tomphilly wrote: ↑Thu May 20, 2021 10:36 am
Any thoughts on the following ratio for the coming quarter?
UPRO/TMF/PHDG/VIXY - 65/15/15/5
My thesis:
- TMF: has stabilized recently but the downside case is still strong (inflation not being transitory, etc), and.... Burry is a lot smarter than me.
- PHDG: a hedge that has steadily appreciated like TLT did in the past. But it won't provide a strong hedge like TMF during a crash (though this is in question for TMF too)
- VIXY: expensive crash insurance
- My UPRO is broken up into a few components but it's not really worth mentioning (mostly UPRO, a bit of TQQQ & FAS)
PV, post 2020 crash:
https://www.portfoliovisualizer.com/bac ... tion4_2=15
PV, since Jan 2013 (PHDG inception):
https://www.portfoliovisualizer.com/bac ... tion4_2=15
My 2 cents about your alternative, and the results are of course perfect hindsight PV results, so keep in mind lol:
1- Mixing a passive TMF+VIXY+UPRO AA with PHDG, an actively managed fund which includes the same instruments, strikes me as odd.
What you are effectively doing, by holding PHDG, is deleveraging your equities portion, all while sometimes allocating more to Short-Term VIX or CASH, based on some secret sauce. I glanced at the prospectus and even the supplement doc and I did not notice any actual explanation of what metrics/ signals the managers use to move from SP500 to ST-VIX or CASH. They also give themselves some leeway, stating they can go off-track if a "defensive" strategy is needed at any time.
You'll have to be comfortable with their approach, as you're basically hedging your passive, leveraged strat with their non-leveraged active one.
2- I would stay away from Short-Term VIX contracts. The drag on returns is huge and protection is ultimately a cr@(shoot, based strongly on timing of rebalance. My suggestion is to move to Medium-Term VIX (VIXM or VXZ, if wanting to avoid the tax structure of the VIXM ETF). It provides ample protection from drawdowns, with costs that end up spread out over a longer window.
3- Take a look at the results of your desired alternative VS something like
60/30/10 UPRO+TMF+VIXM. If you still think 30% to TMF is too risky, you can sprinkle in some more UPRO and VIXM (
65/20/15). The latter, at least based on the little dataset, is almost perfectly inline with your idea, but more predictable and with less moving parts.
Also, I've been proselytizing with regard to ITT funds like TYD and UST, for those who wish to rely less on LTT. I think they are a nice complement.
4- Honestly, I think your alternative AA will do just fine, if you are comfortable with holding approx (slightly less than) 3x leverage long-term.