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 » Fri Sep 13, 2019 7:15 pm

HEDGEFUNDIE wrote:
Fri Sep 13, 2019 7:14 pm
queso wrote:
Fri Sep 13, 2019 7:12 pm
Lee_WSP wrote:
Fri Sep 13, 2019 5:41 pm
This week has really brought home my reservations about the "spikiness" of TMF. EDV is looking a lot less "prickly".
+1. My hedgefundie fundie ain't doing so hot compared to VTSAX. *sigh*

After years of disappointments with get rich quick schemes I know I'm gonna get rich with this scheme, and quick! :happy
Stay. The. Course.
Hey! Cherry picking pieces of the BH philosophy is what got me into this mess in the first place! :P

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

Post by MotoTrojan » Fri Sep 13, 2019 7:20 pm

queso wrote:
Fri Sep 13, 2019 7:12 pm
Lee_WSP wrote:
Fri Sep 13, 2019 5:41 pm
This week has really brought home my reservations about the "spikiness" of TMF. EDV is looking a lot less "prickly".
+1. My hedgefundie fundie ain't doing so hot compared to VTSAX. *sigh*

After years of disappointments with get rich quick schemes I know I'm gonna get rich with this scheme, and quick! :happy
I am not in the TMF variant anymore but I still had a bit of a drop these past few days. My XIRR is now at a whopping 81% compared to the S&P500's 16% (dividends included). Staying the course is easy right now.

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

Post by queso » Fri Sep 13, 2019 7:50 pm

MotoTrojan wrote:
Fri Sep 13, 2019 7:20 pm
queso wrote:
Fri Sep 13, 2019 7:12 pm
Lee_WSP wrote:
Fri Sep 13, 2019 5:41 pm
This week has really brought home my reservations about the "spikiness" of TMF. EDV is looking a lot less "prickly".
+1. My hedgefundie fundie ain't doing so hot compared to VTSAX. *sigh*

After years of disappointments with get rich quick schemes I know I'm gonna get rich with this scheme, and quick! :happy
I am not in the TMF variant anymore but I still had a bit of a drop these past few days. My XIRR is now at a whopping 81% compared to the S&P500's 16% (dividends included). Staying the course is easy right now.
I got in at the wrong time.. I should have ignored the part about not timing the market too. :D

Really, just kidding around. This is a fun experiment and thanks to all for sharing your reams of backtesting and number crunching.

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

Post by rascott » Fri Sep 13, 2019 8:04 pm

The run up in bonds just got ahead of itself a bit.... moved too much, too fast.

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

Post by privatefarmer » Sat Sep 14, 2019 12:08 am

I’ve been thinking about the problem of daily rebalancing with LETFs a lot. The major downside is that they essentially sell off shares when the market takes a dip thus locking in losses.

One thought I’ve had is that you could fix this by simply buying more LETFs as the market dips to off set the daily rebalancing? Obviously would not be practical to do this on a daily basis, but perhaps weekly or even monthly, analyzing how much was “sold off” by the LETFs and buying that amount back. This way, when the market recovers, you are fully leveraged as you would be if you were using say a margin loan instead of LETFs.

So for those who say allocate 10% of their portfolio to this strategy, you could simply allocate a slightly higher amount during market dips. Thoughts?

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

Post by Lee_WSP » Sat Sep 14, 2019 12:25 am

privatefarmer wrote:
Sat Sep 14, 2019 12:08 am

So for those who say allocate 10% of their portfolio to this strategy, you could simply allocate a slightly higher amount during market dips. Thoughts?
Where would these "extra" funds come from?

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

Post by privatefarmer » Sat Sep 14, 2019 11:56 am

Lee_WSP wrote:
Sat Sep 14, 2019 12:25 am
privatefarmer wrote:
Sat Sep 14, 2019 12:08 am

So for those who say allocate 10% of their portfolio to this strategy, you could simply allocate a slightly higher amount during market dips. Thoughts?
Where would these "extra" funds come from?
Well, in my case, I’m using margin at IB. So I start with 3.5x leverage and then increase the leverage appropriately during market dips. For example, my leverage as of now has been increased to 3.75x

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

Post by Diego_Quant » Sat Sep 14, 2019 7:24 pm

privatefarmer wrote:
Sat Sep 14, 2019 11:56 am
Lee_WSP wrote:
Sat Sep 14, 2019 12:25 am
privatefarmer wrote:
Sat Sep 14, 2019 12:08 am

So for those who say allocate 10% of their portfolio to this strategy, you could simply allocate a slightly higher amount during market dips. Thoughts?
Where would these "extra" funds come from?
Well, in my case, I’m using margin at IB. So I start with 3.5x leverage and then increase the leverage appropriately during market dips. For example, my leverage as of now has been increased to 3.75x
Whit the 100% of your portfolio?

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

Post by privatefarmer » Sat Sep 14, 2019 7:37 pm

Diego_Quant wrote:
Sat Sep 14, 2019 7:24 pm
privatefarmer wrote:
Sat Sep 14, 2019 11:56 am
Lee_WSP wrote:
Sat Sep 14, 2019 12:25 am
privatefarmer wrote:
Sat Sep 14, 2019 12:08 am

So for those who say allocate 10% of their portfolio to this strategy, you could simply allocate a slightly higher amount during market dips. Thoughts?
Where would these "extra" funds come from?
Well, in my case, I’m using margin at IB. So I start with 3.5x leverage and then increase the leverage appropriately during market dips. For example, my leverage as of now has been increased to 3.75x
Whit the 100% of your portfolio?
Yes. I was at 3.5x levered at the peak (for me that was on 9/4), since then it’s dropped some and I am now 3.75x leveraged. I think once it fully recovers I will let it “grow out” of its leverage down to 3x levered (basically just own solely LETFs) and then use my margin account to increase my leverage appropriately as it dips, to essentially off set the daily rebalancing decay.

Diego_Quant
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Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Post by Diego_Quant » Sat Sep 14, 2019 11:01 pm

privatefarmer wrote:
Tue Aug 13, 2019 1:03 am
Lee_WSP wrote:
Tue Aug 13, 2019 12:52 am
privatefarmer wrote:
Tue Aug 13, 2019 12:46 am
MoneyMarathon wrote:
Tue Aug 13, 2019 12:32 am
privatefarmer wrote:
Mon Aug 12, 2019 11:31 pm
So I’m fine with a targeted max DD of 60-70%. I was 100% global SCV before this thread. Since 1987, the 20day risk parity strategy using s/p500/LTTs would've had a max DD of 12%, thus a 4.5x leveraged strategy would’ve fallen 54%. I’m in IBs “portfolio margin” setup where they allow me to borrow up to $4 for every $1 I have invested. Because of LETFs, I am easily able to stay within that margin requirement while maintaining an overall 4.5x leveraged portfolio (if I’m close to a margin call I simply swap out unleveraged ETFs for LETFs and reduce my margin with IB).
market timer: "If you choose to adopt this strategy, have contingency plans in place ahead of time and follow your plan. You don't want to be a deer in headlights, making decisions lacking sleep in the middle of night, as I was. One of the key lessons I learned is that bad decisions tend to beget more bad decisions. Try to make decisions with a sound mind."
- https://forum.mrmoneymustache.com/inves ... verage/50/
privatefarmer wrote:
Mon Aug 12, 2019 11:31 pm
where they allow me to borrow up to $4 for every $1 I have invested
Where do the portfolio margin rules at IB say that you may have only $1 in for every $4 borrowed, without getting positions liquidated?
They calculate margin requirements based on the volatility of overall portfolio. Right now, they would allow me to borrow $4 for every $1, that could change. It’s a risk. But, again, all I have to do is move non leveraged ETFS to leveraged ETFs and reduce my margin loan. Right now, 65% of my portfolio is in UNleveraged ETFs that could be converted to 3x LETFs if need be.
I thought the sec limits margin to 50%?
For Reg t margin accounts they do. IB allows you to borrow more if your acct is >$100k. I am currently borrowing $1.3mil and only have $300k of my own money in it.
With 300k you could easily use futures (instead of leveraged etfs)

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

Post by comeinvest » Mon Sep 16, 2019 5:17 am

privatefarmer wrote:
Sat Sep 14, 2019 7:37 pm
"I was 100% global SCV before this thread." - How much of global and SCV were you able to maintain after implementing the leverage strategy? What is your estimate of the opportunity cost from giving up part of your global and SCV strategy?

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

Post by SVT » Mon Sep 16, 2019 6:52 pm

I think I may be one of the remaining few, if not only one(?), to be in the original 60/40 TMF/UPRO allocation. I started Feb 22nd and was up about 50% at one point. The portfolio has taken a bit of a dip the last 10 days though. I'm now up 38% since starting. I'm not sure when/if I'll change the allocation or what I'd change it to, so I've stayed put.

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

Post by keith6014 » Mon Sep 16, 2019 7:12 pm

SVT wrote:
Mon Sep 16, 2019 6:52 pm
I think I may be one of the remaining few, if not only one(?), to be in the original 60/40 TMF/UPRO allocation. I started Feb 22nd and was up about 50% at one point. The portfolio has taken a bit of a dip the last 10 days though. I'm now up 38% since starting. I'm not sure when/if I'll change the allocation or what I'd change it to, so I've stayed put.
I started 1 month ago. 45/55 (TQQQ/TMF). I am down ~ 5%. I've rebalanced by adding more funds last Friday (13th Sep) when TMF took a drubbing.
Last edited by keith6014 on Tue Sep 17, 2019 7:42 pm, edited 1 time in total.

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

Post by rascott » Mon Sep 16, 2019 7:27 pm

SVT wrote:
Mon Sep 16, 2019 6:52 pm
I think I may be one of the remaining few, if not only one(?), to be in the original 60/40 TMF/UPRO allocation. I started Feb 22nd and was up about 50% at one point. The portfolio has taken a bit of a dip the last 10 days though. I'm now up 38% since starting. I'm not sure when/if I'll change the allocation or what I'd change it to, so I've stayed put.

I'm still in the original 40/60. Planning to move to a full futures based strategy, but probably won't be doing so until later this year. May keep the 40/60 alive at M1 to be able to compare.

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

Post by dave_k » Mon Sep 16, 2019 10:05 pm

SVT wrote:
Mon Sep 16, 2019 6:52 pm
I think I may be one of the remaining few, if not only one(?), to be in the original 60/40 TMF/UPRO allocation. I started Feb 22nd and was up about 50% at one point. The portfolio has taken a bit of a dip the last 10 days though. I'm now up 38% since starting. I'm not sure when/if I'll change the allocation or what I'd change it to, so I've stayed put.
I'm with you, and I started around the same time. I may switch to a dynamic volatility based strategy, but haven't decided yet either.

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

Post by MotoTrojan » Mon Sep 16, 2019 10:28 pm

Still happy without TMF :sharebeer.

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

Post by hdas » Mon Sep 16, 2019 10:33 pm

keith6014 wrote:
Mon Sep 16, 2019 7:12 pm
SVT wrote:
Mon Sep 16, 2019 6:52 pm
I think I may be one of the remaining few, if not only one(?), to be in the original 60/40 TMF/UPRO allocation. I started Feb 22nd and was up about 50% at one point. The portfolio has taken a bit of a dip the last 10 days though. I'm now up 38% since starting. I'm not sure when/if I'll change the allocation or what I'd change it to, so I've stayed put.
I started 1 month ago. 55/45 (TQQQ/TMF). I am down ~ 5%. I've rebalanced by adding more funds last Friday (13th Sep) when TMF took a drubbing.
I think you might be Patient Zero. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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

Post by MotoTrojan » Mon Sep 16, 2019 11:42 pm

keith6014 wrote:
Mon Sep 16, 2019 7:12 pm
SVT wrote:
Mon Sep 16, 2019 6:52 pm
I think I may be one of the remaining few, if not only one(?), to be in the original 60/40 TMF/UPRO allocation. I started Feb 22nd and was up about 50% at one point. The portfolio has taken a bit of a dip the last 10 days though. I'm now up 38% since starting. I'm not sure when/if I'll change the allocation or what I'd change it to, so I've stayed put.
I started 1 month ago. 55/45 (TQQQ/TMF). I am down ~ 5%. I've rebalanced by adding more funds last Friday (13th Sep) when TMF took a drubbing.
55% UPRO wasn’t enough for ya?

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

Post by Alaric » Tue Sep 17, 2019 6:52 am

SVT wrote:
Mon Sep 16, 2019 6:52 pm
I think I may be one of the remaining few, if not only one(?), to be in the original 60/40 TMF/UPRO allocation. I started Feb 22nd and was up about 50% at one point. The portfolio has taken a bit of a dip the last 10 days though. I'm now up 38% since starting. I'm not sure when/if I'll change the allocation or what I'd change it to, so I've stayed put.
I got in at almost the same time, Feb. 27, at the original 40/60 UPRO/TMF. I have never rebalanced or updated to 55/45, so I am now at 65/35, up 37% total. I am thinking I will rebalance at the quarter dates (year's quarter, not my original investing date quarter), beginning 9/30. Including making the change to 55/45.

VTI is up 6.1% from 2/27 - 9/16, and VT is up 3.9%.

caklim00
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by caklim00 » Tue Sep 17, 2019 8:23 am

Off topic question, what did everyone do with their whopping $10 M1 contribution in their taxable account (which was required to open an IRA). I don't plan on putting any money in the taxable account so it just sits there. I tried to buy VFMF but apparently you have to have 1 share before M1 can do fractional purchases.

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

Post by rascott » Tue Sep 17, 2019 8:41 am

caklim00 wrote:
Tue Sep 17, 2019 8:23 am
Off topic question, what did everyone do with their whopping $10 M1 contribution in their taxable account (which was required to open an IRA). I don't plan on putting any money in the taxable account so it just sits there. I tried to buy VFMF but apparently you have to have 1 share before M1 can do fractional purchases.
Try a penny stock :D

markcloutier1212
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by markcloutier1212 » Tue Sep 17, 2019 10:18 am

Is there an easy way to test out backtest rebalancing strategies for 55% UPRO / 45% TMF? I'm trying to figure out the best strategy, be it daily rebalance, weekly rebalance, monthly rebalance, or quarterly rebalance. I've perused back through this thread, but it is a bit overwhelming lol. Is there a consensus?

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

Post by Hydromod » Tue Sep 17, 2019 10:51 am

markcloutier1212 wrote:
Tue Sep 17, 2019 10:18 am
Is there an easy way to test out backtest rebalancing strategies for 55% UPRO / 45% TMF? I'm trying to figure out the best strategy, be it daily rebalance, weekly rebalance, monthly rebalance, or quarterly rebalance. I've perused back through this thread, but it is a bit overwhelming lol. Is there a consensus?
I think that the consensus is that Portfoliovisualizer does pretty well, once you upload the simulated daily series.

I tried to systematically go through a bunch of the options in a separate thread. You might want to start at viewtopic.php?f=10&t=284955&start=100#p4731324.

I pretty much have concluded that daily rebalancing would give some benefit, but really would be better implemented as an ETF. Otherwise there doesn't seem to be all that much difference between weekly through quarterly, except that the spread in outcomes increases as the duration increases.

caklim00
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by caklim00 » Tue Sep 17, 2019 11:05 am

rascott wrote:
Tue Sep 17, 2019 8:41 am
caklim00 wrote:
Tue Sep 17, 2019 8:23 am
Off topic question, what did everyone do with their whopping $10 M1 contribution in their taxable account (which was required to open an IRA). I don't plan on putting any money in the taxable account so it just sits there. I tried to buy VFMF but apparently you have to have 1 share before M1 can do fractional purchases.
Try a penny stock :D
Your probably right. Either its going to 0 or will grow large enough that it eventually will be worth the transfer out fee.

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

Post by MotoTrojan » Tue Sep 17, 2019 11:17 am

markcloutier1212 wrote:
Tue Sep 17, 2019 10:18 am
Is there an easy way to test out backtest rebalancing strategies for 55% UPRO / 45% TMF? I'm trying to figure out the best strategy, be it daily rebalance, weekly rebalance, monthly rebalance, or quarterly rebalance. I've perused back through this thread, but it is a bit overwhelming lol. Is there a consensus?
Drawdown gets quite a bit worse at daily/weekly/‘ontjly compared to quarterly due to catching the falling knife. I’d use quarterly and/or wide rebalancing bands (not 5%) personally. I’m using quarterly with UPRO/EDV.

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

Post by tchoupitoulas » Tue Sep 17, 2019 11:29 am

I am still using the original 60/40 TMF/UPRO allocation. I'm currently up 27.7% and approaching my second rebalance date in a few weeks. I have no plans to change.

markcloutier1212
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by markcloutier1212 » Tue Sep 17, 2019 12:13 pm

Hydromod wrote:
Tue Sep 17, 2019 10:51 am
markcloutier1212 wrote:
Tue Sep 17, 2019 10:18 am
Is there an easy way to test out backtest rebalancing strategies for 55% UPRO / 45% TMF? I'm trying to figure out the best strategy, be it daily rebalance, weekly rebalance, monthly rebalance, or quarterly rebalance. I've perused back through this thread, but it is a bit overwhelming lol. Is there a consensus?
I think that the consensus is that Portfoliovisualizer does pretty well, once you upload the simulated daily series.

I tried to systematically go through a bunch of the options in a separate thread. You might want to start at viewtopic.php?f=10&t=284955&start=100#p4731324.

I pretty much have concluded that daily rebalancing would give some benefit, but really would be better implemented as an ETF. Otherwise there doesn't seem to be all that much difference between weekly through quarterly, except that the spread in outcomes increases as the duration increases.
This is awesome. Thank you. I was scared to ask because I'm used to most people on forums being grumpy, so thank you for an actual answer. :happy

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

Post by dspencer » Tue Sep 17, 2019 12:34 pm

caklim00 wrote:
Tue Sep 17, 2019 11:05 am
rascott wrote:
Tue Sep 17, 2019 8:41 am
caklim00 wrote:
Tue Sep 17, 2019 8:23 am
Off topic question, what did everyone do with their whopping $10 M1 contribution in their taxable account (which was required to open an IRA). I don't plan on putting any money in the taxable account so it just sits there. I tried to buy VFMF but apparently you have to have 1 share before M1 can do fractional purchases.
Try a penny stock :D
Your probably right. Either its going to 0 or will grow large enough that it eventually will be worth the transfer out fee.
While reading about Michael Burry's index fund comments, I also learned he is heavily invested in TLRD. They own Men's Wearhouse and the stock has taken an absolute beating. You could buy 2 shares and hope he's a genius.

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

Post by Hydromod » Tue Sep 17, 2019 12:41 pm

markcloutier1212 wrote:
Tue Sep 17, 2019 12:13 pm
This is awesome. Thank you. I was scared to ask because I'm used to most people on forums being grumpy, so thank you for an actual answer. :happy
No problem. I like to share what I've learned. :sharebeer

And I'd say most folks on this forum are here to be helpful, in my few months experience.

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

Post by dspencer » Tue Sep 17, 2019 12:49 pm

SVT wrote:
Mon Sep 16, 2019 6:52 pm
I think I may be one of the remaining few, if not only one(?), to be in the original 60/40 TMF/UPRO allocation. I started Feb 22nd and was up about 50% at one point. The portfolio has taken a bit of a dip the last 10 days though. I'm now up 38% since starting. I'm not sure when/if I'll change the allocation or what I'd change it to, so I've stayed put.
I'm in the original allocation for now. Tomorrow I am going to transition 15% of my TMF into EDV and probably a bit more over time. It's probably (almost certainly) too anecdotal, but it bothers me that on days the stock market goes up my portfolio tends to go down and vice versa.

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

Post by schismal » Tue Sep 17, 2019 1:11 pm

Since the theorycrafting has largely stopped for now, an update:

My Roth is split between the 55/45 allocation and PSLDX.

I threw $2k in taxable a few months ago, at 50% UPRO, 25% TMF, 25% EDV. I am not making further contributions, but I'll rebalance with new money for as long as feasible.

griffin3141
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Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Post by griffin3141 » Tue Sep 17, 2019 3:59 pm

schismal wrote:
Tue Sep 17, 2019 1:11 pm
Since the theorycrafting has largely stopped for now, an update:

My Roth is split between the 55/45 allocation and PSLDX.

I threw $2k in taxable a few months ago, at 50% UPRO, 25% TMF, 25% EDV. I am not making further contributions, but I'll rebalance with new money for as long as feasible.
Have you considered NTSX for taxable?

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

Post by schismal » Tue Sep 17, 2019 4:02 pm

griffin3141 wrote:
Tue Sep 17, 2019 3:59 pm
schismal wrote:
Tue Sep 17, 2019 1:11 pm
Since the theorycrafting has largely stopped for now, an update:

My Roth is split between the 55/45 allocation and PSLDX.

I threw $2k in taxable a few months ago, at 50% UPRO, 25% TMF, 25% EDV. I am not making further contributions, but I'll rebalance with new money for as long as feasible.
Have you considered NTSX for taxable?
NTSX is a core holding in my (actual) taxable account. :happy

This small 50/25/25 allocation is just a side pie that I set up at M1 a few months ago. Like I said, not actively contributing to it.

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

Post by sabhen » Tue Sep 17, 2019 8:15 pm

A risk Parity ETF (RPAR) is planned for Q4. More like the All-Weather Portfolio.

https://seekingalpha.com/news/3493198-r ... parity-etf
An exchange-traded fund based on a strategy popularized by Ray Dalio may be available as soon as November, according to Alex Shahidi of Advanced Research Investment Solutions.

The RPAR Risk Parity ETF (RPAR), an actively managed ETF, seeks to generate positive returns during periods of economic growth, preserve capital during periods of economic contraction, and preserve real rates of return during periods of heightened inflation.

The fund’s investment adviser seeks to invest assets to achieve exposures similar to those of the Advanced Research Risk Parity Index, a rules-based index created by ARIS, according to a regulatory filing made by TidalETF Trust.

ARIS is working with Tosoro Investments to start the fund.

The RPAR Index allocates its exposure to four asset classes -- U.S. Treasury Inflation Protected Securities, global equities, commodities, and U.S. Treasury bonds -- using a “risk-parity” approach that seeks to achieve an equal balance between the risk associated with each asset class based on the long-term historic volatility exhibited by each asset class.

Lower risk asset classes (such as U.S. Treasury Inflation Protected Securities) will generally have higher notional allocations than higher risk asset classes (such as global equities).

Fund expenses and fees weren't yet estimated.

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

Post by ltdshred » Tue Sep 17, 2019 8:21 pm

Love this thread and the work you guys are doing. Been playing with leveraged funds for a few months and fully got into this strategy around the beginning of the month.

Did some backtesting with PV and shows that monthly rebalancing is much better than quarterly. Due to the rebalancing bonus I guess?

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

Post by privatefarmer » Tue Sep 17, 2019 10:24 pm

Has there been much research on adding gold to this experiment? I understand it may be considered too volatile for LETFs but I’ve found some interesting backtests

- using PV, I found that a 40/50/10 stock/LTT/gold unlevered portfolio since 1978 had a 10.3% CAGR with a max DD of about 14.5%, which is slightly better than a plain 40/60 portfolio
- using a 3-fund 20-day risk parity look back timing strategy, since GLDs inception (2005) it has performed about equally as well as just using unleveraged VOO/VUSTX
- UGLD is a 3x version of GLD
- since UGLDs inception (2012) using a 20day risk parity look back timing strategy with UGLD/TMF/UPRO, it has had a 20.7% CAGR and a max DD of 24%, which means it actually tracked the non levered risk parity strategy quite nicely.

“Pure” risk parity would include commodities as an inflation hedge and gold should serve this purpose. I know it’s essentially “dead weight” the vast majority of the time yet as I said above, since 1978 adding gold to a non leveraged portfolio of stocks/LTTs did improve the sharpe ratio slightly even though we’ve mostly been in a low inflationary environment since then.

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

Post by rascott » Tue Sep 17, 2019 10:41 pm

privatefarmer wrote:
Tue Sep 17, 2019 10:24 pm
Has there been much research on adding gold to this experiment? I understand it may be considered too volatile for LETFs but I’ve found some interesting backtests

- using PV, I found that a 40/50/10 stock/LTT/gold unlevered portfolio since 1978 had a 10.3% CAGR with a max DD of about 14.5%, which is slightly better than a plain 40/60 portfolio
- using a 3-fund 20-day risk parity look back timing strategy, since GLDs inception (2005) it has performed about equally as well as just using unleveraged VOO/VUSTX
- UGLD is a 3x version of GLD
- since UGLDs inception (2012) using a 20day risk parity look back timing strategy with UGLD/TMF/UPRO, it has had a 20.7% CAGR and a max DD of 24%, which means it actually tracked the non levered risk parity strategy quite nicely.

“Pure” risk parity would include commodities as an inflation hedge and gold should serve this purpose. I know it’s essentially “dead weight” the vast majority of the time yet as I said above, since 1978 adding gold to a non leveraged portfolio of stocks/LTTs did improve the sharpe ratio slightly even though we’ve mostly been in a low inflationary environment since then.

It's hard for me to put any money into gold, as I think the underlying "value" for it is BS.... but do agree it has done well in periods of stress.

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

Post by SVT » Tue Sep 17, 2019 10:45 pm

I think the OP addressed adding gold in the first post of part 1.

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

Post by Lee_WSP » Tue Sep 17, 2019 11:18 pm

privatefarmer wrote:
Tue Sep 17, 2019 10:24 pm
Has there been much research on adding gold to this experiment? I understand it may be considered too volatile for LETFs but I’ve found some interesting backtests

- using PV, I found that a 40/50/10 stock/LTT/gold unlevered portfolio since 1978 had a 10.3% CAGR with a max DD of about 14.5%, which is slightly better than a plain 40/60 portfolio
- using a 3-fund 20-day risk parity look back timing strategy, since GLDs inception (2005) it has performed about equally as well as just using unleveraged VOO/VUSTX
- UGLD is a 3x version of GLD
- since UGLDs inception (2012) using a 20day risk parity look back timing strategy with UGLD/TMF/UPRO, it has had a 20.7% CAGR and a max DD of 24%, which means it actually tracked the non levered risk parity strategy quite nicely.

“Pure” risk parity would include commodities as an inflation hedge and gold should serve this purpose. I know it’s essentially “dead weight” the vast majority of the time yet as I said above, since 1978 adding gold to a non leveraged portfolio of stocks/LTTs did improve the sharpe ratio slightly even though we’ve mostly been in a low inflationary environment since then.
If/when TMF becomes untenable, I will switch it with 3x gold. Although I'll probably also delever as well.

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

Post by MotoTrojan » Wed Sep 18, 2019 8:44 am

ltdshred wrote:
Tue Sep 17, 2019 8:21 pm
Love this thread and the work you guys are doing. Been playing with leveraged funds for a few months and fully got into this strategy around the beginning of the month.

Did some backtesting with PV and shows that monthly rebalancing is much better than quarterly. Due to the rebalancing bonus I guess?
Simulated data or just since inception? Monthly has much worse drawdown and no clear outperformance.

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

Post by Hydromod » Wed Sep 18, 2019 9:39 am

MotoTrojan wrote:
Wed Sep 18, 2019 8:44 am
ltdshred wrote:
Tue Sep 17, 2019 8:21 pm
Love this thread and the work you guys are doing. Been playing with leveraged funds for a few months and fully got into this strategy around the beginning of the month.

Did some backtesting with PV and shows that monthly rebalancing is much better than quarterly. Due to the rebalancing bonus I guess?
Simulated data or just since inception? Monthly has much worse drawdown and no clear outperformance.
I think you need to be very careful about how the testing is done to draw sharp conclusions regarding which strategy is best. I went through this fairly systematically with the UPRO/TMF simulated data, using fixed-duration sequences that start at each possible day from 1987 (see viewtopic.php?f=10&t=284955&start=100#p4731324).

I found that one's conclusions very much depend on the starting date for the sequence. PV is an excellent tool, it's just that I'd be cautious about drawing conclusions based on short-term sequences using it.

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

Post by MotoTrojan » Wed Sep 18, 2019 10:30 am

Hydromod wrote:
Wed Sep 18, 2019 9:39 am
MotoTrojan wrote:
Wed Sep 18, 2019 8:44 am
ltdshred wrote:
Tue Sep 17, 2019 8:21 pm
Love this thread and the work you guys are doing. Been playing with leveraged funds for a few months and fully got into this strategy around the beginning of the month.

Did some backtesting with PV and shows that monthly rebalancing is much better than quarterly. Due to the rebalancing bonus I guess?
Simulated data or just since inception? Monthly has much worse drawdown and no clear outperformance.
I think you need to be very careful about how the testing is done to draw sharp conclusions regarding which strategy is best. I went through this fairly systematically with the UPRO/TMF simulated data, using fixed-duration sequences that start at each possible day from 1987 (see viewtopic.php?f=10&t=284955&start=100#p4731324).

I found that one's conclusions very much depend on the starting date for the sequence. PV is an excellent tool, it's just that I'd be cautious about drawing conclusions based on short-term sequences using it.
Just to make sure I am interpreting the graphs correctly, what was the average drawdown for monthly vs. quarterly rebalance on a 55/45 or 40/60 UPRO/TMF portfoio?

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

Post by Hydromod » Wed Sep 18, 2019 11:50 am

MotoTrojan wrote:
Wed Sep 18, 2019 10:30 am
Just to make sure I am interpreting the graphs correctly, what was the average drawdown for monthly vs. quarterly rebalance on a 55/45 or 40/60 UPRO/TMF portfoio?
The direct comparison of monthly (purple) versus quarterly (gray) for 40/60 is at viewtopic.php?f=10&t=284955&start=100#p4731341. Both monthly and quarterly have a horizontal line indicating the mean at around 12 percent; the quarterly mean is obscured because the monthly is over top. The drawdown for monthly around 2009 falls in the bottom half of the quarterly cloud, otherwise monthly and quarterly are very similar.

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

Post by Dudley » Wed Sep 18, 2019 12:47 pm

Lee_WSP wrote:
Tue Sep 17, 2019 11:18 pm
privatefarmer wrote:
Tue Sep 17, 2019 10:24 pm
Has there been much research on adding gold to this experiment? I understand it may be considered too volatile for LETFs but I’ve found some interesting backtests

- using PV, I found that a 40/50/10 stock/LTT/gold unlevered portfolio since 1978 had a 10.3% CAGR with a max DD of about 14.5%, which is slightly better than a plain 40/60 portfolio
- using a 3-fund 20-day risk parity look back timing strategy, since GLDs inception (2005) it has performed about equally as well as just using unleveraged VOO/VUSTX
- UGLD is a 3x version of GLD
- since UGLDs inception (2012) using a 20day risk parity look back timing strategy with UGLD/TMF/UPRO, it has had a 20.7% CAGR and a max DD of 24%, which means it actually tracked the non levered risk parity strategy quite nicely.

“Pure” risk parity would include commodities as an inflation hedge and gold should serve this purpose. I know it’s essentially “dead weight” the vast majority of the time yet as I said above, since 1978 adding gold to a non leveraged portfolio of stocks/LTTs did improve the sharpe ratio slightly even though we’ve mostly been in a low inflationary environment since then.
If/when TMF becomes untenable, I will switch it with 3x gold. Although I'll probably also delever as well.
Put in some gold, de-lever, and then what have you got ... Permanent Portfolio.. :happy

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

Post by privatefarmer » Wed Sep 18, 2019 1:07 pm

Bingo (regarding permanent portfolio). Someone mentioned above that it depends on the start date you use. But again, going back to 1978 (the earliest I can using gold with PV), a constant 40/50/10 stock/LTT/gold portfolio did really well. That’s a long period. And the more “expert” opinions I read on risk parity the more I see and inclusion of gold or commodities. It’s only value would be as a counter weight to equities during market crashes or to LTTs during an inflationary period.

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

Post by markcloutier1212 » Wed Sep 18, 2019 4:31 pm

I'm late to the game here and have been reading up on the pages and pages of content. Where is this now? Is 55% UPRO & 45% TMF the most bang for the buck with the least risk, or have other leveraged ETF combinations given similar or better results?

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

Post by Hydromod » Wed Sep 18, 2019 4:53 pm

markcloutier1212 wrote:
Wed Sep 18, 2019 4:31 pm
I'm late to the game here and have been reading up on the pages and pages of content. Where is this now? Is 55% UPRO & 45% TMF the most bang for the buck with the least risk, or have other leveraged ETF combinations given similar or better results?
The 40/60 UPRO/TMF combination is basically the risk parity combination based on the average behavior since 1987. Combinations between 30/70 and 60/40 would have given similar returns over this period, albeit with increasing volatility as the UPRO fraction increased.

After long discussions about dropping interest rates and their effects on long-term treasuries, Hedgefundie was persuaded that (i) the TMF returns over this period were a significant driver for the performance and (ii) the historical TMF returns cannot be maintained in the future. Accordingly, he has opted to take a bit more risk in the equities. Others are using the original weighting or are adaptively adjusting the weighting.

Schemes that adaptively adjust the weighting based on recent volatility (typically one to three months) would have done a bit better than fixed weighting. These may be attractive, depending on your attitude towards a fixed allocation versus adaptive allocation, whether the funds are in a taxable or tax-deferred, and the amount of trading costs. If you go to bands for rebalancing, typically you can limit the number of trades without necessarily degrading performance (much).

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

Post by MotoTrojan » Wed Sep 18, 2019 5:14 pm

markcloutier1212 wrote:
Wed Sep 18, 2019 4:31 pm
I'm late to the game here and have been reading up on the pages and pages of content. Where is this now? Is 55% UPRO & 45% TMF the most bang for the buck with the least risk, or have other leveraged ETF combinations given similar or better results?
43/57 UPRO/EDV is what I’ve settled on the best chance at outperforming S&P500.

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

Post by ltdshred » Wed Sep 18, 2019 7:18 pm

Hydromod wrote:
Wed Sep 18, 2019 9:39 am
MotoTrojan wrote:
Wed Sep 18, 2019 8:44 am
ltdshred wrote:
Tue Sep 17, 2019 8:21 pm
Love this thread and the work you guys are doing. Been playing with leveraged funds for a few months and fully got into this strategy around the beginning of the month.

Did some backtesting with PV and shows that monthly rebalancing is much better than quarterly. Due to the rebalancing bonus I guess?
Simulated data or just since inception? Monthly has much worse drawdown and no clear outperformance.
I think you need to be very careful about how the testing is done to draw sharp conclusions regarding which strategy is best. I went through this fairly systematically with the UPRO/TMF simulated data, using fixed-duration sequences that start at each possible day from 1987 (see viewtopic.php?f=10&t=284955&start=100#p4731324).

I found that one's conclusions very much depend on the starting date for the sequence. PV is an excellent tool, it's just that I'd be cautious about drawing conclusions based on short-term sequences using it.
Took a quick skim of the graphs... great work! Agreed that starting date and time period viewed affects rebalancing, but depending on transactions costs, is volatility managed better through rebalancing? I'm just basing this off the principal from William Bernstein that more rebalancing allows you to buy assets with falling prices.

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

Post by Kbg » Wed Sep 18, 2019 10:19 pm

Long UGLD since 2014. 5 years straight in the red, overall UGLD position now up 35%. The undeniable fact is it’s a good diversifier. My version of this has slightly outperformed SPY total return by 6% points over 5yrs, lags by 12 over 3yrs and is +22% points over 1 year.

I believe this is called tracking error. :D

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