MotoTrojan wrote: ↑Sat Apr 13, 2019 5:28 pmWe can also agree to disagree. Your plan worries me especially because it has changed at least once based on a single comment. Will you stick with this after an 80% drawdown?privatefarmer wrote: ↑Sat Apr 13, 2019 1:51 pmAgree to disagree I suppose. I look at this from a very top-down approach. For those who are young, have solid incomes, positive monthly cash flow, strong career prospects, and even own a home I believe even having all available liquid investments in this strategy can be reasonable. What we have to remember is that it is a RISK PARITY strategy. We like to focus on the leverage part but we have to remember the underlying assets and strategy of diversify risk. Also, going heavy into this strategy may seem extreme to the average boglehead but maybe not to most of the investing world. MANY “investors” throw everything they have at HIGHLY leveraged rental properties. Or even worse, take out a massive personal loan to invest in a restaurant or some other business idea. Everything is relative I suppose. I look at my TOTAL net worth and see 1) two very solid W2 income streams in a field of healthcare in high demand 2) our house, which makes up 50% of our total assets and then 3) this strategy which makes up the other half. I also have dedicated emerging markets, unleveraged, as my 401k allocation to add more diversification.mffl wrote: ↑Sat Apr 13, 2019 11:00 amRight, and I think that to the extent that this is a simple, buy and hold strategy that deviates from standard Boglehead philosophy in only one dimension (leverage), that means it's at least Boglehead-adjacent *IF* one keeps it to that 5% play money portion of your portfolio. I think the 5% play money thing is reasonably accepted around here assuming it helps you get it out of your system keep your activist instincts away from the main 95% of your portfolio. As someone who's in on this myself for about 1% of investable assets and may go up to 5%, I think the danger here is getting too excited and instead of helping contain non-Boglehead behavior to your play money, it bleeds over into a larger portion of your portfolio. So, to the extent that you can keep yourself under control, this is relatively harmless with some great upside. If you can't control yourself, this is suddenly very un-Bogleheadish and dangerous. The backtests and theory make it an excellent play money strategy. But as garlandwhizzer suggested, there have been countless can't lose strategies over the years, and the probability that something goes dramatically off the rails here is low enough to play around with, but high enough such that it's wise to keep exposure low, as most posters here are doing. The few that have gone hog wild with this should be very careful.DonIce wrote: ↑Fri Apr 12, 2019 1:39 pmI dunno, makes perfect sense to me that there would be lots of discussion on this. Obviously, the typical boglehead strategy is well understood on this forum. Invest in a few low cost index funds at a reasonable ratio of stocks and bonds. There's a 50 page thread on it stickied at the top of the forums. When new people come to the forum and ask about how they should invest, they are invariably given advice along the lines of this general boglehead strategy.garlandwhizzer wrote: ↑Fri Apr 12, 2019 1:22 pmI find it fascination that in the Bogleheads Forum, there are 31 pages of posts about a 3X leverage ETF strategy which is a far cry from what Bogle himself advocated. Granted, it is a very interesting strategy and it backtests very well. The question of course is does backtesting accurately define what will unfold in the future. Mr. Market seems to enjoy being unpredictable and frustrating the experts who try to define its behavior in the future. Time will tell, but I'm too old and have been burned too many times with seemingly brilliant strategies to try another one.
But for long time forum members that like to think about things and chat about finances/investments, clearly the topics that will engender deeper and longer discussion is riskier strategies, untested strategies, new ideas, etc.
an 80% drawdown in just the TMF/UPRO allocation? That did happen during the 70s according to the simulations, but I think that kind of stagflation is unlikely. If it happened, however, then hopefully my house (50% of assets) and my W2 income would appreciate in value. So hopefully my total net worth would not decline by 80%. But anything is possible I suppose.