WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

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muffins14
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

Mortgasm wrote: Mon Dec 20, 2021 4:15 pm . It's benefit is not just buying some bonds for 17 bp.
It seems like it’s bond futures that you pay 0.2% for, and they manage the futures and rebalance in/out of equities for you.

Is there something I’m missing there?
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vpiguy88
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by vpiguy88 »

muffins14 wrote: Mon Dec 20, 2021 4:01 pm Right now, EDV yield is about 1.9%

A blend of 5 year and 10 year treasuries has a yield around 1.28%

Bond yield contribution to your portfolio is 0.1 * 1.9 = 0.19% for a 90/10 portfolio w 10% EDV

For NTSX, it’s 0.6* 1.28 = 0.77 for the NTSX bond exposure

Say that’s 0.77 - 0.2 = 0.57% for NTSX after fees

getting 0.4% more is enough to offset the fact that you’re paying 0.2% more on your equity exposure by using NTSX, I think
This makes sense. Other part of my question: Is there a more cost efficient way to get leveraged bond exposure through futures than by using NTSX?
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

I think answer depends on how you value your time. Certainly you could manage the futures yourself on some brokerage. Some posters do that but I can’t be bothered to learn and continue to monitor it
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vpiguy88
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by vpiguy88 »

Really simple question that I can't for the life of me find an answer to: Do futures actually give you incremental interest or just interest rate exposure? There are items here talking about intermediate yield, etc, but do futures actually give yield?

Trying to understand whether futures have positive expected returns or are just used to hedge interest rate movements.

If it is just a hedge, and no coupon/interest rate payment, it would seem to significantly diminish the incremental value of futures.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by ivgrivchuck »

vpiguy88 wrote: Mon Dec 20, 2021 6:09 pm Really simple question that I can't for the life of me find an answer to: Do futures actually give you incremental interest or just interest rate exposure? There are items here talking about intermediate yield, etc, but do futures actually give yield?

Trying to understand whether futures have positive expected returns or are just used to hedge interest rate movements.

If it is just a hedge, and no coupon/interest rate payment, it would seem to significantly diminish the incremental value of futures.
It's complicated. If you really want to learn about this strategy, please read: viewtopic.php?f=10&t=357281

In my very limited understanding, a future contract in itself is nothing more than an agreement to deliver certain securities at a certain date at certain price. https://www.cmegroup.com/trading/intere ... tures.html

However when you roll your futures forward systematically, it can potentially be shown to approximate bond etfs minus the cost of leverage.

This shows the idea:
https://www.portfoliovisualizer.com/bac ... ion4_2=-50
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DMoogle
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by DMoogle »

vpiguy88 wrote: Mon Dec 20, 2021 6:09 pm Really simple question that I can't for the life of me find an answer to: Do futures actually give you incremental interest or just interest rate exposure? There are items here talking about intermediate yield, etc, but do futures actually give yield?
The short answer is that you do not get the interest per se, but the lack of interest payments is baked into the price (or rather, the value of the contract). In other words, it doesn't really matter whether you hold the future or the underlying (except for the cost of the leverage).

Same with stock futures and dividends. Dividends aren't actually paid, but the lack of them is baked into the value of the contract.
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Admiral Fun
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Admiral Fun »

NTSX went up by .59% yesterday while the SP500 grew by about 1%. Intermediate treasuries were also slightly positive.

Why did this underperformance happen given that NTSX is 90% SP500?
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by kevinf »

Admiral Fun wrote: Thu Dec 23, 2021 8:09 am NTSX went up by .59% yesterday while the SP500 grew by about 1%. Intermediate treasuries were also slightly positive.

Why did this underperformance happen given that NTSX is 90% SP500?
It depends on when the prices hit those levels... NTSX's pricing can lag slightly behind when closing prices change rapidly and not be updated end-of-day so keep on eye on NTSX's share price next opening day.

It's not unusual for a positive day to show negative and a negative day to show positive, daily changes are just noise. This isn't a fund that you need to track daily like a 3x daily-reset leveraged fund would be.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by ChinchillaWhiplash »

Admiral Fun wrote: Thu Dec 23, 2021 8:09 am NTSX went up by .59% yesterday while the SP500 grew by about 1%. Intermediate treasuries were also slightly positive.

Why did this underperformance happen given that NTSX is 90% SP500?
Fund does tend to have large (relatively for ETFs) premiums and lower volume. Currently at almost 1% premium! So price does not entirely follow its NAV.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by bgf »

I"ve been looking more into 'return stacking' funds, as i think this is really going to take off in the future. return stacking ETFs may well end up becoming core holdings for many with long investment horizons. this brought me across SPUC, Simplify's SP500 Plus Upside Convexity. looks like a very simple strategy -

98% SPY/IVV
the remaning 2% is split equally among 25% OTM calls on the Index spaced at 6, 12, 18, and 24 months durations. they may actively manage these options other than simply allowing to expire/rolling over, but im not sure.

it seems like you can pretty easily improve on this strategy just by using NTSX over SPY/IVV. make NTSX the core holding and copy the call option strategy. when they expire worthless you'll have a bit of losses to count against capital gains. NTSX is already tax efficient. when the market rips up the convexity of the calls will pay off and slightly juice your returns.
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Admiral Fun
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expected returns for bond portion of NTSX

Post by Admiral Fun »

From my understanding, to approximate the expected return of the bond portion of NTSX, you can just multiply the yield of intermediate term treasuries x 6 (e.g. 1.5% x 6 = 9%). Is that right?

Furthermore, is it fair to say that it is unlikely for the bond portion to lose money if held for at least the average duration period? (7 years)

So 6x leveraged intermediate treasuries are an asset that...
- is expected to return ~9% (higher than expected returns for stocks)
- is highly unlikely to lose money nominally if held 7+ years
- has low correlation to stocks

This sounds too good to be true. What am I missing?
Mortgasm
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Mortgasm »

Intermediate treasuries are closer to 1% than 1.5% but I assume you are asking more about the methodology.

You are forgetting capital gains or losses as the yield curve changes. Bonds are very expensive right now. If people decide to dump bonds, this portion of the ETF will suffer.
There are costs to the leverage and costs for the futures that are not held by normal bonds.
And no, you don't get that guaranteed by holding for duration because they will keep extending the duration as they turnover the futures. You will always have an intermediate duration bond fund.
And, if bonds lose money, you will keep rebalancing into more bonds which can lose more money. That might not be likely, but it's possible.

That said, generally this has backtested well. And generally Intermediate treasuries are going to be something of a boost either through returns or diversification. But I think it's a mistake to assume that it's too good to be true. It has risk.
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Re: expected returns for bond portion of NTSX

Post by adamhg »

Admiral Fun wrote: Wed Jan 05, 2022 8:35 am From my understanding, to approximate the expected return of the bond portion of NTSX, you can just multiply the yield of intermediate term treasuries x 6 (e.g. 1.5% x 6 = 9%). Is that right?

Furthermore, is it fair to say that it is unlikely for the bond portion to lose money if held for at least the average duration period? (7 years)

So 6x leveraged intermediate treasuries are an asset that...
- is expected to return ~9% (higher than expected returns for stocks)
- is highly unlikely to lose money nominally if held 7+ years
- has low correlation to stocks

This sounds too good to be true. What am I missing?
Is 6x the 10%, so a 90/60 allocation meaning the bond portion for ntsx should track 60% intermediate treasuries instead of 600%
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

THe duration is ~7.5 years, so I think 1.4-1.5% is a good estimate of the "yield".

As previous poster said, it's 6x on just the 10%, and you need to consider the cost, so maybe use the 3 month rate for that.

I estimate that to be something like 1.45 - 0.05 = 1.4% return on a 100% exposure, or 0.84% on 60% exposure.

So will 90% S&P + 0.84% - 0.2% fee = 90% S&P + 0.64% beat out 100% S&P? Sometimes.

I imagine we're in for some pain while yields rise, but that will be very good long-term since the bond exposure will start to yield more
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

Considering the worst case scenario, how badly could this blow up versus a 60/40 portfolio (and also compared to PSLDX and HFEA)? i.e. stocks and bonds correlating and going down. I'm considering running this 100% in my taxable account, and then HFEA in my retirement accounts (27%). To anyone else considering going 100% NTSX, do you plan to deleverage or get out of the fund later in life or is that unnecessary? It looks unnecessary based on the backtests and better drawdowns, but that's also why I want to get a sense of the worst case scenario and what you all think about it. Thanks!
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

Probably 1.5x as bad as a 60/40 does ;) it is a 90% equity exposure and, via futures, the equivalent of 60% treasuries with a mix of durations that average to about 7.5

I plan to hold it forever, but as I get older I will be adding “normal” bonds, and NTSX will go from about 35% of my portfolio to maybe 24%
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by a_s_h »

hiddenpower wrote: Wed Jan 12, 2022 9:47 pm Considering the worst case scenario, how badly could this blow up versus a 60/40 portfolio (and also compared to PSLDX and HFEA)? i.e. stocks and bonds correlating and going down. I'm considering running this 100% in my taxable account, and then HFEA in my retirement accounts (27%). To anyone else considering going 100% NTSX, do you plan to deleverage or get out of the fund later in life or is that unnecessary? It looks unnecessary based on the backtests and better drawdowns, but that's also why I want to get a sense of the worst case scenario and what you all think about it. Thanks!
Doing NTSX in taxable and HFEA/PSLDX in retirement account would mean your entire stock exposure is the S&P500.

Keep in mind the S&P500 was flat for about a decade (approx 2000-2010). Personally, I would definitely diversify internationally (e.g. NTSI, NTSE to supplement NTSX, the international version of PSLDX to supplement PSLDX), but it is of course up to you. With near-record valuations for S&P500, it seems like another lost decade for the S&P500 is not unlikely, but as always, predicting the future is notoriously difficult.

Personally, US underperformance for a decade is a bigger concern to me than the 1.5x leverage of the 60/40. I hold NTSX+NTSI+NTSE for that reason.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by firebirdparts »

a_s_h wrote: Thu Jan 13, 2022 7:23 am
Keep in mind the S&P500 was flat for about a decade (approx 2000-2010).
Sure didn't feel flat. I lost half my net worth twice. I think cherry picking dates is really worse than saying nothing.

Better to just say all your stocks would be S&P500 and it is what it is.

I like PSLDX enough to have a large allocation to it, and what worries me more is that all the bond exposure is long duration and it is what it is. And I can't do anything about it; can't buy ETFs in my 401k.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by a_s_h »

firebirdparts wrote: Thu Jan 13, 2022 7:30 am
a_s_h wrote: Thu Jan 13, 2022 7:23 am
Keep in mind the S&P500 was flat for about a decade (approx 2000-2010).
Sure didn't feel flat. I lost half my net worth twice. I think cherry picking dates is really worse than saying nothing.

Better to just say all your stocks would be S&P500 and it is what it is.
Fair point - "flat" was not a the best term. How a about, "being 100% in the S&P500 from 2000-2010 would not have been fun"?
My main point was that being 100% committed to one market segment (e.g. S&P500, EM, developed international, SCV, etc.) will mean you will have great periods and that you will have terrible periods, and for that reason, I personally would suggest diversifying.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

Thanks I will heed that advice and look into diversifying too.

I am just curious how bad this ride could really get with NTSX/HFEA as core holdings? It's not clear to me from reading the thread what the worst case scenarios are, and it sounds like free lunch :wink: . I'm inexperienced with futures and bonds though and have been absorbing what I can this past week.

Cheers.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Mortgasm »

HFEA is a different beast entirely. Stagflation will really harm returns in a leveraged portfolio.

RobertT posted this somewhere

"HFEA in 40:60 rather than 55:45 form, 1973 to 1981: Annualized return (%)-9.0 =
For the 20 year period ending 1981 - annualized return of the 3x leveraged strategy = -3.1%"

One might not be worried about stagflation. But you asked about how bad the ride could be. Changing the ratios will affect the outcome somewhat in backtests, but I think that would be an analytic mistake to think that changes the outcome drastically. However I did not do my own test.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by DMoogle »

HFEA is also automatic daily rebalanced 3x leverage ratio, with asset allocation rebalanced however often you want (plan is quarterly).

NTSX is quarterly rebalanced (presumably both asset allocation and leverage) with 5% bands.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

hiddenpower wrote: Thu Jan 13, 2022 8:43 am Thanks I will heed that advice and look into diversifying too.

I am just curious how bad this ride could really get with NTSX/HFEA as core holdings? It's not clear to me from reading the thread what the worst case scenarios are, and it sounds like free lunch :wink: . I'm inexperienced with futures and bonds though and have been absorbing what I can this past week.

Cheers.
I mean it could be Really Bad, let’s be honest. You’re talking about HFEA as a core holding, which are 3x leveraged funds. Your “diversification” is more S&P 500 plus treasury futures.

It’s risky. Too risky for me

I’d hold less leverage overall, and diversify into international and SCV as well
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Re: expected returns for bond portion of NTSX

Post by aristotelian »

Admiral Fun wrote: Wed Jan 05, 2022 8:35 am From my understanding, to approximate the expected return of the bond portion of NTSX, you can just multiply the yield of intermediate term treasuries x 6 (e.g. 1.5% x 6 = 9%). Is that right?

Furthermore, is it fair to say that it is unlikely for the bond portion to lose money if held for at least the average duration period? (7 years)

So 6x leveraged intermediate treasuries are an asset that...
- is expected to return ~9% (higher than expected returns for stocks)
- is highly unlikely to lose money nominally if held 7+ years
- has low correlation to stocks

This sounds too good to be true. What am I missing?
I think you are missing the cost of leverage. The fund is borrowing in order to buy the 6X Treasuries. The fund prospectus does not state outperforming S&P500 as a goal. The goal is to match the return of 90% S&P with less volatility.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by TXGator »

I view ntsx as a way to juice the the “Buffet”allocation of 90% S&P and 10% STT

https://www.portfoliovisualizer.com/bac ... sisResults
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by ckangas »

TXGator wrote: Thu Jan 13, 2022 10:35 am I view ntsx as a way to juice the the “Buffet”allocation of 90% S&P and 10% STT

https://www.portfoliovisualizer.com/bac ... sisResults
I think you intended something additional for your link?
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by PluckyDucky »

Has anyone thought about pairing NTSX with a gold fund?

Portfoliocharts has an interesting recent article about various portfolios and how gold can help returns and ulcer index.

https://portfoliocharts.com/2021/12/16/ ... ortfolios/
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by a_s_h »

PluckyDucky wrote: Mon Jan 17, 2022 2:22 pm Has anyone thought about pairing NTSX with a gold fund?

Portfoliocharts has an interesting recent article about various portfolios and how gold can help returns and ulcer index.

https://portfoliocharts.com/2021/12/16/ ... ortfolios/
The new WisdomTree ETF GDMN is a potentially interesting pairing if you want to maintain a similar level of leverage to NTSX. It is 180% exposure for ER=0.45% including 90% exposure to gold through futures and 90% exposure to gold mining stocks. Not everyone agrees with the exposure to gold mining stocks though viewtopic.php?t=364933

I am personally watching both UPAR and GDMN, which both recently launched. I have bought a little bit of both, but waiting and hoping for them to grow in AUM and liquidity before fully jumping in. GDMN could be paired with NTSX+NTSI+NTSE. UPAR includes exposure to gold and is potentially a likely lower risk/lower return replacement for NTSX+NTSI+NTSE(+GDMN).
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

PluckyDucky wrote: Mon Jan 17, 2022 2:22 pm Has anyone thought about pairing NTSX with a gold fund?

Portfoliocharts has an interesting recent article about various portfolios and how gold can help returns and ulcer index.

https://portfoliocharts.com/2021/12/16/ ... ortfolios/
I just have no interest in gold
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by PluckyDucky »

Using the numbers on portfolio charts portfolio builder,

72/48/30 Stock/Bond (IT)/Gold has 11.0% average return, 13 stdev, ulcer index 4.9 (72/48 maintains the 60/40 ratio of stock/bond)

while 90/60 stock/bond (IT) has 11.1% average return, 16.1 stdev, ulcer index 10.6
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

Mortgasm wrote: Thu Jan 13, 2022 8:56 am HFEA is a different beast entirely. Stagflation will really harm returns in a leveraged portfolio.

RobertT posted this somewhere

"HFEA in 40:60 rather than 55:45 form, 1973 to 1981: Annualized return (%)-9.0 =
For the 20 year period ending 1981 - annualized return of the 3x leveraged strategy = -3.1%"

One might not be worried about stagflation. But you asked about how bad the ride could be. Changing the ratios will affect the outcome somewhat in backtests, but I think that would be an analytic mistake to think that changes the outcome drastically. However I did not do my own test.
I'm curious how bad the ride could be compared to 100% VTI, like is this an okay replacement or would the tail risk be too extreme? Is the downside 150% worse than a 90/60? And it sounds like that can be worse than 100/0?

I've read through everything I can find on BH. I think a lot of the confusion is around the 6:1 leverage on the bonds side and will do a bit more investigation on futures before I make any moves. The following question wasn't answered in the closed thread but I was wondering the same.
nisiprius wrote: Question #3b: What are the effective differences between:

--a 60/40 fund bought using actual 1.5X leverage, i.e. if it drops 67% you have lost all your money;

--90% plain unleveraged stocks and 60% bonds bought with 10% cash using 6:1 leverage;

--90% plain unleveraged stocks and 10% futures contracts?

Question #4: Is 90% unleveraged stocks + 10% holding of 6:1 leveraged bonds effectively the same thing as a 1.5X leveraged holding of a 60/40 portfolio? First I keep thinking it isn't, then I keep thinking that because money--even negative money, borrowed, is fungible, maybe it is.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by F8_Tributo »

pepys wrote: Thu Aug 12, 2021 2:20 pm
sfmurph wrote: Wed Aug 11, 2021 11:21 am
pepys wrote: Sat May 29, 2021 9:39 pm
newguy123 wrote: Fri May 28, 2021 10:17 am sadly Merrill doesn't allow me to buy this
It isn't too difficult to get around this restriction if you really want NTSX (or just don't like the restriction). They have a document called "Client Representation Letter for Purchases of Blocked ETPs" that you can sign.
I just tried this and was declined. Talking with a trade rep, NTSX is "blocked on the platform." Now, it may be that I just got a rep who doesn't know, but I wouldn't say it "It isn't too difficult to get around this restriction." I don't see any form available for me to just sign and send in either.
That's odd. Sorry for possibly wasting your time.

I originally got it in 2019 after sending a secure message asking for it. Full name was "Block List Exchange Traded Products Client Representation Letter Purchases of Blocked ETPs". At the bottom said "ETFCLTRP (v. Sept 2019)".

It's possible they made it more difficult.
It has been changed so in order to get that letter you need 10M in assets. It’s inconsistent to allow 3x leveraged funds but not one that mostly tracks an index fund - but it appears the “active” management of the bond portion is the issue, not the leverage. Merrill Lynch supposedly allows it, but not Merrill Edge.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

Specifically I'm kind of wondering the true risks here. If the treasuries are 6:1 leveraged, and the underlying drops 16%, does that mean the bond part of this portfolios wiped out? And would it be reloaded the next day? What would be the chances of this shitting the bed? I'm trying to assess if it can be used as a full on replacement for VTI.

Moreover why use this instead of VTI/VOO + a 3x treasury etf. Thanks!
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

hiddenpower wrote: Tue Jan 18, 2022 6:40 pm
Moreover why use this instead of VTI/VOO + a 3x treasury etf. Thanks!
This has been discussed, you can search for it
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by kevinf »

hiddenpower wrote: Tue Jan 18, 2022 6:40 pm Specifically I'm kind of wondering the true risks here. If the treasuries are 6:1 leveraged, and the underlying drops 16%, does that mean the bond part of this portfolios wiped out? And would it be reloaded the next day? What would be the chances of this shitting the bed? I'm trying to assess if it can be used as a full on replacement for VTI.

Moreover why use this instead of VTI/VOO + a 3x treasury etf. Thanks!
It's a treasury futures ladder, not a bond fund leveraged to 6x. The risk is the same as buying the equivalent futures contracts and I don't see a mechanism where that could go to zero without much larger repercussions that anyone wants... this also answers the second question.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by DMoogle »

Also worth noting that, aside from rebalancing quarterly, it also rebalances with 5% bands.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by corp_sharecropper »

kevinf wrote: Tue Jan 18, 2022 7:52 pm
hiddenpower wrote: Tue Jan 18, 2022 6:40 pm Specifically I'm kind of wondering the true risks here. If the treasuries are 6:1 leveraged, and the underlying drops 16%, does that mean the bond part of this portfolios wiped out? And would it be reloaded the next day? What would be the chances of this shitting the bed? I'm trying to assess if it can be used as a full on replacement for VTI.

Moreover why use this instead of VTI/VOO + a 3x treasury etf. Thanks!
It's a treasury futures ladder, not a bond fund leveraged to 6x. The risk is the same as buying the equivalent futures contracts and I don't see a mechanism where that could go to zero without much larger repercussions that anyone wants... this also answers the second question.
600% leverage on treasuries is ridiculously tame in the eyes of most fund managers. With quarterly rebalancing and rebalancing bands there is literally nothing to worry about
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

For those of you who actually hold treasury futures, how much collateral cash do you hold per contract for some example durations?
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by DMoogle »

muffins14 wrote: Tue Jan 18, 2022 10:34 pm For those of you who actually hold treasury futures, how much collateral cash do you hold per contract for some example durations?
In a taxable account, I don't really worry about it with a portfolio margin account. I try to target a cash balance of $0, but if it goes negative and I'm paying margin interest, it's whatevs.

In a tax-sheltered account, I asked how much people keep in cash in the mHFEA thread, and the only response that I got said they keep 15% of the contract's value in cash (knowing that they might be auto-liquidated once in a rare while).
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by pepys »

F8_Tributo wrote: Mon Jan 17, 2022 7:08 pm
pepys wrote: Thu Aug 12, 2021 2:20 pm
sfmurph wrote: Wed Aug 11, 2021 11:21 am
pepys wrote: Sat May 29, 2021 9:39 pm
newguy123 wrote: Fri May 28, 2021 10:17 am sadly Merrill doesn't allow me to buy this
It isn't too difficult to get around this restriction if you really want NTSX (or just don't like the restriction). They have a document called "Client Representation Letter for Purchases of Blocked ETPs" that you can sign.
I just tried this and was declined. Talking with a trade rep, NTSX is "blocked on the platform." Now, it may be that I just got a rep who doesn't know, but I wouldn't say it "It isn't too difficult to get around this restriction." I don't see any form available for me to just sign and send in either.
That's odd. Sorry for possibly wasting your time.

I originally got it in 2019 after sending a secure message asking for it. Full name was "Block List Exchange Traded Products Client Representation Letter Purchases of Blocked ETPs". At the bottom said "ETFCLTRP (v. Sept 2019)".

It's possible they made it more difficult.
It has been changed so in order to get that letter you need 10M in assets. It’s inconsistent to allow 3x leveraged funds but not one that mostly tracks an index fund - but it appears the “active” management of the bond portion is the issue, not the leverage. Merrill Lynch supposedly allows it, but not Merrill Edge.
$10 million *at Merrill Edge*, or do you just have to say you're worth $10 million? I had to say the latter (I said I was including present value of my future labor), but only had ~$100K on the platform.

I am going to have to renew mine somewhat soon. Hoping it isn't going to be a big headache.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

corp_sharecropper wrote: Tue Jan 18, 2022 8:22 pm
kevinf wrote: Tue Jan 18, 2022 7:52 pm
hiddenpower wrote: Tue Jan 18, 2022 6:40 pm Specifically I'm kind of wondering the true risks here. If the treasuries are 6:1 leveraged, and the underlying drops 16%, does that mean the bond part of this portfolios wiped out? And would it be reloaded the next day? What would be the chances of this shitting the bed? I'm trying to assess if it can be used as a full on replacement for VTI.

Moreover why use this instead of VTI/VOO + a 3x treasury etf. Thanks!
It's a treasury futures ladder, not a bond fund leveraged to 6x. The risk is the same as buying the equivalent futures contracts and I don't see a mechanism where that could go to zero without much larger repercussions that anyone wants... this also answers the second question.
600% leverage on treasuries is ridiculously tame in the eyes of most fund managers. With quarterly rebalancing and rebalancing bands there is literally nothing to worry about
If the fund moves 6x to interest rates, does that mean a 16% increase in rates is what would be needed to kill the 10% portion? Which is obviously unheard of, but say a major 4% spike occured, would that deplete the cash collateral by 24%?

I think the futures part is confusing, having only studied options in depth. Any reasoning on the safety behind this maybe with an example would help immensely. I also saw the fund mention you can't lose >100% of the principal despite using leverage which is not what I expected to read.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by PluckyDucky »

pepys wrote: Wed Jan 19, 2022 12:32 am ... (I said I was including present value of my future labor), but only had ~$100K on the platform.
...
That's a good one!
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

DMoogle wrote: Tue Jan 18, 2022 11:36 pm
muffins14 wrote: Tue Jan 18, 2022 10:34 pm For those of you who actually hold treasury futures, how much collateral cash do you hold per contract for some example durations?
In a taxable account, I don't really worry about it with a portfolio margin account. I try to target a cash balance of $0, but if it goes negative and I'm paying margin interest, it's whatevs.

In a tax-sheltered account, I asked how much people keep in cash in the mHFEA thread, and the only response that I got said they keep 15% of the contract's value in cash (knowing that they might be auto-liquidated once in a rare while).
If I'm reading this right, are you saying it's also likely that in a taxable, Reg-T margin account at IBKR, you can hold treasury futures without holding any cash as collateral, and you just use your remaining portfolio as equity. Thus as there are price changes in the futures value, you just let losses get turned into margin debt, and hope eventually gains pay off the margin debt?

If that's the case, have you done any analysis to show the opportunity cost of that (taking on margin debt), versus having cash sitting as collateral?

I'd be seeking to make something like NTSX, but with a more diversified portfolio, like 60/40 US/INTL and include small-cap value as well. Perhaps overall I'd be trying to get an exposure like 95% equities, and then use 5% cash as collateral for however many treasury futures that would buy me
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by David Jay »

hiddenpower wrote: Tue Jan 18, 2022 6:40 pmI'm trying to assess if it can be used as a full on replacement for VTI.
On no planet is HFEA a replacement for VTI.

One of the reasons why you are getting minimal responses to your HFEA questions is the HFEA is way, way out of the mainstream here at BH. We didn't censor HedgeFundie (we don't censor anyone who follows the forum rules) but his approach is light-years away from Boglehead Philosophy. Note that even HedgeFundie said he was only investing a small portion of his portfolio and a 100% loss would not significantly affect his financial future.

As a relative newcomer to investing, I would recommend that you avoid all forms of portfolio leverage until you have at least one major downturn under your belt. It is hard to describe the emotions that well up during a major downturn and you need to observe the person in the mirror through such an event to get an understanding of how you react. 100% stocks will be a wild enough ride the first time around.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

David Jay wrote: Wed Jan 19, 2022 2:30 pm
hiddenpower wrote: Tue Jan 18, 2022 6:40 pmI'm trying to assess if it can be used as a full on replacement for VTI.
On no planet is HFEA a replacement for VTI.

One of the reasons why you are getting minimal responses to your HFEA questions is the HFEA is way, way out of the mainstream here at BH. We didn't censor HedgeFundie (we don't censor anyone who follows the forum rules) but his approach is light-years away from Boglehead Philosophy. Note that even HedgeFundie said he was only investing a small portion of his portfolio and a 100% loss would not significantly affect his financial future.

As a relative newcomer to investing, I would recommend that you avoid all forms of portfolio leverage until you have at least one major downturn under your belt. It is hard to describe the emotions that well up during a major downturn and you need to observe the person in the mirror through such an event to get an understanding of how you react. 100% stocks will be a wild enough ride the first time around.
I'm referring to NTSX as the core of the portfolio and inquiring about the risks of being 100% NTSX in a taxable. HFEA/PSLDX as supplemental percents.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by David Jay »

hiddenpower wrote: Wed Jan 19, 2022 2:32 pm
David Jay wrote: Wed Jan 19, 2022 2:30 pm
hiddenpower wrote: Tue Jan 18, 2022 6:40 pmI'm trying to assess if it can be used as a full on replacement for VTI.
On no planet is HFEA a replacement for VTI.

One of the reasons why you are getting minimal responses to your HFEA questions is the HFEA is way, way out of the mainstream here at BH. We didn't censor HedgeFundie (we don't censor anyone who follows the forum rules) but his approach is light-years away from Boglehead Philosophy. Note that even HedgeFundie said he was only investing a small portion of his portfolio and a 100% loss would not significantly affect his financial future.

As a relative newcomer to investing, I would recommend that you avoid all forms of portfolio leverage until you have at least one major downturn under your belt. It is hard to describe the emotions that well up during a major downturn and you need to observe the person in the mirror through such an event to get an understanding of how you react. 100% stocks will be a wild enough ride the first time around.
I'm referring to NTSX as the core of the portfolio and inquiring about the risks of being 100% NTSX in a taxable. HFEA/PSLDX as supplemental percents.
You referenced both HFEA and NTSX in a single post more than once, so it was not clear.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by a_s_h »

hiddenpower wrote: Wed Jan 19, 2022 2:32 pm
David Jay wrote: Wed Jan 19, 2022 2:30 pm
hiddenpower wrote: Tue Jan 18, 2022 6:40 pmI'm trying to assess if it can be used as a full on replacement for VTI.
On no planet is HFEA a replacement for VTI.

One of the reasons why you are getting minimal responses to your HFEA questions is the HFEA is way, way out of the mainstream here at BH. We didn't censor HedgeFundie (we don't censor anyone who follows the forum rules) but his approach is light-years away from Boglehead Philosophy. Note that even HedgeFundie said he was only investing a small portion of his portfolio and a 100% loss would not significantly affect his financial future.

As a relative newcomer to investing, I would recommend that you avoid all forms of portfolio leverage until you have at least one major downturn under your belt. It is hard to describe the emotions that well up during a major downturn and you need to observe the person in the mirror through such an event to get an understanding of how you react. 100% stocks will be a wild enough ride the first time around.
I'm referring to NTSX as the core of the portfolio and inquiring about the risks of being 100% NTSX in a taxable. HFEA/PSLDX as supplemental percents.
@Hiddenpower, I think the reason you are not getting a precise answer like "there is a 0.4% risk of an NTSX wipe-out in the next 30 years", is because it is not possible to give one. However, to the best of my knowledge, if you use backtesting data as far back as it goes, I don't think there has ever been a situation where NTSX would have been wiped out. Even if intermediate treasuries were to fall 50% in the span of a few months (I don't think this has ever happened in history), NTSX would still only fall 30% since its overall exposure is 60%.

Since the level of leverage is low and is applied to a negatively correlated asset (treasuries tend to go up when stocks go down), the probability of a wipe-out is in my opinion effectively zero, but no one knows for sure. Asking the same question over and over again will not get you a quantitative and precise answer, because no one can give one as no one can know the future. If you feel the need for a quantitative and precise assurance about how NTSX will behave in the future, then you are probably better off investing in a low risk portfolio and staying clear of leverage.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

a_s_h wrote: Wed Jan 19, 2022 2:47 pm
hiddenpower wrote: Wed Jan 19, 2022 2:32 pm
David Jay wrote: Wed Jan 19, 2022 2:30 pm
hiddenpower wrote: Tue Jan 18, 2022 6:40 pmI'm trying to assess if it can be used as a full on replacement for VTI.
On no planet is HFEA a replacement for VTI.

One of the reasons why you are getting minimal responses to your HFEA questions is the HFEA is way, way out of the mainstream here at BH. We didn't censor HedgeFundie (we don't censor anyone who follows the forum rules) but his approach is light-years away from Boglehead Philosophy. Note that even HedgeFundie said he was only investing a small portion of his portfolio and a 100% loss would not significantly affect his financial future.

As a relative newcomer to investing, I would recommend that you avoid all forms of portfolio leverage until you have at least one major downturn under your belt. It is hard to describe the emotions that well up during a major downturn and you need to observe the person in the mirror through such an event to get an understanding of how you react. 100% stocks will be a wild enough ride the first time around.
I'm referring to NTSX as the core of the portfolio and inquiring about the risks of being 100% NTSX in a taxable. HFEA/PSLDX as supplemental percents.
@Hiddenpower, I think the reason you are not getting a precise answer like "there is a 0.4% risk of an NTSX wipe-out in the next 30 years", is because it is not possible to give one. However, to the best of my knowledge, if you use backtesting data as far back as it goes, I don't think there has ever been a situation where NTSX would have been wiped out. Even if intermediate treasuries were to fall 50% in the span of a few months (I don't think this has ever happened in history), NTSX would still only fall 30% since its overall exposure is 60%.

Since the level of leverage is low and is applied to a negatively correlated asset (treasuries tend to go up when stocks go down), the probability of a wipe-out is in my opinion effectively zero, but no one knows for sure. Asking the same question over and over again will not get you a quantitative and precise answer, because no one can give one as no one can know the future. If you feel the need for a quantitative and precise assurance about how NTSX will behave in the future, then you are probably better off investing in a low risk portfolio and staying clear of leverage.
I've seen this mentioned a few places where it's a better substitute than going with VTI/VOO so I wanted to put on the strawman hat here since I imagine someone much more familiar with this allocation has considered various forward looking scenarios. If there's a 50% drop over treasuries, that's more like 6x, 300% on the treasury futures side I would imagine, and each 50% drop on the futures side would reload the 10% cash balance due to the rebalancing bands. This does seem like an upper bound of 30% as you stated. But I'm a complete noob with futures and wanting to learn more. i.e. The underlying question I'm getting at, is the risk really worth the 1% extra CAGR.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by DMoogle »

muffins14 wrote: Wed Jan 19, 2022 12:24 pm
DMoogle wrote: Tue Jan 18, 2022 11:36 pm
muffins14 wrote: Tue Jan 18, 2022 10:34 pm For those of you who actually hold treasury futures, how much collateral cash do you hold per contract for some example durations?
In a taxable account, I don't really worry about it with a portfolio margin account. I try to target a cash balance of $0, but if it goes negative and I'm paying margin interest, it's whatevs.

In a tax-sheltered account, I asked how much people keep in cash in the mHFEA thread, and the only response that I got said they keep 15% of the contract's value in cash (knowing that they might be auto-liquidated once in a rare while).
If I'm reading this right, are you saying it's also likely that in a taxable, Reg-T margin account at IBKR, you can hold treasury futures without holding any cash as collateral, and you just use your remaining portfolio as equity. Thus as there are price changes in the futures value, you just let losses get turned into margin debt, and hope eventually gains pay off the margin debt?

If that's the case, have you done any analysis to show the opportunity cost of that (taking on margin debt), versus having cash sitting as collateral?

I'd be seeking to make something like NTSX, but with a more diversified portfolio, like 60/40 US/INTL and include small-cap value as well. Perhaps overall I'd be trying to get an exposure like 95% equities, and then use 5% cash as collateral for however many treasury futures that would buy me
That is correct. I haven't done an in-depth analysis of it. Because the daily fluctuations are taken out of (or put into) your cash balance, you can start at $0 one day and a week later have a cash balance of several thousand positive or negative.

Margin rates are low so I wouldn't worry about it. I use box spreads for more leverage anyway, so I just factor that in when rebalancing.
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