What to pair with NTSX?

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mr.masku
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Re: What to pair with NTSX?

Post by mr.masku » Wed Jan 29, 2020 4:17 pm

Lee_WSP wrote:
Wed Jan 29, 2020 3:51 pm
I think vs a Total Market fund that NTSX is a good way to go for an accumulator. Probably not the best idea for wealth preservation.
Not seeing the reasoning for that... take a look at these portfolios:

https://www.portfoliovisualizer.com/bac ... n7_2=55.56

Portfolio 1: 40/60 Stocks/Bonds
Portfolio 2: 44.44/55.56 NTSX (simulated)/Total Bond

The two portfolios have the same overall 40/60 Stocks/Bonds ratio. Portfolio 2 has 22.22% leverage.

Portfolio 2 has better CAGR, lower Max DD, slightly higher Std Dev.

crystalbank
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Re: What to pair with NTSX?

Post by crystalbank » Wed Jan 29, 2020 4:17 pm

I like the idea of NTSX and so far it performed consistent with the expectations set by the prospectus. BUT it's just VERY illiquid. The bid/ask spread is often too wide and very often there's either a huge premium/discount to NAV at market closing time.

I think it would make more sense as a Mutual Fund, but then probably won't be as tax efficient. I bought few shares in taxable last week and was hoping to accumulate more this year but these liquidity (or lack of) issues bother me over the long term. Last thing I want is to be stuck with a fund that is very illiquid in a taxable account.

Lee_WSP
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Re: What to pair with NTSX?

Post by Lee_WSP » Wed Jan 29, 2020 4:42 pm

mr.masku wrote:
Wed Jan 29, 2020 4:17 pm
Lee_WSP wrote:
Wed Jan 29, 2020 3:51 pm
I think vs a Total Market fund that NTSX is a good way to go for an accumulator. Probably not the best idea for wealth preservation.
Not seeing the reasoning for that... take a look at these portfolios:

https://www.portfoliovisualizer.com/bac ... n7_2=55.56

Portfolio 1: 40/60 Stocks/Bonds
Portfolio 2: 44.44/55.56 NTSX (simulated)/Total Bond

The two portfolios have the same overall 40/60 Stocks/Bonds ratio. Portfolio 2 has 22.22% leverage.

Portfolio 2 has better CAGR, lower Max DD, slightly higher Std Dev.
Let me rephrase my initial statement.

Going 100% TSM vs 100% NTSX is about equal to the accumulator. I'd give NTSX the slight edge due to the bond component. But it probably won't matter in the end.

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willthrill81
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Re: What to pair with NTSX?

Post by willthrill81 » Wed Jan 29, 2020 6:18 pm

mr.masku wrote:
Wed Jan 29, 2020 12:55 pm
willthrill81 wrote:
Wed Jan 29, 2020 11:46 am
oldcomputerguy wrote:
Wed Jan 29, 2020 11:39 am
nullisland wrote:
Wed Jan 29, 2020 11:07 am
There's nothing magic happening here, on its own NTSX is unquestionably more risky than a 60/40 portfolio. It's similar in the sense that it should have roughly the same Sharpe ratio, but it has 1.5x the risk and return.
That's what I was missing. The way I read the above, the risk and return of the fund was basically the same as the risk and return of a 60/40 portfolio, so I couldn't see the point. Added return with more risk makes sense. Thanks.
I'm not convinced that NTSX merely offers 50% more risk and return than a 60/40 portfolio. If it did, then the Sharpe ratio should be about the same for both. But over the admittedly brief history of NTSX, that hasn't been the case. The Sharpe ratio for NTSX since September of 2017 was .78, whereas it was .69 for a 60/40 of VTSAX/VBTLX.

Further, over the same period, NTSX provided higher returns than VTSAX (12.72% vs. 9.11%) but a lower drawdown as well (-11.24% vs. -14.26%). That doesn't look like merely ramping up risk and returns to me.
The Sharpe Ratios for a Simulated NTSX and an Actual 60/40 Portfolio over a longer duration are the same, at 0.64.
https://www.portfoliovisualizer.com/bac ... ion3_1=-50
Thanks.

It still would have significantly outperformed VTSAX. I still find an allocation of 60% to NTSX and 40% to LTT to be interesting.
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core4portfolio
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Re: What to pair with NTSX?

Post by core4portfolio » Thu Jan 30, 2020 1:21 am

if NTSX is mutual fund then its really good to not worry on liquidity..... EFT but with very low volume ? just 25k per day
How will you guys liquidate that if you have large quantity to sale on one day ?
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Wyodoc
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Re: What to pair with NTSX?

Post by Wyodoc » Thu Jan 30, 2020 8:38 am

I believe this is incorrect.
ETF liquidity has 0 to do with daily volume of the ETF but depends on the underlying assets of the ETF. There are many posts here discussing this and how people complete trades of ETFs with low volume in millions.
I have personally TLH NTSX when it had lower volume than currently in low 100k size instantaneously.
Low volume can effect NAV and the price (which for long term investors shouldn’t be a big deal) but not the liquidity.

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nisiprius
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Re: What to pair with NTSX?

Post by nisiprius » Thu Jan 30, 2020 9:12 am

As I understand WisdomTree, the right thing to pair with NTSX would be something that has intriguingly low correlation with stocks and bonds, but disappointingly low return.

If you had, say, a portfolio of 100% Vanguard Balanced Index (60/40 Total Stock/Total Bond) and you cut that down to 67% of your portfolio, and filled up the other 33% with something like the WisdomTree Managed Futures fund, WTMF--nope, not that one. PCRIX, PIMCO Commodity RealReturn strategy? Nope. Vanguard Market Neutral Fund? Nope. Uh... those all have had returns-since-inception that have been too disappointing.

...with a hypothetical alt fund of some kind, say one that has been earning less than Balanced Index, but more than Treasury Bills...

...you might improve the Sharpe ratio but, at the same time, drag down return. Reduced return, but volatility reduced even more.

You could fix that by leveraging up the return of Balanced Index by swapping in NTSX. If you filled the other 34% with a money market fund or Treasury bills or something, you'd be back to where you were--going round Robin Hood's barn to get back to 60/40. But if you could find something with low correlation and some kind of half decent return, you would be ahead of where you were with Balanced Index. Instead of "reduced return, volatility reduced even more," you could get to "same return, less volatility" or you could get to "same volatility, more return."

I think that's what they mean by an "overlay" strategy. You're not trying to get 1.5X the performance of 60/40, you're trying to overcome the drag effect from typical diversifiers having lower Sharpe ratios than 60/40. You are seeking to get 1X the performance of 60/40, by filling 67% of your portfolio with 90/60, and then layer some MPT diversification benefit on top of that.

Subtle. Ain't gonna work over time periods in which your chosen "alt" diversifier is doing this:

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guyinlaw
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Re: What to pair with NTSX?

Post by guyinlaw » Thu Jan 30, 2020 9:31 am

core4portfolio wrote:
Thu Jan 30, 2020 1:21 am
if NTSX is mutual fund then its really good to not worry on liquidity..... EFT but with very low volume ? just 25k per day
How will you guys liquidate that if you have large quantity to sale on one day ?
NTSX components are SP500 stocks and treasury future.. Two of the most liquid investments... You can liquidate 10s of millions without any issue..

core4portfolio
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Re: What to pair with NTSX?

Post by core4portfolio » Thu Jan 30, 2020 11:07 am

guyinlaw wrote:
Thu Jan 30, 2020 9:31 am
core4portfolio wrote:
Thu Jan 30, 2020 1:21 am
if NTSX is mutual fund then its really good to not worry on liquidity..... EFT but with very low volume ? just 25k per day
How will you guys liquidate that if you have large quantity to sale on one day ?
NTSX components are SP500 stocks and treasury future.. Two of the most liquid investments... You can liquidate 10s of millions without any issue..
Do NAV price dont change much more / bid spread will be so wide ?
I used to do INDL long back but its very volume on any day and its bid/spread price ask will be wider..
if you investing 40k then you need 1300 units approximately but entire day's volume is only 25k.. so if 40 such people decided to sell 40k worth of investments then we dont have any buyers to buy :(
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guyinlaw
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Re: What to pair with NTSX?

Post by guyinlaw » Thu Jan 30, 2020 11:15 am

core4portfolio wrote:
Thu Jan 30, 2020 11:07 am
guyinlaw wrote:
Thu Jan 30, 2020 9:31 am
core4portfolio wrote:
Thu Jan 30, 2020 1:21 am
if NTSX is mutual fund then its really good to not worry on liquidity..... EFT but with very low volume ? just 25k per day
How will you guys liquidate that if you have large quantity to sale on one day ?
NTSX components are SP500 stocks and treasury future.. Two of the most liquid investments... You can liquidate 10s of millions without any issue..
Do NAV price dont change much more / bid spread will be so wide ?
I used to do INDL long back but its very volume on any day and its bid/spread price ask will be wider..
if you investing 40k then you need 1300 units approximately but entire day's volume is only 25k.. so if 40 such people decided to sell 40k worth of investments then we dont have any buyers to buy :(
Bid ask spread is a problem, if you are trading frequently,.. If you are buy and hold, there should be no issue.. (might overpay for couple of cents)

Put a limit order of any quantity with a limit price (based on NAV on website and your own calculation) and the market maker will fill the order for you. (Will create ETFs if required)

schismal
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Re: What to pair with NTSX?

Post by schismal » Thu Jan 30, 2020 11:17 am

core4portfolio wrote:
Thu Jan 30, 2020 11:07 am
guyinlaw wrote:
Thu Jan 30, 2020 9:31 am
core4portfolio wrote:
Thu Jan 30, 2020 1:21 am
if NTSX is mutual fund then its really good to not worry on liquidity..... EFT but with very low volume ? just 25k per day
How will you guys liquidate that if you have large quantity to sale on one day ?
NTSX components are SP500 stocks and treasury future.. Two of the most liquid investments... You can liquidate 10s of millions without any issue..
Do NAV price dont change much more / bid spread will be so wide ?
I used to do INDL long back but its very volume on any day and its bid/spread price ask will be wider..
if you investing 40k then you need 1300 units approximately but entire day's volume is only 25k.. so if 40 such people decided to sell 40k worth of investments then we dont have any buyers to buy :(
Someone in the previous thread bought 400k on a market order and it went through just fine. LINK

rascott
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Re: What to pair with NTSX?

Post by rascott » Thu Jan 30, 2020 11:42 am

core4portfolio wrote:
Thu Jan 30, 2020 11:07 am
guyinlaw wrote:
Thu Jan 30, 2020 9:31 am
core4portfolio wrote:
Thu Jan 30, 2020 1:21 am
if NTSX is mutual fund then its really good to not worry on liquidity..... EFT but with very low volume ? just 25k per day
How will you guys liquidate that if you have large quantity to sale on one day ?
NTSX components are SP500 stocks and treasury future.. Two of the most liquid investments... You can liquidate 10s of millions without any issue..
Do NAV price dont change much more / bid spread will be so wide ?
I used to do INDL long back but its very volume on any day and its bid/spread price ask will be wider..
if you investing 40k then you need 1300 units approximately but entire day's volume is only 25k.. so if 40 such people decided to sell 40k worth of investments then we dont have any buyers to buy :(

I've bought it using market orders and it fills immediately.... usually halfway between bid and ask. The market maker will create whatever quantity you need to buy.

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travelogue
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Re: What to pair with NTSX?

Post by travelogue » Thu Jan 30, 2020 12:03 pm

Since NTSX has a domestic equity allocation, why not something like VXUS or IXUS (total market ex-us) for international exposure, or a more risk (and hopefully return) oriented allocation like EFV (EAFE value) and SCHE or VWO (emerging markets).

rascott
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Re: What to pair with NTSX?

Post by rascott » Thu Jan 30, 2020 12:15 pm

travelogue wrote:
Thu Jan 30, 2020 12:03 pm
Since NTSX has a domestic equity allocation, why not something like VXUS or IXUS (total market ex-us) for international exposure, or a more risk (and hopefully return) oriented allocation like EFV (EAFE value) and SCHE or VWO (emerging markets).

I've held some EFV for a long time. Sure wish I hadn't. I guess it's doing it's diversification thing quite well. By going literally nowhere for years.

garlandwhizzer
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Re: What to pair with NTSX?

Post by garlandwhizzer » Thu Jan 30, 2020 12:19 pm

willthrill81 wrote:

But over the admittedly brief history of NTSX, that hasn't been the case. The Sharpe ratio for NTSX since September of 2017 was .78, whereas it was .69 for a 60/40 of VTSAX/VBTLX.

Further, over the same period, NTSX provided higher returns than VTSAX (12.72% vs. 9.11%) but a lower drawdown as well (-11.24% vs. -14.26%). That doesn't look like merely ramping up risk and returns to me.
These admittedly impressive risk adjusted returns for NTSX occurred over 17 months, the lifetime of the fund. Except for the brief fake out bear market of Q4 2018, the period of the fund's existence has been in a solid bull market. S&P 500 returns for calendar 2019 were 31.5% for VOO. NTSX is designed to do substantially better in a bull market than 60/40 so that is no surprise. Whether the brief sentiment driven downturn of Q4 2018 (fear of a recession that didn't happen) in which NTSX held up pretty well is an accurate forecast of how it will hold up in a severe bear market in the midst of a bad recession we don't know for sure as wlllthrill81 pointed out.

I am not aware of any well tested long term strategy other than the perplexing low vol anomaly (which is very different from this higher vol strategy) that has been shown to substantially increase returns without commensurate increases in risk. Any strategy that does this reliably will quickly get very crowded. I remain skeptical because NTSX has not yet passed the test of a severe bear. The combo of NTSX with LTT is an interesting option theoretically but again how it will works out in time through multiple market cycles is an unknown IMO. Theory is nice, but outcome doesn't always correlate with theory.

As others have said, NTSX could be useful when you're in the long term accumulation phase assuming you're not risk averse and you have a secure income stream. 90/10 without leverage is what Buffett chose for his wife's portfolio. If you're financially secure and immune to bear markets you'll thrive long term with either 90/10 approache. The risk if you're not financially immune is a market crisis like 2007-9 which is an unknown at present. 17 months of backtesting is insufficient to answer that question. Many of us find it hard to hold onto our 60% equity position at such times and surely it would be harder with 90%. I'm in the retirement phase and NTSX is not my cup of tea.

Garland Whizzer

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travelogue
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Re: What to pair with NTSX?

Post by travelogue » Thu Jan 30, 2020 12:35 pm

rascott wrote:
Thu Jan 30, 2020 12:15 pm
travelogue wrote:
Thu Jan 30, 2020 12:03 pm
Since NTSX has a domestic equity allocation, why not something like VXUS or IXUS (total market ex-us) for international exposure, or a more risk (and hopefully return) oriented allocation like EFV (EAFE value) and SCHE or VWO (emerging markets).

I've held some EFV for a long time. Sure wish I hadn't. I guess it's doing it's diversification thing quite well. By going literally nowhere for years.
The longer things go sideways and chase out those who can’t, or won’t, stay the course, the more potential for commensurate outperformance once the asset class pendulum swings back. (Unless it doesn’t.)

There’s a very sound historical and theoretical basis for standing pat if you have a sufficient time horizon.

NTSX, in theory, gives your portfolio “space” for asset classes you might otherwise feel uncomfortable allocating to and buys time for those classes to begin working.

stormcrow
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Re: What to pair with NTSX?

Post by stormcrow » Thu Jan 30, 2020 2:59 pm

rascott wrote:
Thu Jan 30, 2020 12:15 pm
travelogue wrote:
Thu Jan 30, 2020 12:03 pm
Since NTSX has a domestic equity allocation, why not something like VXUS or IXUS (total market ex-us) for international exposure, or a more risk (and hopefully return) oriented allocation like EFV (EAFE value) and SCHE or VWO (emerging markets).

I've held some EFV for a long time. Sure wish I hadn't. I guess it's doing it's diversification thing quite well. By going literally nowhere for years.
I think this encapsulates the crux of the thread, and my own personal frustrations. It is really hard to find anything worthwhile outside the US to invest in at the moment. Of course, will that change? Quite possibly, but how long will one be bagholding waiting on the change?

Lee_WSP
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Re: What to pair with NTSX?

Post by Lee_WSP » Thu Jan 30, 2020 3:27 pm

stormcrow wrote:
Thu Jan 30, 2020 2:59 pm
rascott wrote:
Thu Jan 30, 2020 12:15 pm
travelogue wrote:
Thu Jan 30, 2020 12:03 pm
Since NTSX has a domestic equity allocation, why not something like VXUS or IXUS (total market ex-us) for international exposure, or a more risk (and hopefully return) oriented allocation like EFV (EAFE value) and SCHE or VWO (emerging markets).

I've held some EFV for a long time. Sure wish I hadn't. I guess it's doing it's diversification thing quite well. By going literally nowhere for years.
I think this encapsulates the crux of the thread, and my own personal frustrations. It is really hard to find anything worthwhile outside the US to invest in at the moment. Of course, will that change? Quite possibly, but how long will one be bagholding waiting on the change?
There's always gold and/or commodities.

rascott
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Re: What to pair with NTSX?

Post by rascott » Thu Jan 30, 2020 4:45 pm

travelogue wrote:
Thu Jan 30, 2020 12:35 pm
rascott wrote:
Thu Jan 30, 2020 12:15 pm
travelogue wrote:
Thu Jan 30, 2020 12:03 pm
Since NTSX has a domestic equity allocation, why not something like VXUS or IXUS (total market ex-us) for international exposure, or a more risk (and hopefully return) oriented allocation like EFV (EAFE value) and SCHE or VWO (emerging markets).

I've held some EFV for a long time. Sure wish I hadn't. I guess it's doing it's diversification thing quite well. By going literally nowhere for years.
The longer things go sideways and chase out those who can’t, or won’t, stay the course, the more potential for commensurate outperformance once the asset class pendulum swings back. (Unless it doesn’t.)

There’s a very sound historical and theoretical basis for standing pat if you have a sufficient time horizon.

NTSX, in theory, gives your portfolio “space” for asset classes you might otherwise feel uncomfortable allocating to and buys time for those classes to begin working.

I'll hold as I refuse to sell anything that I've bought. I may stop allocating new money to something..... but I can't sell, ever. Rode a couple individual stocks into BK with this stubbornness.

Day9
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Re: What to pair with NTSX?

Post by Day9 » Fri Jan 31, 2020 12:08 am

I'm surprised no one has suggested QSPIX AQR Style Premia Alternative: "The Fund invests long and short across five different asset groups (stocks & industries, equity indices, fixed income, currencies and commodities) and four investment styles (Value, Momentum, Carry and Defensive), and aims to be market neutral"

I personally do not invest in either of these funds. I considered using leverage but if I were to do that I would do it manually using futures or options/LEAPS and ultimately decided against it and wrote my IPS to be unleveraged, long only.
I'm just a fan of the person I got my user name from

core4portfolio
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Re: What to pair with NTSX?

Post by core4portfolio » Fri Jan 31, 2020 10:25 am

Bought NTSX in roth finally. No look back till next year
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effigy98
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Re: What to pair with NTSX?

Post by effigy98 » Fri Jan 31, 2020 11:00 am

Inspired by golden butterfly

42 NTSX
20 SMMV
20 GLDM
18 EDV

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watchnerd
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Re: What to pair with NTSX?

Post by watchnerd » Fri Jan 31, 2020 11:47 am

HawkeyePierce wrote:
Mon Jan 27, 2020 12:30 pm


2) Hold enough NTSX to reach your target bond exposure. Half your portfolio in NTSX gives you 20% bonds. See #1 for what to do with the rest of the space.
Given that NTSX is 90/60, wouldn't half of your port be 30% bonds?
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HawkeyePierce
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Re: What to pair with NTSX?

Post by HawkeyePierce » Fri Jan 31, 2020 1:13 pm

watchnerd wrote:
Fri Jan 31, 2020 11:47 am
HawkeyePierce wrote:
Mon Jan 27, 2020 12:30 pm


2) Hold enough NTSX to reach your target bond exposure. Half your portfolio in NTSX gives you 20% bonds. See #1 for what to do with the rest of the space.
Given that NTSX is 90/60, wouldn't half of your port be 30% bonds?
You're right, I meant 30%. 33% of your portfolio in NTSX gives you 20% bonds.

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watchnerd
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Re: What to pair with NTSX?

Post by watchnerd » Fri Jan 31, 2020 11:15 pm

siriusblack wrote:
Wed Jan 29, 2020 11:12 am
Pulled the trigger today on this. Only one of my Roth IRA's (< 5% of total net worth... the majority still in 55/45 boglehead-style portfolio, with a few other exceptions for my entertainment and/or education).

70% NTSX
20% Vanguard Long-Term Treasuries ETF
10% Vanguard Real Estate ETF

https://www.portfoliovisualizer.com/bac ... tion3_1=10

I month of data available for that combo.....I'm not sure what I'm to conclude with that little backtesting.
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watchnerd
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Re: What to pair with NTSX?

Post by watchnerd » Fri Jan 31, 2020 11:44 pm

So if I had:

$100,000 VTI

vs

$100,00 NTSX

Does that mean I could:

Hold $50,000 worth of NTSX en lieu of $100,000 VTI, freeing up $50,000 for something else entirely?

Sorry it seems like it's blatantly obviously "yes", but I want to make sure there isn't some nuance that I'm not getting....
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

crystalbank
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Re: What to pair with NTSX?

Post by crystalbank » Fri Jan 31, 2020 11:48 pm

watchnerd wrote:
Fri Jan 31, 2020 11:44 pm
So if I had:

$100,000 VTI

vs

$100,00 NTSX

Does that mean I could:

Hold $50,000 worth of NTSX en lieu of $100,000 VTI, freeing up $50,000 for something else entirely?

Sorry it seems like it's blatantly obviously "yes", but I want to make sure there isn't some nuance that I'm not getting....
I'm pretty sure that this is not the case from what I understood so far. I'll let more experienced users answer this question.

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Re: What to pair with NTSX?

Post by Lee_WSP » Fri Jan 31, 2020 11:54 pm

watchnerd wrote:
Fri Jan 31, 2020 11:44 pm
So if I had:

$100,000 VTI

vs

$100,00 NTSX

Does that mean I could:

Hold $50,000 worth of NTSX en lieu of $100,000 VTI, freeing up $50,000 for something else entirely?

Sorry it seems like it's blatantly obviously "yes", but I want to make sure there isn't some nuance that I'm not getting....
No. You'd only have $90,000 in VTI via the NTSX fund.

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watchnerd
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Re: What to pair with NTSX?

Post by watchnerd » Sat Feb 01, 2020 12:17 am

Lee_WSP wrote:
Fri Jan 31, 2020 11:54 pm
watchnerd wrote:
Fri Jan 31, 2020 11:44 pm
So if I had:

$100,000 VTI

vs

$100,00 NTSX

Does that mean I could:

Hold $50,000 worth of NTSX en lieu of $100,000 VTI, freeing up $50,000 for something else entirely?

Sorry it seems like it's blatantly obviously "yes", but I want to make sure there isn't some nuance that I'm not getting....
No. You'd only have $90,000 in VTI via the NTSX fund.
So $50K of NTSX = $90K of VTI?

Or are you saying $100K of NTSX = $90K of VTI?
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

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Re: What to pair with NTSX?

Post by HawkeyePierce » Sat Feb 01, 2020 12:21 am

watchnerd wrote:
Sat Feb 01, 2020 12:17 am
Or are you saying $100K of NTSX = $90K of VTI?
This one.

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watchnerd
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Re: What to pair with NTSX?

Post by watchnerd » Sat Feb 01, 2020 1:23 am

nisiprius wrote:
Thu Jan 30, 2020 9:12 am

I think that's what they mean by an "overlay" strategy. You're not trying to get 1.5X the performance of 60/40, you're trying to overcome the drag effect from typical diversifiers having lower Sharpe ratios than 60/40. You are seeking to get 1X the performance of 60/40, by filling 67% of your portfolio with 90/60, and then layer some MPT diversification benefit on top of that.
EM USD gov bonds?

1/2 the return, 1/2 the volatility of stocks.


(I know, I know...1997....just ignore that for now...)
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

uberaeth
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Re: What to pair with NTSX?

Post by uberaeth » Mon Feb 03, 2020 11:29 pm

effigy98 wrote:
Fri Jan 31, 2020 11:00 am
Inspired by golden butterfly

42 NTSX
20 SMMV
20 GLDM
18 EDV
The portfolio that I built is

41 NTSX
25 VXUS
24 EDV
10 GLDM

Portfolio visualizer shows the return behavior as very similar.

rockstar
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Re: What to pair with NTSX?

Post by rockstar » Mon Feb 03, 2020 11:38 pm

If you want to minimize the correlation, maybe try EMB, an emerging market debt ETF.

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willthrill81
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Re: What to pair with NTSX?

Post by willthrill81 » Thu Feb 06, 2020 1:28 am

garlandwhizzer wrote:
Thu Jan 30, 2020 12:19 pm
willthrill81 wrote:

But over the admittedly brief history of NTSX, that hasn't been the case. The Sharpe ratio for NTSX since September of 2017 was .78, whereas it was .69 for a 60/40 of VTSAX/VBTLX.

Further, over the same period, NTSX provided higher returns than VTSAX (12.72% vs. 9.11%) but a lower drawdown as well (-11.24% vs. -14.26%). That doesn't look like merely ramping up risk and returns to me.
These admittedly impressive risk adjusted returns for NTSX occurred over 17 months, the lifetime of the fund. Except for the brief fake out bear market of Q4 2018, the period of the fund's existence has been in a solid bull market. S&P 500 returns for calendar 2019 were 31.5% for VOO. NTSX is designed to do substantially better in a bull market than 60/40 so that is no surprise. Whether the brief sentiment driven downturn of Q4 2018 (fear of a recession that didn't happen) in which NTSX held up pretty well is an accurate forecast of how it will hold up in a severe bear market in the midst of a bad recession we don't know for sure as wlllthrill81 pointed out.

I am not aware of any well tested long term strategy other than the perplexing low vol anomaly (which is very different from this higher vol strategy) that has been shown to substantially increase returns without commensurate increases in risk. Any strategy that does this reliably will quickly get very crowded. I remain skeptical because NTSX has not yet passed the test of a severe bear. The combo of NTSX with LTT is an interesting option theoretically but again how it will works out in time through multiple market cycles is an unknown IMO. Theory is nice, but outcome doesn't always correlate with theory.

As others have said, NTSX could be useful when you're in the long term accumulation phase assuming you're not risk averse and you have a secure income stream. 90/10 without leverage is what Buffett chose for his wife's portfolio. If you're financially secure and immune to bear markets you'll thrive long term with either 90/10 approache. The risk if you're not financially immune is a market crisis like 2007-9 which is an unknown at present. 17 months of backtesting is insufficient to answer that question. Many of us find it hard to hold onto our 60% equity position at such times and surely it would be harder with 90%. I'm in the retirement phase and NTSX is not my cup of tea.

Garland Whizzer
I would find it reasonable to swap 10-20% of one's equities (e.g. VTSAX) for NTSX in the retirement phase, but at this point, going with more than that with as little history as there is for a live fund would concern me.
“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

Lee_WSP
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Re: What to pair with NTSX?

Post by Lee_WSP » Thu Feb 06, 2020 11:28 am

The more I think about NTSX, the more I think it's use is as a replacement for total market as opposed to anything else.

HawkeyePierce
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Re: What to pair with NTSX?

Post by HawkeyePierce » Thu Feb 06, 2020 11:52 am

uberaeth wrote:
Mon Feb 03, 2020 11:29 pm
effigy98 wrote:
Fri Jan 31, 2020 11:00 am
Inspired by golden butterfly

42 NTSX
20 SMMV
20 GLDM
18 EDV
The portfolio that I built is

41 NTSX
25 VXUS
24 EDV
10 GLDM

Portfolio visualizer shows the return behavior as very similar.
rockstar wrote:
Mon Feb 03, 2020 11:38 pm
If you want to minimize the correlation, maybe try EMB, an emerging market debt ETF.
Lee_WSP wrote:
Thu Feb 06, 2020 11:28 am
The more I think about NTSX, the more I think it's use is as a replacement for total market as opposed to anything else.
Slowly everyone converges on the NTSX-based HawkeyePierce portfolio. :D

MotoTrojan
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Re: What to pair with NTSX?

Post by MotoTrojan » Thu Feb 06, 2020 1:22 pm

siriusblack wrote:
Tue Jan 28, 2020 6:41 pm
willthrill81 wrote:
Mon Jan 27, 2020 11:40 pm
I think that a portfolio with 60% of NTSX and 40% of long-term Treasuries is interesting.
I think I'm leaning in similar direction. Here is 70/20/10 NTSX, Long-Term Treasuries, and Real Estate.

https://www.portfoliovisualizer.com/bac ... ion6_2=-35

The return is very close to S&P 500 -- but the volatility is about 1/2 and the maximum drawdown is 1/3rd. In some ways this reminds me of Hedgefundie's adventure, but a much tamer version with less upside but way less downside risk.
Careful using long-term treasury back-tests, let alone such short ones. Long-bonds have been on a historic bull for nearly 4 decades. It is all but impossible for that performance to continue without the monetary system being reinvented as we know it.

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watchnerd
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Re: What to pair with NTSX?

Post by watchnerd » Thu Feb 06, 2020 2:14 pm

MotoTrojan wrote:
Thu Feb 06, 2020 1:22 pm


Careful using long-term treasury back-tests, let alone such short ones. Long-bonds have been on a historic bull for nearly 4 decades. It is all but impossible for that performance to continue without the monetary system being reinvented as we know it.
Deflation, negative nominal rates during next recession.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

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willthrill81
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Re: What to pair with NTSX?

Post by willthrill81 » Thu Feb 06, 2020 7:32 pm

MotoTrojan wrote:
Thu Feb 06, 2020 1:22 pm
siriusblack wrote:
Tue Jan 28, 2020 6:41 pm
willthrill81 wrote:
Mon Jan 27, 2020 11:40 pm
I think that a portfolio with 60% of NTSX and 40% of long-term Treasuries is interesting.
I think I'm leaning in similar direction. Here is 70/20/10 NTSX, Long-Term Treasuries, and Real Estate.

https://www.portfoliovisualizer.com/bac ... ion6_2=-35

The return is very close to S&P 500 -- but the volatility is about 1/2 and the maximum drawdown is 1/3rd. In some ways this reminds me of Hedgefundie's adventure, but a much tamer version with less upside but way less downside risk.
Careful using long-term treasury back-tests, let alone such short ones. Long-bonds have been on a historic bull for nearly 4 decades. It is all but impossible for that performance to continue without the monetary system being reinvented as we know it.
I think it's safe to say that the bond bull market ended around 2013. But your point regarding the comparative lack of live data with leveraged bond funds in a rising interest rate environment is well taken.
“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

Lee_WSP
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Re: What to pair with NTSX?

Post by Lee_WSP » Thu Feb 06, 2020 7:34 pm

willthrill81 wrote:
Thu Feb 06, 2020 7:32 pm

I think it's safe to say that the bond bull market ended around 2013.
Why do you say that?

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willthrill81
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Re: What to pair with NTSX?

Post by willthrill81 » Thu Feb 06, 2020 8:06 pm

Lee_WSP wrote:
Thu Feb 06, 2020 7:34 pm
willthrill81 wrote:
Thu Feb 06, 2020 7:32 pm

I think it's safe to say that the bond bull market ended around 2013.
Why do you say that?
Flat or rising rates (in sum) since that time. TBM has returned about 1.3% real annualized since 2013. I don't see how that could be called a bull market.
“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

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watchnerd
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Re: What to pair with NTSX?

Post by watchnerd » Sun Feb 09, 2020 5:30 pm

uberaeth wrote:
Mon Feb 03, 2020 11:29 pm
effigy98 wrote:
Fri Jan 31, 2020 11:00 am
Inspired by golden butterfly

42 NTSX
20 SMMV
20 GLDM
18 EDV
The portfolio that I built is

41 NTSX
25 VXUS
24 EDV
10 GLDM

Portfolio visualizer shows the return behavior as very similar.
Both of these seem to miss the point of how and why the GB is built the way it is and aren't playing the "4 economic regimes" quadrant strategy that the PP and GB are based on.

Image

The idea is to have risk parity matching and exposure in roughly equal amounts in all 4 areas.

And, as Dalio notes, risk exposure is not the same as capital exposure due to differences in risk exposure between assets (i.e. 10% to cash is far less volatile than 10% to stocks).
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

occambogle
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Re: What to pair with NTSX?

Post by occambogle » Sat Feb 15, 2020 3:27 am

Relative newbie here, reading about this ETF and it's interesting to me. A couple questions...

I was planning on something like 50% VTI, 30% VXUS, 20% BND or BND/BNDX for a general 80/20 equities/FI split. NTSX seems like it could replace at least some of the VTI + BND for similar returns with less volatility.

1. If so in what proportions would you suggest to keep a similar risk level? If I replaced all of 50% + 20% BND, with NTSX would I effectively get 70 x 0.90 = 63% S&P 500 with a similar bond cushioning as the original 20% BND?

2. The fund prospectus implies NTSX is more tax-efficient than normal bonds because "capital gains on Treasury futures contracts are taxed at 60% long-term, 40% short-term capital gains rates." https://www.wisdomtree.com/-/media/us-m ... sx_faq.pdf

Can anyone comment on or even better quantify the tax efficiency of NTSX when used in a taxable account (at 24% marginal rate) when replacing VTI/BND?

Trying to get my head around these aspects, appreciate any information.... Thanks.

guyinlaw
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Re: What to pair with NTSX?

Post by guyinlaw » Sat Feb 15, 2020 9:15 am

2019 cap gains distribution for NTSX:

0.39% of NAV (~28% short-term and ~72% long term)

It is fairly tax efficient.

You could consider 50 NTSX/ 30 VXUS/ 20 other

This will be like 95/30 stock/Bond portfolio.

Remaining 20% you could consider SC/SCV.. some recommend long bonds, gold and REITs.

I have VB/VIOV/AVUV/AVDV/EDV.

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willthrill81
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Re: What to pair with NTSX?

Post by willthrill81 » Sat Feb 15, 2020 9:15 am

watchnerd wrote:
Sun Feb 09, 2020 5:30 pm
Both of these seem to miss the point of how and why the GB is built the way it is and aren't playing the "4 economic regimes" quadrant strategy that the PP and GB are based on.
Dailo did indeed build the PP on the economic regime idea, but Tyler at Portfolio Charts did not when he crafted the GB.
“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

occambogle
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Re: What to pair with NTSX?

Post by occambogle » Sat Feb 15, 2020 11:48 am

guyinlaw wrote:
Sat Feb 15, 2020 9:15 am
2019 cap gains distribution for NTSX:
0.39% of NAV (~28% short-term and ~72% long term)
It is fairly tax efficient.
Sorry for the likely stupid question, but how would that compare to 80/20 VTI/BND in terms of tax? Or how do I calculate it?
guyinlaw wrote:
Sat Feb 15, 2020 9:15 am
You could consider 50 NTSX/ 30 VXUS/ 20 other
This will be like 95/30 stock/Bond portfolio.
Trying to understand the calculations... that's 0.9 x 50 = 45, + 30, +20 = 95 equities (when "other" is equities") - correct?
And to take that back and compare to a non-levereged AA, in terms of notional risk not performance, would be comparable to 95/125 = 76/24 equities/bonds - correct?

I'm trying to play out different options in PortfolioVizualizer, and in the various NTSX threads have seen some different ways to represent it long-term (given NTSX only goes back a year or so). Which would you say is the closest representation?
But it then gets a bit complicated when trying to calculate NTSX as a portion of a portfolio and i get confused... any advice on how best to do that? I'd like to for example compare 50 NTSX / 30 VXUS / Other, to 80 NTSX / 20 VXUS, etc

Thanks...

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watchnerd
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Re: What to pair with NTSX?

Post by watchnerd » Sat Feb 15, 2020 1:32 pm

willthrill81 wrote:
Sat Feb 15, 2020 9:15 am
watchnerd wrote:
Sun Feb 09, 2020 5:30 pm
Both of these seem to miss the point of how and why the GB is built the way it is and aren't playing the "4 economic regimes" quadrant strategy that the PP and GB are based on.
Dailo did indeed build the PP on the economic regime idea, but Tyler at Portfolio Charts did not when he crafted the GB.
I guess I have a very different interpretation given Tyler wrote this:

"The Golden Butterfly is essentially a modified Permanent Portfolio with one additional asset class that incorporates some of the characteristics of a few other notable lazy portfolios."

https://portfoliocharts.com/2015/09/22/ ... butterfly/
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

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watchnerd
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Re: What to pair with NTSX?

Post by watchnerd » Sat Feb 15, 2020 1:36 pm

willthrill81 wrote:
Sat Feb 15, 2020 9:15 am
watchnerd wrote:
Sun Feb 09, 2020 5:30 pm
Both of these seem to miss the point of how and why the GB is built the way it is and aren't playing the "4 economic regimes" quadrant strategy that the PP and GB are based on.
Dailo did indeed build the PP on the economic regime idea, but Tyler at Portfolio Charts did not when he crafted the GB.
Also this:

"As I mentioned in a previous post, the Golden Butterfly is built as an extension of the Permanent Portfolio. So to understand how it works, let’s start with the foundation.

The basic theory of the Permanent Portfolio is to select assets that do particularly well in the four possible economic conditions. Generally speaking:

Prosperity: stocks
Recession: cash (or commonly short term treasuries)
Inflation: gold
Deflation: long term treasuries"

"The Golden Butterfly follows the same philosophy"

https://portfoliocharts.com/2016/04/18/ ... butterfly/
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

Uncorrelated
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Re: What to pair with NTSX?

Post by Uncorrelated » Sat Feb 15, 2020 2:28 pm

occambogle wrote:
Sat Feb 15, 2020 11:48 am
And to take that back and compare to a non-levereged AA, in terms of notional risk not performance, would be comparable to 95/125 = 76/24 equities/bonds - correct?
The risk of your portfolio is primarily defined by the amount of equities in it. A portfolio of 100% NTSX (90% stocks, 60% bonds) is comparable to 90% stocks and 10% bonds in terms of volatility. The bond portion just doesn't do a whole lot for volatility.

I plugged the numbers into my mean-variance optimizer and found a volatility of 14.0% for 90% total stock market and 10% total bond market, a volatility of 13.6% for NTSX (simulated as 90% large cap (S&P500) and 60% total bond market). Finally, a portfolio of 100% total stock market has a volatility of 15.6% according to my numbers. Note that total stock market is not the same as large cap, although it barely matters total stock market has a slightly lower volatility than large cap in my model.

So the simple answer is to just shoot for the same equity exposure and ignore the bonds.

If you want to calculate it exactly, you can use the calculation rules for normal random variables. First calculate the total amount of stocks and bonds. We assume stocks have a standard deviation of 15.6% and bonds have a standard deviation of 6%. The standard deviation of the entire portfolio can be calculated as: sqrt((stocks * 15.6%)^2 + (bonds * 6%)^2). This analysis assumes a correlation of 0 between stocks and bonds, which I think is fair.

Gemini
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Re: What to pair with NTSX?

Post by Gemini » Sat Feb 15, 2020 2:50 pm

If one wanted to be 100% equities with 50% INTL and SCV tilt, what are some suggestions for pairing with NTSX?

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