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

[no simpler]

As a thought experiment - if you believe that markets systematically underestimate extreme tail risk, and therefore a 90% down move in the market is in fact quite possible, then 40% TMF and 60% IEF is far, far safer. The reason is obvious: you would lose your 40% TMF position, but you would have at least 60% of your capital remaining, vs a 90% drawdown for someone concentrated in unlevered index. This is similar to the barbell strategy that Taleb advocates.

Risk parity is a much a better way of limiting tail risk (assuming reasonable leverage). It's traditional MPT mean-variance optimization that relies too much on normality of returns and leads to tail risk.

[Steve Reading]

ANY 20 random data points, even of a normal distribution... is not going to appear to be normally distributed*. That's um... completely expected? That is what happens when you randomly sample 20 points of data. Does that mean stdev is invalid for measuring volatility? No.

Yes, absolutely. Which is why I don't use the St. Dev of a non-normally distributed variable (even normally distributed) until I obtain enough observations. Would you feel confident that the St. Dev. of human income is the one you get from sampling 20 humans? Would you bet money on such a number?

I wouldn't but there are people who are doing the equivalent of this. And they're doing so with distributions that we even know for a fact aren't normal.

* especially when you have 3x leveraged funds with leverage drag, etc; by definition it won't be a normal distribution. This is why for volatility targeting, I use underlying return indexes, and not those of whatever instruments I choose to execute my strategy.

Please prove that volatility drag leads to non-normal distributions; I for one did not follow this point.

Dude, lots of us know this. I'm a data scientist and I've also read Misbehaviour of Markets. It sounds like you just learned this stuff after reading Taleb or Mandlebrot, or took a course in school.

Kind of a rude and unnecessary comment.

As far as using trailing variance - it's very predictive of next month variance, and empirically, it improves risk adjusted return as an input to vol targeting, including tail risk. Even if you cannot use these variance estimates to reliably estimate the distribution of returns, especially extreme movements, this "wrong" model improves returns.

Models can be correct and very backtest well by luck. It's called data mining and overfitting. I admit that I haven't read much into it. I would wonder if it's robust (does it work with 10 days? 37 days?, etc) and consistent across markets (does it work in Japan?). I simply heard people applying it to 20 days of trading and red lights began to flash.

I did suggest to use the VIX and TYVIX instead of historical variance, which include sophisticated market participants fears about higher moments of return distributions, including tail risk. The options market is highly efficient and takes into account much more sophisticated models than just the Cauchy distribution, which is also not a completely correct distribution.

That seems like a great choice.

In the high noise to signal worlds of investment discussions, it's always great to get educated and well informed opinions.

Another rude and unnecessary comment.

Risk parity is a much a better way of limiting tail risk (assuming reasonable leverage). It's traditional MPT mean-variance optimization that relies too much on normality of returns and leads to tail risk.

I agree and I never argued otherwise. I utilize Risk Parity concepts but use long-term correlations and St. Dev. for them (over multiple years). i also make use of VIX.

[HEDGEFUNDIE]

As far as using trailing variance - it's very predictive of next month variance.

And we still do not have any reasoning as to why this should be the case...

[no simpler]

As far as using trailing variance - it's very predictive of next month variance.

And we still do not have any reasoning as to why this should be the case...

Well, a guy won the nobel prize explaining why:
http://www.econ.uiuc.edu/~econ536/Papers/engle82.pdf

This one is more readable:
http://www.cmat.edu.uy/~mordecki/hk/engle.pdf

Here is the wiki summary:
https://en.wikipedia.org/wiki/Volatility_clustering



Mandlebrot (the physicist) was supposedly the first to notice this phenomenon.

[HEDGEFUNDIE]

As far as using trailing variance - it's very predictive of next month variance.

And we still do not have any reasoning as to why this should be the case...

Well, a guy won the nobel prize explaining why:
http://www.econ.uiuc.edu/~econ536/Papers/engle82.pdf

This one is more readable:
http://www.cmat.edu.uy/~mordecki/hk/engle.pdf

Here is the wiki summary:
https://en.wikipedia.org/wiki/Volatility_clustering



Mandlebrot (the physicist) was supposedly the first to notice this phenomenon.

I’m not denying the pattern exists.

But none of those explain why the pattern should exist.

[no simpler]

As far as using trailing variance - it's very predictive of next month variance.

And we still do not have any reasoning as to why this should be the case...

Well, a guy won the nobel prize explaining why:
http://www.econ.uiuc.edu/~econ536/Papers/engle82.pdf

This one is more readable:
http://www.cmat.edu.uy/~mordecki/hk/engle.pdf

Here is the wiki summary:
https://en.wikipedia.org/wiki/Volatility_clustering



Mandlebrot (the physicist) was supposedly the first to notice this phenomenon.

I’m not denying the pattern exists.

But none of those explain why the pattern should exist.

I see. Yeah, I don't think there is a truly satisfying causal explanation. I feel the same way about so many other observed phenomena - factor models in particular. "Value", "quality", "size", etc as stemming from some sort of risk is really unsettling.

[Hydromod]

Just to get a feel, and for those like me that are not up on this stuff, I plotted the standard deviation of total return price for one month versus another month (lag one month and lag 3 months) for the S&P 500, long-term treasuries, and gold. These are from Siamond's monthly worksheet. I think that the monthly SD is based on the price changes for early years, and based on total returns for later years, and in both cases is based on the raw value rather than the log-transformed changes. I'd have preferred to use the daily returns and look at smaller lags, but we don't have the long-term data.

Color code is by decade (hot (red = 1950s) => neutral (gray = 1980s) => cool (blue = 2010s)). Note that the treasuries and gold are not available in the earlier decades.



The reported correlation coefficient is over all available observations. I used the log of monthly SD for the correlation coefficient.

The correlation coefficient for individual decades are usually less than the overall correlation coefficient. One-month lag for 2010s: S&P = 0.475, LTT = 0.611, Gold = 0.583. Since the 1960s, this is the smallest decadal value for gold, second-smallest for S&P, and third-smallest for LTT.

So this has been a thing, as many have recognized, and appears to still be a thing. The information is better than guessing for inverse-volatility calculations at monthly and even quarterly lags.

It's interesting that the volatility appears to be increasing for LTT and S&P 500 (note the predominance of cool dots at the high end and hot dots at the low end).

[make_a_better_world]

Since you guys keep discussing the optimal frequency for rebalancing, just thought I'd share an option available if you must do this inside a taxable account: M1 offers dynamic rebalancing. So I put in a deposit to get started, set the pie at 40/60, and then added small monthly auto-deposits to go in such to keep it balanced.

[HEDGEFUNDIE]

I'm all in. My total portfolio is currently 82.5% PIMCO StocksPLUS® Long Duration Fund and 17.5% Vanguard Total Intl Stock Index Trust. Over the next few months I will add to the international side to bring it back to my international target.

I can't get this fund (PSLDX) out of my head. Have been thinking about it for the last couple of weeks. And trying to figure out why I shouldn't put basically all my LC blend allocation into this fund (or as much as I can get into it).

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

[samsdad]

I'm all in. My total portfolio is currently 82.5% PIMCO StocksPLUS® Long Duration Fund and 17.5% Vanguard Total Intl Stock Index Trust. Over the next few months I will add to the international side to bring it back to my international target.

I can't get this fund (PSLDX) out of my head. Have been thinking about it for the last couple of weeks. And trying to figure out why I shouldn't put basically all my LC blend allocation into this fund (or as much as I can get into it).

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Well, I guess that means it’s time for yet another edit (no. 110ish) to the OP...

The rest of my assets will be invested "normally".

Surely this is incontrovertible...

[HEDGEFUNDIE]

I'm all in. My total portfolio is currently 82.5% PIMCO StocksPLUS® Long Duration Fund and 17.5% Vanguard Total Intl Stock Index Trust. Over the next few months I will add to the international side to bring it back to my international target.

I can't get this fund (PSLDX) out of my head. Have been thinking about it for the last couple of weeks. And trying to figure out why I shouldn't put basically all my LC blend allocation into this fund (or as much as I can get into it).

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Well, I guess that means it’s time for yet another edit (no. 110ish) to the OP...

The rest of my assets will be invested "normally".

Fair enough. Although the quote marks are telling, I would say...

[MotoTrojan]

I'm all in. My total portfolio is currently 82.5% PIMCO StocksPLUS® Long Duration Fund and 17.5% Vanguard Total Intl Stock Index Trust. Over the next few months I will add to the international side to bring it back to my international target.

I can't get this fund (PSLDX) out of my head. Have been thinking about it for the last couple of weeks. And trying to figure out why I shouldn't put basically all my LC blend allocation into this fund (or as much as I can get into it).

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

I'll wait until the 3x portfolio gets me to $10M and then move that over to PSLDX during my withdrawal phase .

[keith6014]

I'm all in. My total portfolio is currently 82.5% PIMCO StocksPLUS® Long Duration Fund and 17.5% Vanguard Total Intl Stock Index Trust. Over the next few months I will add to the international side to bring it back to my international target.

I can't get this fund (PSLDX) out of my head. Have been thinking about it for the last couple of weeks. And trying to figure out why I shouldn't put basically all my LC blend allocation into this fund (or as much as I can get into it).

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

I'll wait until the 3x portfolio gets me to $10M and then move that over to PSLDX during my withdrawal phase .

I am seriously considering moving from QQQ to PSLDX in my IRA.
Arguably, one of the best threads on BH!

[hdas]

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

This is an interesting fund, however, without knowing the nominal exposure (leverage), it's hard to evaluate. Do you know the numbers?....Is it 100% stocks 100% bonds?. Thx

[columbia]

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

This is an interesting fund, however, without knowing the nominal exposure (leverage), it's hard to evaluate. Do you know the numbers?....Is it 100% stocks 100% bonds?. Thx

That info:
https://markets.ft.com/data/funds/tears ... gs?s=PSLDX

[hdas]

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

This is an interesting fund, however, without knowing the nominal exposure (leverage), it's hard to evaluate. Do you know the numbers?....Is it 100% stocks 100% bonds?. Thx

That info:
https://markets.ft.com/data/funds/tears ... gs?s=PSLDX

Thanks, hard to know the whole exposure because (other=6.65%, Future/Forward 7.50%, Swap 6.94%)....but it seems that this is a ~150% Bond + 100% Stocks. Depending on how facile are you with futures, one could DIY with some mix of ES, ZN, ZB. And get 2-3.5% of additional CAGR. I think PIMCO strategy is sub optimal.

Cheers

[JBeck]

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Why not add dollars to your original strategy instead?

[HEDGEFUNDIE]

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Why not add dollars to your original strategy instead?

The original strategy is an Excellent Adventure.

I'd prefer for the rest of my money to be on a Somnolent Journey by comparison.

[MotoTrojan]

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Why not add dollars to your original strategy instead?

The original strategy is an Excellent Adventure.

I'd prefer for the rest of my money to be on a Somnolent Journey by comparison.

How do you feel about the bias to corporate bonds? If it existed, would you not prefer a pure long-treasury StockPLUS fund?

[HEDGEFUNDIE]

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Why not add dollars to your original strategy instead?

The original strategy is an Excellent Adventure.

I'd prefer for the rest of my money to be on a Somnolent Journey by comparison.

How do you feel about the bias to corporate bonds? If it existed, would you not prefer a pure long-treasury StockPLUS fund?

I tend to look at PSLDX holistically - in other words, I’m counting it in my AA as a 100% equity position.

My bond allocation is entirely EDV, so adding the corporate bonds probably couldn’t hurt.

[MotoTrojan]

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Why not add dollars to your original strategy instead?

The original strategy is an Excellent Adventure.

I'd prefer for the rest of my money to be on a Somnolent Journey by comparison.

How do you feel about the bias to corporate bonds? If it existed, would you not prefer a pure long-treasury StockPLUS fund?

I tend to look at PSLDX holistically - in other words, I’m counting it in my AA as a 100% equity position.

My bond allocation is entirely EDV, so adding the corporate bonds probably couldn’t hurt.

Understood. Just looking at things from a fundamental/theoretical standpoint I am curious if you see the corporate bonds as a feature or as a means to an end (easier than running your own futures/long-bond portfolio). I agree with your stance to just view this as 100% equity, I would do the same, but you chose this over an active stock-picking fund (I'd also consider that 100% equity) so curious how close to optimal you feel the strategy is.

[HEDGEFUNDIE]

Understood. Just looking at things from a fundamental/theoretical standpoint I am curious if you see the corporate bonds as a feature or as a means to an end (easier than running your own futures/long-bond portfolio). I agree with your stance to just view this as 100% equity, I would do the same, but you chose this over an active stock-picking fund (I'd also consider that 100% equity) so curious how close to optimal you feel the strategy is.

Means to an end for sure. Who knows, maybe there is something to actively selected corporate bonds that improves the strategy.

I don't think there is enough alpha to be had in any unleveraged large cap stock fund to distinguish them; I was holding Contrafund with this money but I wasn't expecting significant sustained outperformance from it.

[caklim00]

So annoyed right now. Was buying into this today at WF to transfer to M1 early August. Turns out TMF is restricted, argh...
Should I just buy TLT until I can rebalnace into TMF at M1?

[MoneyMarathon]

Should I just buy TLT

EDV (extended duration) or UBT (2x ETF) would give you more term risk than just TLT, so they would be preferable.

[caklim00]

Should I just buy TLT

EDV (extended duration) or UBT (2x ETF) would give you more term risk than just TLT, so they would be preferable.

Thanks, I just went with TLT since its hopefully just for a few days and didn't want to deal with bid/ask spreads more than 0.01

[MotoTrojan]

Should I just buy TLT

EDV (extended duration) or UBT (2x ETF) would give you more term risk than just TLT, so they would be preferable.

Thanks, I just went with TLT since its hopefully just for a few days and didn't want to deal with bid/ask spreads more than 0.01

Good luck. Not sure why you couldn't just wait until the M1 transfer. If there is a large equity decline you may have a deeper drawdown than the rest of us.

[tj]

I'm all in. My total portfolio is currently 82.5% PIMCO StocksPLUS® Long Duration Fund and 17.5% Vanguard Total Intl Stock Index Trust. Over the next few months I will add to the international side to bring it back to my international target.

I can't get this fund (PSLDX) out of my head. Have been thinking about it for the last couple of weeks. And trying to figure out why I shouldn't put basically all my LC blend allocation into this fund (or as much as I can get into it).

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Only in IRA's or taxable too?

[HEDGEFUNDIE]

I'm all in. My total portfolio is currently 82.5% PIMCO StocksPLUS® Long Duration Fund and 17.5% Vanguard Total Intl Stock Index Trust. Over the next few months I will add to the international side to bring it back to my international target.

I can't get this fund (PSLDX) out of my head. Have been thinking about it for the last couple of weeks. And trying to figure out why I shouldn't put basically all my LC blend allocation into this fund (or as much as I can get into it).

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Only in IRA's or taxable too?

I would not touch any of these strategies in taxable.

[schismal]

Only in IRA's or taxable too?

The PIMCO funds, especially, are such a bad idea for taxable that Vanguard won’t even let you buy them outside a tax-sheltered account.

[MotoTrojan]

I wish I had more IRA space .

[columbia]

I wish I had more IRA space .

What’s your current AA?

25% PSLDX/75% treasuries has* bested a standard 50/50.

[caklim00]

Should I just buy TLT

EDV (extended duration) or UBT (2x ETF) would give you more term risk than just TLT, so they would be preferable.

Thanks, I just went with TLT since its hopefully just for a few days and didn't want to deal with bid/ask spreads more than 0.01

Good luck. Not sure why you couldn't just wait until the M1 transfer. If there is a large equity decline you may have a deeper drawdown than the rest of us.

Found out that I couldn't buy TMF after I bought UPRO lol. Seriously Hope I get lucky and if there is an up day, maybe I just sell both positions and wait until it makes it to M1. M1 is very slow with there responses I find so its definitely a risk.

[MotoTrojan]

I wish I had more IRA space .

What’s your current AA?

25% PSLDX/75% treasuries has* bested a standard 50/50.

Core portfolio is 55% Total US, 25% Total Int, 20% Small-value. I settled on 40/30/30 UPRO/TMF/EDV quarterly for this excellent adventure side-bet, which is currently 27% of my portfolio, but contributions are pushing that down quickly (will see how returns potentially counter-balance that). I also hold a large sum of private company stock but that could go to zero much more quickly than this strategy.

I currently am looking at the core portfolio in isolation (not considering the UPRO exposure) but would consider PSLDX as US large-cap. I probably should consider this leveraged ETF as having a weight contribution to US large-cap and holding proportionally more International and Small-value.

[tj]

I'm all in. My total portfolio is currently 82.5% PIMCO StocksPLUS® Long Duration Fund and 17.5% Vanguard Total Intl Stock Index Trust. Over the next few months I will add to the international side to bring it back to my international target.

I can't get this fund (PSLDX) out of my head. Have been thinking about it for the last couple of weeks. And trying to figure out why I shouldn't put basically all my LC blend allocation into this fund (or as much as I can get into it).

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Only in IRA's or taxable too?

I would not touch any of these strategies in taxable.

Yeah, that's what I figured...

[Cochese]

Why not add dollars to your original strategy instead?

The original strategy is an Excellent Adventure.

I'd prefer for the rest of my money to be on a Somnolent Journey by comparison.

How do you feel about the bias to corporate bonds? If it existed, would you not prefer a pure long-treasury StockPLUS fund?

I tend to look at PSLDX holistically - in other words, I’m counting it in my AA as a 100% equity position.

My bond allocation is entirely EDV, so adding the corporate bonds probably couldn’t hurt.

Understood. Just looking at things from a fundamental/theoretical standpoint I am curious if you see the corporate bonds as a feature or as a means to an end (easier than running your own futures/long-bond portfolio). I agree with your stance to just view this as 100% equity, I would do the same, but you chose this over an active stock-picking fund (I'd also consider that 100% equity) so curious how close to optimal you feel the strategy is.

Apologies if I missed this somewhere along the line, but why would PSLDX be treated as 100% equity? I feel like I’m missing some subtlety here.

[HEDGEFUNDIE]

The original strategy is an Excellent Adventure.

I'd prefer for the rest of my money to be on a Somnolent Journey by comparison.

How do you feel about the bias to corporate bonds? If it existed, would you not prefer a pure long-treasury StockPLUS fund?

I tend to look at PSLDX holistically - in other words, I’m counting it in my AA as a 100% equity position.

My bond allocation is entirely EDV, so adding the corporate bonds probably couldn’t hurt.

Understood. Just looking at things from a fundamental/theoretical standpoint I am curious if you see the corporate bonds as a feature or as a means to an end (easier than running your own futures/long-bond portfolio). I agree with your stance to just view this as 100% equity, I would do the same, but you chose this over an active stock-picking fund (I'd also consider that 100% equity) so curious how close to optimal you feel the strategy is.

Apologies if I missed this somewhere along the line, but why would PSLDX be treated as 100% equity? I feel like I’m missing some subtlety here.

PSLDX’s risk profile (std dev, max drawdown) is comparable to the S&P 500.

[MoneyMarathon]

How do you feel about the bias to corporate bonds? If it existed, would you not prefer a pure long-treasury StockPLUS fund?

I tend to look at PSLDX holistically - in other words, I’m counting it in my AA as a 100% equity position.

My bond allocation is entirely EDV, so adding the corporate bonds probably couldn’t hurt.

Understood. Just looking at things from a fundamental/theoretical standpoint I am curious if you see the corporate bonds as a feature or as a means to an end (easier than running your own futures/long-bond portfolio).

I think it's useful to keep in mind that it has a negative cash position and a corporate bond position, including some international and high yield. While the S&P 500 exposure explains most of its performance, the rest has effects on how I think about asset allocation:

(1) I am happy that I get to put some corporate bonds in tax-advantaged, without taking away much space from equity. Usually someone who is in a high tax bracket and has a long time horizon would avoid corporate bonds, so this is a nice bit of diversification.

(2) I am more inclined to hold a pure treasury fund in taxable (such as VGLT).

(3) I am less inclined to have much low-yielding cash, because I'm net negative on cash and it's inefficient to be both short and long cash. The borrow rate is necessarily above the payout rate.

If I just viewed it as a US large cap position, then I wouldn't necessarily make those conclusions.

It will also explain why it can drop more than equities, when it eventually does that (like it did in 2018), and I hopefully won't worry as much about it. Someone who viewed it as stocks with just some consistent positive alpha might panic more.

[MotoTrojan]

How do you feel about the bias to corporate bonds? If it existed, would you not prefer a pure long-treasury StockPLUS fund?

I tend to look at PSLDX holistically - in other words, I’m counting it in my AA as a 100% equity position.

My bond allocation is entirely EDV, so adding the corporate bonds probably couldn’t hurt.

Understood. Just looking at things from a fundamental/theoretical standpoint I am curious if you see the corporate bonds as a feature or as a means to an end (easier than running your own futures/long-bond portfolio).

I think it's useful to keep in mind that it has a negative cash position and a corporate bond position, including some international and high yield. While the S&P 500 exposure explains most of its performance, the rest has effects on how I think about asset allocation:

(1) I am happy that I get to put some corporate bonds in tax-advantaged, without taking away much space from equity. Usually someone who is in a high tax bracket and has a long time horizon would avoid corporate bonds, so this is a nice bit of diversification.

(2) I am more inclined to hold a pure treasury fund in taxable (such as VGLT).

(3) I am less inclined to have much low-yielding cash, because I'm net negative on cash and it's inefficient to be both short and long cash. The borrow rate is necessarily above the payout rate.

If I just viewed it as a US large cap position, then I wouldn't necessarily make those conclusions.

It will also explain why it can drop more than equities, when it eventually does that (like it did in 2018), and I hopefully won't worry as much about it. Someone who viewed it as stocks with just some consistent positive alpha might panic more.

All excellent points and understood. For someone who would otherwise be 100/0 I do think it makes sense to consider this a portion of your US large-cap allocation, as it has significantly more correlation there than to other equity assets classes, but it is of course not a pure equity play.

[keith6014]

tried to buy PSLDX in Merrill Roth IRA. Says


This fund is not eligible to be purchased in the account selected. Please select an eligible fund. (RES_FTSN0XXX)

[tj]

tried to buy PSLDX in Merrill Roth IRA. Says


This fund is not eligible to be purchased in the account selected. Please select an eligible fund. (RES_FTSN0XXX)

It's not available at Merrill. It seems to be available at etrade, vanguard, and maybe Ally?

[MotoTrojan]

tried to buy PSLDX in Merrill Roth IRA. Says


This fund is not eligible to be purchased in the account selected. Please select an eligible fund. (RES_FTSN0XXX)

It's not available at Merrill. It seems to be available at etrade, vanguard, and maybe Ally?

Rumor is you can get it at Ally the easiest, with a $100 minimum and $10 buy/sell price. If I start allocating some of my Roth contributions to it I will likely have to go the Ally route.

[keith6014]

is it available with Fidelity? My employment restricts me from certain brokerages so its not that easy for me to move.

[rascott]

tried to buy PSLDX in Merrill Roth IRA. Says


This fund is not eligible to be purchased in the account selected. Please select an eligible fund. (RES_FTSN0XXX)

It's not available at Merrill. It seems to be available at etrade, vanguard, and maybe Ally?

TDA has it, but they charge a $50 transaction fee like they do for a lot of MFs. Not that big of a deal if doing a larger one time investment. But not ideal.

[caklim00]

Should I just buy TLT

EDV (extended duration) or UBT (2x ETF) would give you more term risk than just TLT, so they would be preferable.

Thanks, I just went with TLT since its hopefully just for a few days and didn't want to deal with bid/ask spreads more than 0.01

Good luck. Not sure why you couldn't just wait until the M1 transfer. If there is a large equity decline you may have a deeper drawdown than the rest of us.

Big drawdown scared me at start since its likely going to be at least a week before it made it over to M1. Ran 20 day lookback for risk parity using UPRO and TLT in PV and it came back with 69% TLT, 31% UPRO so I sold some UPRO and bought TLT once the price bounced back up a bit this morning. Will rebalance using 20 day lookback with UPRO and TMF once it makes it over to M1. Looks like long term the allocation dances around 75% TLT and 25% UPRO. Looks like a slightly better version of S&P 500 (smoother, smaller drawdowns, and about a 4% higher annual return).

Darn wells fargo and restricting ETFs lol. You never know if an order will go thorugh until you hit that submit buttom

[RandomWord]

I'm all in. My total portfolio is currently 82.5% PIMCO StocksPLUS® Long Duration Fund and 17.5% Vanguard Total Intl Stock Index Trust. Over the next few months I will add to the international side to bring it back to my international target.

I can't get this fund (PSLDX) out of my head. Have been thinking about it for the last couple of weeks. And trying to figure out why I shouldn't put basically all my LC blend allocation into this fund (or as much as I can get into it).

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Only in IRA's or taxable too?

I would not touch any of these strategies in taxable.

Can you elaborate on why not? If we assume that this strategy works perfectly (a big if, but let's just go with it) then it will make a lot of money. Better to make a lot of money and pay a lot of taxes then to not make money at all. Alternatively, if the strategy doesn't work, you won't be paying paxes on it (because there won't be any gains), regardless of what kind of account it's in.

[MotoTrojan]

I'm all in. My total portfolio is currently 82.5% PIMCO StocksPLUS® Long Duration Fund and 17.5% Vanguard Total Intl Stock Index Trust. Over the next few months I will add to the international side to bring it back to my international target.

I can't get this fund (PSLDX) out of my head. Have been thinking about it for the last couple of weeks. And trying to figure out why I shouldn't put basically all my LC blend allocation into this fund (or as much as I can get into it).

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Only in IRA's or taxable too?

I would not touch any of these strategies in taxable.

Can you elaborate on why not? If we assume that this strategy works perfectly (a big if, but let's just go with it) then it will make a lot of money. Better to make a lot of money and pay a lot of taxes then to not make money at all. Alternatively, if the strategy doesn't work, you won't be paying paxes on it (because there won't be any gains), regardless of what kind of account it's in.

The allocation drifts massively and requires substantial exchanges during most rebalancing periods. If you don't rebalance your performance will be awful (just look at 100% UPRO in isolation). Sure you may be able to keep up with rebalancing via contributions right now, but IF the strategy is successful and you are at $10M, do you really think you'll have >$1M every quarter to rebalance with?

There are countless strategies that have previously outperformed the S&P500 before taxes but would be crushed due to the tax-drag of frequent trading. In this case you could even be underperforming the S&P500 and still have a massive tax-bill, even if your longterm return is negative.

[caklim00]

Sure you may be able to keep up with rebalancing via contributions right now, but IF the strategy is successful and you are at $10M, do you really think you'll have >$1M every quarter to rebalance with?

Can I please have this problem?

[RandomWord]

Starting this week I will also be shifting the bulk of my US large cap holdings into PSLDX. Just makes too much sense for an aggressive, risk-tolerant accumulator to ignore.

Only in IRA's or taxable too?

I would not touch any of these strategies in taxable.

Can you elaborate on why not? If we assume that this strategy works perfectly (a big if, but let's just go with it) then it will make a lot of money. Better to make a lot of money and pay a lot of taxes then to not make money at all. Alternatively, if the strategy doesn't work, you won't be paying paxes on it (because there won't be any gains), regardless of what kind of account it's in.

The allocation drifts massively and requires substantial exchanges during most rebalancing periods. If you don't rebalance your performance will be awful (just look at 100% UPRO in isolation). Sure you may be able to keep up with rebalancing via contributions right now, but IF the strategy is successful and you are at $10M, do you really think you'll have >$1M every quarter to rebalance with?

There are countless strategies that have previously outperformed the S&P500 before taxes but would be crushed due to the tax-drag of frequent trading. In this case you could even be underperforming the S&P500 and still have a massive tax-bill, even if your longterm return is negative.

If my account grew to $10M, I would just suck it up and pay the capital gains taxes. I'd still have at least $7.5M left over, much better than the likely returns of any normal strategy. This seems like winning the lottery and then complaining about how bad the taxes are.

And "normal" strategies will eventually have to pay capital gains taxes too, you're just delaying them. Of course delaying taxes is also a benefit, but you'd need some weirdly specific returns in order for this strategy to work overall but be dragged down by taxes. I'd like to see some numbers on how that would even work.

[jminv]

Only in IRA's or taxable too?

I would not touch any of these strategies in taxable.

Can you elaborate on why not? If we assume that this strategy works perfectly (a big if, but let's just go with it) then it will make a lot of money. Better to make a lot of money and pay a lot of taxes then to not make money at all. Alternatively, if the strategy doesn't work, you won't be paying paxes on it (because there won't be any gains), regardless of what kind of account it's in.

The allocation drifts massively and requires substantial exchanges during most rebalancing periods. If you don't rebalance your performance will be awful (just look at 100% UPRO in isolation). Sure you may be able to keep up with rebalancing via contributions right now, but IF the strategy is successful and you are at $10M, do you really think you'll have >$1M every quarter to rebalance with?

There are countless strategies that have previously outperformed the S&P500 before taxes but would be crushed due to the tax-drag of frequent trading. In this case you could even be underperforming the S&P500 and still have a massive tax-bill, even if your longterm return is negative.

If my account grew to $10M, I would just suck it up and pay the capital gains taxes. I'd still have at least $7.5M left over, much better than the likely returns of any normal strategy. This seems like winning the lottery and then complaining about how bad the taxes are.

And "normal" strategies will eventually have to pay capital gains taxes too, you're just delaying them. Of course delaying taxes is also a benefit, but you'd need some weirdly specific returns in order for this strategy to work overall but be dragged down by taxes. I'd like to see some numbers on how that would even work.

If you were interested in starting this strategy in taxable on a large scale as a US citizen and you are retired or your work is not dependent on location, you could move to Puerto Rico to avoid the re-balancing tax drag issue for 20 years. Of course it's not as great as it seems and to make it worthwhile, you would already need to have a large portfolio.

[MotoTrojan]

If my account grew to $10M, I would just suck it up and pay the capital gains taxes. I'd still have at least $7.5M left over, much better than the likely returns of any normal strategy. This seems like winning the lottery and then complaining about how bad the taxes are.

And "normal" strategies will eventually have to pay capital gains taxes too, you're just delaying them. Of course delaying taxes is also a benefit, but you'd need some weirdly specific returns in order for this strategy to work overall but be dragged down by taxes. I'd like to see some numbers on how that would even work.

If it were as simple as it growing to $10M and then you pay 25% tax that would be awesome. Instead you are paying 25% tax (or whatever your average tax rate ends up being, I'd maybe suggest annual re-balancing to keep it as a long-term gain). This means your returns are being reduced by 25%, which is vastly different than a one time 25% reduction after completion of growth. A 2% advisory fee will cut your portfolio in half over just a couple of decades, imagine a 15-25% annual tax dragging you down, yikes.

You do you, but I think it would be a pretty reckless maneuver to use this strategy in taxable. Same situation with the Pimco fund, which has double digit distribution yield.