
Sun Feb 09, 2020 6:11 pm
Hi,

first of all I want to thank you all for these two fantastic threads -- it has been a great read.

I'm only a novice, so please keep in mind the notes and questions below are from someone inexperienced.

One of the main drawbacks of this strategy, as an European, is geographic risk. While the S&P 500 has had a fantastic decade, I would feel much better about using leverage on a globally diversified index such as VT, as well as a global aggregate bond index instead of treasuries. I know some of you have been able to simulate this strategy on past data, can anyone point me towards resources helping me do the same with this more diversified strategy? I tried using portfolio visualizer, but it's limited to a Jan 2019 start as that is when Vanguard's Total World Bond ETF was initially offered. Any help would be appreciated.

I would also love to know if any European is currently using this strategy. When I last looked into it, the only harmonized 3x leveraged funds were WisdomTree's, which are ETNs. This makes the strategy unappealing to me, as I would incur further risk (in this case, counter-party risk) without any reward. If any European wants to chime in I would appreciate that as well.

Overall, as a young investor with an appetite for returns (and thus risks) I'm extremely interested in this strategy, especially with a focus on using DCA as I have many years both to stomach losses as well as to average them down. The geographic risk and counter-party risk currently make me prefer an unleveraged approach (I'm currently 100% SWRD, a MSCI World fund, but I'll soon add a share of MSCI EMIM), though if there were other accessible ways to obtain leverage in a similarly passive way I would love to hear them .

Ideas? Criticisms? Everything is appreciated.
Thanks!
Hi I’m from the U.K., I’m attempting to replicate the strategy using spread betting. Unfortunately this does also carry counterparty risk, so maybe not what you are after.

I’m planning to run it for 6 months as a paper portfolio to iron out any issues. The geographic diversification is an interesting point and something I have been wondering about. I also thought about including bonds from nations who haven’t undergone QE, to mitigate some of the interest rate risk.

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

Post by Hydromod » Tue Feb 11, 2020 10:11 am

lock.that.stock wrote:
Tue Feb 11, 2020 8:34 am
element2055 wrote:
Tue Feb 11, 2020 6:19 am
I have been following this strategy for the last 6 months and please to report that it's been going well. Thank you everyone who contributed to this thread. I have a question that I would like to clarify.
What is the downside to running a modified version with 20% TQQQ 35% UPRO and 45 % TMF? My understanding TQQQ with UPRO is not recommended because of its increased volatility? I believe that Big Tech will continue to add more value and grow faster as they venture to adjacent industries like health and banking,
Higher volatility with TQQQ. However based on the allocation you are suggesting the volatility may not be that much higher than 55/45 UPRO/TMF and can boost the returns. You really start to feel the volatility of TQQQ when your allocation goes over 50% IMO.
I have a small account devoted to an adaptive allocation variant of the UPRO/TMF approach that I temporarily set mainly to TQQQ for the last few months to take tactical advantage of the current market climb. This is a tactical decision I justify because this is precisely the market condition when the daily 3x compounding effect really kicks in to turbocharge returns.

It's been exciting to watch volatility in action with this account. One daily drop nearly 5%, several daily rises nearing 4%, up 19% YTD compared to the total portfolio (including this component) up 3.5%. This volatility seems to be the normal with high TQQQ.

But I also check the account every day for signs that the boom is ending. The gains feel illusory. This approach with a high percentage of TQQQ is definitely not recommended for most folks and for most market conditions.

I'll back off to something more balanced when the market slows or becomes choppy, and am prepared to drastically pare down TQQQ or drop it entirely.

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lock.that.stock
Posts: 136
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by lock.that.stock » Tue Feb 11, 2020 10:45 am

Hydromod wrote:
Tue Feb 11, 2020 10:11 am
lock.that.stock wrote:
Tue Feb 11, 2020 8:34 am
element2055 wrote:
Tue Feb 11, 2020 6:19 am
I have been following this strategy for the last 6 months and please to report that it's been going well. Thank you everyone who contributed to this thread. I have a question that I would like to clarify.
What is the downside to running a modified version with 20% TQQQ 35% UPRO and 45 % TMF? My understanding TQQQ with UPRO is not recommended because of its increased volatility? I believe that Big Tech will continue to add more value and grow faster as they venture to adjacent industries like health and banking,
Higher volatility with TQQQ. However based on the allocation you are suggesting the volatility may not be that much higher than 55/45 UPRO/TMF and can boost the returns. You really start to feel the volatility of TQQQ when your allocation goes over 50% IMO.
I have a small account devoted to an adaptive allocation variant of the UPRO/TMF approach that I temporarily set mainly to TQQQ for the last few months to take tactical advantage of the current market climb. This is a tactical decision I justify because this is precisely the market condition when the daily 3x compounding effect really kicks in to turbocharge returns.

It's been exciting to watch volatility in action with this account. One daily drop nearly 5%, several daily rises nearing 4%, up 19% YTD compared to the total portfolio (including this component) up 3.5%. This volatility seems to be the normal with high TQQQ.

But I also check the account every day for signs that the boom is ending. The gains feel illusory. This approach with a high percentage of TQQQ is definitely not recommended for most folks and for most market conditions.

I'll back off to something more balanced when the market slows or becomes choppy, and am prepared to drastically pare down TQQQ or drop it entirely.
Ditto. I’m doing the same thing with a very small portion of my portfolio. Adaptive monthly allocation with target volatility of 40%. I watch it every day and I concur - it’s not for the faint of heart but definitely an interesting experiment to test the strategy that comes with risks. Up 13% YTD but it doesn’t move the needle for me since my allocation is so small. Just an interesting experiment that I may end if market stops climbing.

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

Post by MotoTrojan » Tue Feb 11, 2020 10:52 am

lock.that.stock wrote:
Tue Feb 11, 2020 10:45 am


Ditto. I’m doing the same thing with a very small portion of my portfolio. Adaptive monthly allocation with target volatility of 40%. I watch it every day and I concur - it’s not for the faint of heart but definitely an interesting experiment to test the strategy that comes with risks. Up 13% YTD but it doesn’t move the needle for me since my allocation is so small. Just an interesting experiment that I may end if market stops climbing.
Given that TQQQ has had about 46.6% standard deviation since inception, I find your 40% target pretty interesting. Would love to hear more about how you came up with that number. Seems steep.

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

Post by Busdrvr » Tue Feb 11, 2020 11:27 am

element2055 wrote:
Tue Feb 11, 2020 6:19 am
I have been following this strategy for the last 6 months and please to report that it's been going well. Thank you everyone who contributed to this thread. I have a question that I would like to clarify.
What is the downside to running a modified version with 20% TQQQ 35% UPRO and 45 % TMF? My understanding TQQQ with UPRO is not recommended because of its increased volatility? I believe that Big Tech will continue to add more value and grow faster as they venture to adjacent industries like health and banking,
That’s the exact proportion I have settled on for only the last 6 mos. All in Roth. It looks to have gained about 5% more than straight upro/tmf with scant increase in risk. My TQQQ position is 2X my UPRO gain. Everyday I am amazed at how its performing, but maybe with these market conditions it could be even better with more equities. I believe we will have solid market conditions for the next 9 mos. at least.
Last edited by Busdrvr on Tue Feb 11, 2020 11:40 am, edited 1 time in total.

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

Post by MotoTrojan » Tue Feb 11, 2020 11:39 am

Busdrvr wrote:
Tue Feb 11, 2020 11:27 am
I believe we will have solid market conditions for the next 9 mos. at least.
I thought politics weren’t allowed here. 8-)

Busdrvr
Posts: 162
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by Busdrvr » Tue Feb 11, 2020 11:52 am

MotoTrojan wrote:
Tue Feb 11, 2020 11:39 am
Busdrvr wrote:
Tue Feb 11, 2020 11:27 am
I believe we will have solid market conditions for the next 9 mos. at least.
I thought politics weren’t allowed here. 8-)

This is apolitical and not always correct, but it appears to apply in our current cycle.

https://gbr.pepperdine.edu/2010/08/pres ... et-cycles/ :sharebeer

Image

Market timing at its finest
Last edited by Busdrvr on Tue Feb 11, 2020 4:00 pm, edited 1 time in total.

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

Post by SCraw » Tue Feb 11, 2020 12:25 pm

I'm really not interested in pursuing this idea with domestic equities, haha. I might put 5% of my contributions this year towards a similar international strategy though. Also - surely you don't have to put the entire investment into tax free accounts - you could just put enough buffer (50%?) for regular rebalancing (mostly the UPRO?) and if major rebalancing has to happen the other way, you might be tax loss harvesting anyway. I haven't really thought this through, so that probably isn't true.

Another question - People on here talk a lot about how it's probably better to replicate this strategy with LEAPs, but I haven't actually seen anyone write about the specifics. Has anyone done any backtesting/actually tried it?

Good luck to anyone who's actually trying this.

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

Post by rascott » Tue Feb 11, 2020 2:03 pm

Busdrvr wrote:
Tue Feb 11, 2020 11:27 am
element2055 wrote:
Tue Feb 11, 2020 6:19 am
I have been following this strategy for the last 6 months and please to report that it's been going well. Thank you everyone who contributed to this thread. I have a question that I would like to clarify.
What is the downside to running a modified version with 20% TQQQ 35% UPRO and 45 % TMF? My understanding TQQQ with UPRO is not recommended because of its increased volatility? I believe that Big Tech will continue to add more value and grow faster as they venture to adjacent industries like health and banking,
That’s the exact proportion I have settled on for only the last 6 mos. All in Roth. It looks to have gained about 5% more than straight upro/tmf with scant increase in risk. My TQQQ position is 2X my UPRO gain. Everyday I am amazed at how its performing, but maybe with these market conditions it could be even better with more equities. I believe we will have solid market conditions for the next 9 mos. at least.

Yeah, I just crossed over the triple digit return Rubicon with my TQQQ holding today.... up 101% since Aug. Kind of ridiculous

User avatar
Nicolas Perrault
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Location: Oxford, UK

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

Post by Nicolas Perrault » Tue Feb 11, 2020 4:12 pm

Maker wrote:
Sun Feb 09, 2020 6:11 pm
Hi,

first of all I want to thank you all for these two fantastic threads -- it has been a great read.

I'm only a novice, so please keep in mind the notes and questions below are from someone inexperienced.

One of the main drawbacks of this strategy, as an European, is geographic risk. While the S&P 500 has had a fantastic decade, I would feel much better about using leverage on a globally diversified index such as VT, as well as a global aggregate bond index instead of treasuries. I know some of you have been able to simulate this strategy on past data, can anyone point me towards resources helping me do the same with this more diversified strategy? I tried using portfolio visualizer, but it's limited to a Jan 2019 start as that is when Vanguard's Total World Bond ETF was initially offered. Any help would be appreciated.

I would also love to know if any European is currently using this strategy. When I last looked into it, the only harmonized 3x leveraged funds were WisdomTree's, which are ETNs. This makes the strategy unappealing to me, as I would incur further risk (in this case, counter-party risk) without any reward. If any European wants to chime in I would appreciate that as well.

Overall, as a young investor with an appetite for returns (and thus risks) I'm extremely interested in this strategy, especially with a focus on using DCA as I have many years both to stomach losses as well as to average them down. The geographic risk and counter-party risk currently make me prefer an unleveraged approach (I'm currently 100% SWRD, a MSCI World fund, but I'll soon add a share of MSCI EMIM), though if there were other accessible ways to obtain leverage in a similarly passive way I would love to hear them .

Ideas? Criticisms? Everything is appreciated.
Thanks!
You can try using a mix of BNDX (international bond) and BND (US bonds) to simulate data deeper into the past than 2019, but keep in mind that the average duration of BND is 6 years and that this strategy was designed to work with 3x long-duration bonds (20 years +).

If you want to go down the Excellent Adventure road as a novice, I would suggest to
1) Make sure you understand how it works and then decide for yourself whether the important risks are worth the rewards. This exercise will help you stay the course when the excellent adventure lags the SP500.

2) Follow Hedgefundie's formula with no tweaks or extras. I believe that, as a novice, the more you stray, the likelier you will bail. If you don't follow the formula and you lag the formula by 10% a year in the first five years, you might doubt your own judgment and bail at the wrong time. Don't underestimate the power of this thread to help you stay the course. It is the very reason for which Hedgefudie started it in the first place, to be held accountable for his decisions and stay the course. While reading through this thread I read a bunch of ideas for tweaking the formula and was emotionally tempted by several of them (TQQQ was especially hard to resist). Finally, I scrapped them all in favour of Hedgefundie's 55/45 UPRO/TMF because I think that's the one I am most likely to stay the course with.

By the way, as a European, do you have access to American ETFs? We do in Canada, but I thought this was not easy in Europe, or at least in the European Union.

uberaeth
Posts: 22
Joined: Wed Jun 12, 2019 2:29 pm

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

Post by uberaeth » Tue Feb 11, 2020 9:39 pm

SCraw wrote:
Tue Feb 11, 2020 12:25 pm
I'm really not interested in pursuing this idea with domestic equities, haha. I might put 5% of my contributions this year towards a similar international strategy though. Also - surely you don't have to put the entire investment into tax free accounts - you could just put enough buffer (50%?) for regular rebalancing (mostly the UPRO?) and if major rebalancing has to happen the other way, you might be tax loss harvesting anyway. I haven't really thought this through, so that probably isn't true.

Another question - People on here talk a lot about how it's probably better to replicate this strategy with LEAPs, but I haven't actually seen anyone write about the specifics. Has anyone done any backtesting/actually tried it?

Good luck to anyone who's actually trying this.
I'm not sure how you would backtest LEAPs, but I'm currently gathering together the 7k or so that it would take to get a contract of QQQ at 3x leverage.

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

Post by MoneyMarathon » Wed Feb 12, 2020 3:10 am

Update on how my journey is going:

86% in PSLDX (100% stocks/ 160% bonds) across 401k / Roth IRAs
4% in VXUS (100% international stock) in 401k
10% in NTSX (90% stocks / 60% treasuries) in taxable

The biggest change is that I chickened out and dropped MCDFX (an active China fund) this week. The funds were plowed into PSLDX. I've been wanting to move more international to taxable anyway, since PSLDX is too good to pass up in retirement accounts.

Image

I started this journey around late July / August. My account immediately pulled away from the S&P 500 when it dropped less due to the bond holdings, and it held its lead ever since. Instead of an 11.2% gain on S&P 500, there's a 21.51% gain on my mix of PSLDX, VXUS, and MCDFX since July. This is huge, almost twice the return. My account used to trail the S&P 500 because, when averaged with other positions such as international, an unleveraged passive portfolio couldn't beat the S&P 500.

I haven't used any 3x leveraged rebalanced daily ETFs. I didn't need to go beyond using Vanguard and Schwab. My button finger is well rested. Just by changing what I buy, the yield I got was twice as high, which I must admit feels a bit weird but I will definitely take it! There is a risk that 100% equity without leverage could do better than PSLDX if bonds dive, and it'll hurt if stocks dive at the same time, but that's such a rare event (and I'm at such a "reasonable" gearing of leverage) that I'll probably earn more than whatever is lost in that case (if it happens) if I just hold on long term.

Since I've switched, I've gotten an amazing 42% annualized return (thanks to a boom in stocks and bonds).

Future action items:

I'd like to add positions to MTUM (momentum in US stocks) and EFAV (min vol developed international) in taxable, especially EFAV. Yes, if you haven't noticed a pattern, I'm basically just following HedgeFundie's favorite picks and choosing from them. He should publish a newsletter. :beer

schismal
Posts: 187
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by schismal » Wed Feb 12, 2020 5:40 am

MoneyMarathon wrote:
Wed Feb 12, 2020 3:10 am
The biggest change is that I chickened out and dropped MCDFX (an active China fund) this week.
Curious what prompted this change. No longer interested in EM? I've liked both MCDFX and CXSE.

get_g0ing
Posts: 636
Joined: Sat Dec 09, 2017 11:09 am

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

Post by get_g0ing » Wed Feb 12, 2020 7:54 am

MotoTrojan wrote:
Tue Feb 11, 2020 10:52 am
Given that TQQQ has had about 46.6% standard deviation since inception,
Hi Moto,

Can you explain a bit more what this means please?

Thanks.

MotoTrojan
Posts: 9269
Joined: Wed Feb 01, 2017 8:39 pm

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

Post by MotoTrojan » Wed Feb 12, 2020 8:20 am

get_g0ing wrote:
Wed Feb 12, 2020 7:54 am
MotoTrojan wrote:
Tue Feb 11, 2020 10:52 am
Given that TQQQ has had about 46.6% standard deviation since inception,
Hi Moto,

Can you explain a bit more what this means please?

Thanks.
The volatility of TQQQ in its lifetime is just barely higher than the poster’s 40% target volatility which was intriguing. Usually it would be lower so your average allocation to the 3x equity isn’t nearly 100%.

get_g0ing
Posts: 636
Joined: Sat Dec 09, 2017 11:09 am

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

Post by get_g0ing » Wed Feb 12, 2020 8:58 am

MotoTrojan wrote:
Wed Feb 12, 2020 8:20 am
get_g0ing wrote:
Wed Feb 12, 2020 7:54 am
MotoTrojan wrote:
Tue Feb 11, 2020 10:52 am
Given that TQQQ has had about 46.6% standard deviation since inception,
Hi Moto,

Can you explain a bit more what this means please?

Thanks.
The volatility of TQQQ in its lifetime is just barely higher than the poster’s 40% target volatility which was intriguing. Usually it would be lower so your average allocation to the 3x equity isn’t nearly 100%.
Sorry, I meant what does "46.6% standard deviation" mean?

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