alex6499 wrote: ↑Mon Sep 18, 2023 11:42 am
I've decided that I'm done with this strategy after sitting at a 44% unrealized loss in the ROTH IRA that's hosting the UPRO/TMF. Too wild for my risk tolerance lol. I've started another ROTH IRA that only contains VTI. From here on out, future contributions are going to that one. Still holding onto the UPRO/TMF IRA, but I plan to eventually roll the funds into the IRA that has the VTI. I plan to at least hold the TMF until I reach a point where I'm comfortable transferring it into VTI.
Here's my question. Does anyone smarter than me (most anyone
) see any reason not to transfer the UPRO into my VTI IRA right now? I want to exit the strategy, and I'm at a solid gain with the UPRO. I would leave the TMF (currently down 88%
) in the hopes that it recovers eventually. I'm 28 and have nothing but time to wait lol.
Personally, I would ride it out. For those of us with a little more wear on our treads, we understand that markets recover and interest rates cycle.
I think holding UPRO is a no brainer and I would add to it in order to average down your cost...just do it. It will work out in the end and faster than freezing it in place. Let's say you invested 10K and are down to 7K, top it off to 10K and keep doing so maybe every, 3, 6, 9, or 12 months. Take a pass on adding if the market is currently above average volatility so you aren't losing money to volatility decay alone when you don't need to be. In my multi-year TQQQ investing I've had blocks of shares up 1000%+. 3x leverage does some amazing things (good and bad). As a side note, there's some good math on how to average down in various ways with different properties. Not going to get into it here, but it's worth some Googling if you're mathematically inclined.
TMF is quite a bit more difficult as none of us know what the interest rate future holds and the degree to which it will (or will not recover). However, it would probably be worth your time to review a long term chart of TMF. A recovery to 10, 15 or 20 per share is easily within the realm of the possible as part of an interest rate cutting cycle. I personally would be quite surprised to see anything near the high in TMF for a very long time and don't plan on fully recovering the TMF funds unless adding to them. With the size of the TMF drawdown, you will likely never recover what you put into it with a standard bond ETF or bonds. Really the only way to salvage your TMF funds at this point in time is to be willing to average down. That could work out well or not, or take forever to do so.
Personally, I've done what I suggested for UPRO (only I use TQQQ) and it has worked out fine. For TMF I am not adding to it, but may very well do so when it looks like inflation and interest rates are going to cycle down again. Yes, that's timing. But for this, it's really Fed following.
Full disclosure...I thought a 100% commitment to 3xETFs was nuts and never did it. I've maintained a 50/50 allocation of 1.5 leverage.
Bottom line: If you have discovered your uncle point at 28, that's a good thing to learn. However, to be a successful investor you also need to learn patience and the value of time/sitting on your hands. If your uncle point says, nope not adding to this strategy, that's completely fine and move on to VTI. However, I do feel, with a large amount of confidence that you will recover with a profit what you have put into the strategy if you at least maintain your original investment amount and give it some time. (Of course the usual caveat applies...past history does not indicate future performance.)
And once you've recovered...then never do this again.