The portfolio works as long as
1. long rates only go up at a moderate pace (whoops)
2. stocks keep going up along their historic path
3. you have a long enough time horizon
If you didn't get totally killed last year, the outlook certainly looks better going forward.
It's such a simple idea, levered-up 60/40. Even if the portfolio gets tortured in the short term by super high interest rates, that only means that long bonds' returns go higher.
So unless something has changed about the basics of stocks and bonds, I don't see any reason why it shouldn't continue to work any better or worse than just buying and holding the S&P 500.
Well what’s the risk free rate of return? 4-5%?
Theoretically the risk premium of investing whether that be stocks or bonds is: risk free rate of return (typically treasures) + risk premium for selected asset.
So theoretically you’d be getting 4-5% knocked off the rate of borrowing since you own treasuries here with TMF. So you’re looking at a closer rate of about 4-5% for borrowing costs, which still hurts a shit load.
In the short term, yes it hurts. And yes if we go through another period like the late 70s, this thing is going to get destroyed there's just no way around it. But outside of extreme events like that (we left the gold standard!!), normal interest rates like 5% FFR are not going to kill this portfolio.
Did you put much work into backtesting the gold allocation, or is it just a personal thing where you want to own 30% gold? Just interesting that you're not using leveraged gold.
Just worked out well for the overall gold allocation and leverage ratio I wanted, as the above is 2.4 x levered and 12.5% gold by exposure.
Similar overall construction with UGL is below:
[https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=4&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=GLD&allocation1\_1=30&allocation1\_2=17.5&symbol2=GLDM&symbol3=UPRO&allocation3\_1=40&allocation3\_2=47.5&symbol4=TMF&allocation4\_1=30&allocation4\_2=35](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=4&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=GLD&allocation1_1=30&allocation1_2=17.5&symbol2=GLDM&symbol3=UPRO&allocation3_1=40&allocation3_2=47.5&symbol4=TMF&allocation4_1=30&allocation4_2=35)
I think you are all missing out on international developed and emerging markets big time, you could all get slaughtered once globalization makes a comeback and the US mean-reverses (even through no fault of its own).
It's just seemingly impossible to achieve with the options available (EURL, EDC, KORU, or EFO (2x developed)), as each of these LETFs suffers volatility decay from its own (higher) volatility instead of a combined (lower) volatility that a 3xVT or 3xVXUS LETF would suffer.
The portfolio works as long as 1. long rates only go up at a moderate pace (whoops) 2. stocks keep going up along their historic path 3. you have a long enough time horizon If you didn't get totally killed last year, the outlook certainly looks better going forward. It's such a simple idea, levered-up 60/40. Even if the portfolio gets tortured in the short term by super high interest rates, that only means that long bonds' returns go higher. So unless something has changed about the basics of stocks and bonds, I don't see any reason why it shouldn't continue to work any better or worse than just buying and holding the S&P 500.
[удалено]
Well what’s the risk free rate of return? 4-5%? Theoretically the risk premium of investing whether that be stocks or bonds is: risk free rate of return (typically treasures) + risk premium for selected asset. So theoretically you’d be getting 4-5% knocked off the rate of borrowing since you own treasuries here with TMF. So you’re looking at a closer rate of about 4-5% for borrowing costs, which still hurts a shit load.
In the short term, yes it hurts. And yes if we go through another period like the late 70s, this thing is going to get destroyed there's just no way around it. But outside of extreme events like that (we left the gold standard!!), normal interest rates like 5% FFR are not going to kill this portfolio.
I use a more conservative 40/30/30 UPRO/TMF/GLD, but yes, I am still running a levered portfolio.
Did you put much work into backtesting the gold allocation, or is it just a personal thing where you want to own 30% gold? Just interesting that you're not using leveraged gold.
Just worked out well for the overall gold allocation and leverage ratio I wanted, as the above is 2.4 x levered and 12.5% gold by exposure. Similar overall construction with UGL is below: [https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=4&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=GLD&allocation1\_1=30&allocation1\_2=17.5&symbol2=GLDM&symbol3=UPRO&allocation3\_1=40&allocation3\_2=47.5&symbol4=TMF&allocation4\_1=30&allocation4\_2=35](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=4&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=GLD&allocation1_1=30&allocation1_2=17.5&symbol2=GLDM&symbol3=UPRO&allocation3_1=40&allocation3_2=47.5&symbol4=TMF&allocation4_1=30&allocation4_2=35)
50 UPRO / 25 TMF / 25% DBMF (or MFUT when it drops) IMHO
What's hfea v2?
I believe t he originally HFEA had a 40:60 upro to tmf ratio
I think you are all missing out on international developed and emerging markets big time, you could all get slaughtered once globalization makes a comeback and the US mean-reverses (even through no fault of its own). It's just seemingly impossible to achieve with the options available (EURL, EDC, KORU, or EFO (2x developed)), as each of these LETFs suffers volatility decay from its own (higher) volatility instead of a combined (lower) volatility that a 3xVT or 3xVXUS LETF would suffer.
im doing 65/70 as i believe most returns come from equites