Riding HEDGEFUNDIE’s excellent adventure

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Hydromod
Posts: 1051
Joined: Tue Mar 26, 2019 10:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Hydromod »

gtrplayer wrote: Fri Jul 30, 2021 11:05 pm Just started, relatively small amount in, but up over 10% at this point. Am considering contributing more towards it on a somewhat regular basis, but is setting up a weekly contribution a good idea or is more effective to contribute quarterly when rebalancing? I know in a normal world, invest as soon as you can, but HFEA is a different beast so I wasn’t sure the best method for contributing more to it.
Time in market vs market timing still applies. Automated contributions are the best. Even better if they automatically go to the underweight asset (M1 does this).

IMO weekly contributions to the underweight asset are preferable; rebalancing will have less of an adjustment (which may be nice for a taxable account).

From a rebalancing perspective, the contribution strategy only makes much of a difference while the annual contribution represents a significant fraction of the portfolio. So set up whichever you can sustain better; hopefully in a few years the portfolio will grow to where it doesn't matter.
gtrplayer
Posts: 859
Joined: Sat Dec 08, 2018 3:13 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by gtrplayer »

jarjarM wrote: Sat Jul 31, 2021 12:51 am
gtrplayer wrote: Fri Jul 30, 2021 11:05 pm Just started, relatively small amount in, but up over 10% at this point. Am considering contributing more towards it on a somewhat regular basis, but is setting up a weekly contribution a good idea or is more effective to contribute quarterly when rebalancing? I know in a normal world, invest as soon as you can, but HFEA is a different beast so I wasn’t sure the best method for contributing more to it.
If your expectation is for this little adventure to have significant appreciation, then it’s best to get in on the ground floor (lump sum). However, since the individual component do have significant volatility, you could market time a bit to buy in on low (it’s a sin here though :oops: ). In the end, it really depends on your comfort level with risk and regret.
Mainly I’m contributing portions of each paycheck to a Roth IRA in traditional index funds in addition to my 401k and I’d like to start putting a portion of the Roth contributions into this adventure. Either way, it will get invested, so maybe investing in traditional index funds then quarterly moving some into the adventure as part of rebalancing?
jeremyl
Posts: 360
Joined: Sat Dec 20, 2014 7:38 am
Location: Indiana

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by jeremyl »

I started in January with a separate Roth account with fidelity. I took $4k from VTI in vanguard Roth and combined it with my max Roth contribution for this year. Total of $10k. It's about 2.5% of my portfolio. I'm trying to decide if I want to use each year's Roth max on this adventure or put it in VTI (vanguard total us fund) every year.

Looks like I'm up 30% ytd. Could always support my Roth max each year 50% to the adventure & 50% to the total market fund at vg.
Fonfo
Posts: 15
Joined: Mon Aug 02, 2021 10:55 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Fonfo »

Hi! Just joined to the party.

Start date: 31/07/21
Approach: Fixed allocation - 15/25/60 TQQQ/UPRO/TYD (European alternatives)
Rebalancing frequency: Quarterly
Return (total / YTD): just started
Initial contribution: $10k (~10% of invested assets)
Additional contributions: $1,500 / month, upon an eventual crash, I will contribute with up to 30k more.
Portfolio location: Taxable, trade republic.
tabby123
Posts: 4
Joined: Thu Nov 01, 2018 12:25 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by tabby123 »

Fonfo wrote: Wed Aug 04, 2021 8:06 am
Additional contributions: $1,500 / month, upon an eventual crash, I will contribute with up to 30k more.
This made me wonder. I don't keep much cash on hand, I pretty quickly invest whatever extra cash I have. In the event of a market crash, would it make sense to sell non-leveraged assets in my main taxable portfolio, realize a loss, and move that money over to my HFEA portfolio? Or is the risk that I time the crash wrong, and the market drops even more, enough reason not even to try this? Posing the question to folks smarter than me.
rchmx1
Posts: 523
Joined: Sat Oct 26, 2019 6:38 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by rchmx1 »

tabby123 wrote: Wed Aug 04, 2021 8:34 am
Fonfo wrote: Wed Aug 04, 2021 8:06 am
Additional contributions: $1,500 / month, upon an eventual crash, I will contribute with up to 30k more.
This made me wonder. I don't keep much cash on hand, I pretty quickly invest whatever extra cash I have. In the event of a market crash, would it make sense to sell non-leveraged assets in my main taxable portfolio, realize a loss, and move that money over to my HFEA portfolio? Or is the risk that I time the crash wrong, and the market drops even more, enough reason not even to try this? Posing the question to folks smarter than me.
It's not about smarts, it's about risk assessment. Taking your approach is just making a bet. So ultimately it's just a matter of, in that moment, do you decide to take that bet. To relate an anecdote from the COVID "crash" which has no bearing on anything since past market movements say nothing about what will happen in the future, UPRO was trading around $80 in early Feb. When things started to crash after the 19th, someone who waited a while and bought a bunch at $40 would have been really stressed as it continued to drop to $20. But now UPRO is trading at $120+. So was that a bad bet just because they didn't capture the absolute bottom? Having the expectation that you'll consistently/reliably be able to recognize the bottom is a ridiculous ask imo.

My personal feeling is that it is worth at least considering taking such bets in the moment, as long as you know you won't panic sell if it keeps dropping in the short term.
jarjarM
Posts: 2511
Joined: Mon Jul 16, 2018 1:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by jarjarM »

rchmx1 wrote: Wed Aug 04, 2021 11:09 am
tabby123 wrote: Wed Aug 04, 2021 8:34 am
Fonfo wrote: Wed Aug 04, 2021 8:06 am
Additional contributions: $1,500 / month, upon an eventual crash, I will contribute with up to 30k more.
This made me wonder. I don't keep much cash on hand, I pretty quickly invest whatever extra cash I have. In the event of a market crash, would it make sense to sell non-leveraged assets in my main taxable portfolio, realize a loss, and move that money over to my HFEA portfolio? Or is the risk that I time the crash wrong, and the market drops even more, enough reason not even to try this? Posing the question to folks smarter than me.
It's not about smarts, it's about risk assessment. Taking your approach is just making a bet. So ultimately it's just a matter of, in that moment, do you decide to take that bet. To relate an anecdote from the COVID "crash" which has no bearing on anything since past market movements say nothing about what will happen in the future, UPRO was trading around $80 in early Feb. When things started to crash after the 19th, someone who waited a while and bought a bunch at $40 would have been really stressed as it continued to drop to $20. But now UPRO is trading at $120+. So was that a bad bet just because they didn't capture the absolute bottom? Having the expectation that you'll consistently/reliably be able to recognize the bottom is a ridiculous ask imo.

My personal feeling is that it is worth at least considering taking such bets in the moment, as long as you know you won't panic sell if it keeps dropping in the short term.
+1 on the bolded statement, it's very important to establish your risk tolerance level beforehand. Individual component of this strategy has high volatility, especially during time of crisis. It's critical determine what your course action will be because watching the $100k you just put in after a 50% drawdown going down another 20-30% (that happened in covid bear market) is going to be tough. Best to follow quarterly rebalance schedule if one start to have doubt about catching a falling knife.
Fonfo
Posts: 15
Joined: Mon Aug 02, 2021 10:55 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Fonfo »

tabby123 wrote: Wed Aug 04, 2021 8:34 am
Fonfo wrote: Wed Aug 04, 2021 8:06 am
Additional contributions: $1,500 / month, upon an eventual crash, I will contribute with up to 30k more.
This made me wonder. I don't keep much cash on hand, I pretty quickly invest whatever extra cash I have. In the event of a market crash, would it make sense to sell non-leveraged assets in my main taxable portfolio, realize a loss, and move that money over to my HFEA portfolio? Or is the risk that I time the crash wrong, and the market drops even more, enough reason not even to try this? Posing the question to folks smarter than me.
It makes totally sense. You can increase your leverage part of your portfolio in a crash. Actually it a good idea. It is like to buy option in a dip or warrants, all strategies that make sense at that point. But you will have to be very a little bit more precise for the time you choose to make the move. That's all.

I have heard even people that they are only just with a position in upro without TYD nor TMF waiting for the crash to move their already inverted assets from VIT to UPRO.

So it is all about risk management.
Fonfo
Posts: 15
Joined: Mon Aug 02, 2021 10:55 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Fonfo »

jarjarM wrote: Wed Aug 04, 2021 1:15 pm
rchmx1 wrote: Wed Aug 04, 2021 11:09 am
tabby123 wrote: Wed Aug 04, 2021 8:34 am
Fonfo wrote: Wed Aug 04, 2021 8:06 am
Additional contributions: $1,500 / month, upon an eventual crash, I will contribute with up to 30k more.
This made me wonder. I don't keep much cash on hand, I pretty quickly invest whatever extra cash I have. In the event of a market crash, would it make sense to sell non-leveraged assets in my main taxable portfolio, realize a loss, and move that money over to my HFEA portfolio? Or is the risk that I time the crash wrong, and the market drops even more, enough reason not even to try this? Posing the question to folks smarter than me.
It's not about smarts, it's about risk assessment. Taking your approach is just making a bet. So ultimately it's just a matter of, in that moment, do you decide to take that bet. To relate an anecdote from the COVID "crash" which has no bearing on anything since past market movements say nothing about what will happen in the future, UPRO was trading around $80 in early Feb. When things started to crash after the 19th, someone who waited a while and bought a bunch at $40 would have been really stressed as it continued to drop to $20. But now UPRO is trading at $120+. So was that a bad bet just because they didn't capture the absolute bottom? Having the expectation that you'll consistently/reliably be able to recognize the bottom is a ridiculous ask imo.

My personal feeling is that it is worth at least considering taking such bets in the moment, as long as you know you won't panic sell if it keeps dropping in the short term.
+1 on the bolded statement, it's very important to establish your risk tolerance level beforehand. Individual component of this strategy has high volatility, especially during time of crisis. It's critical determine what your course action will be because watching the $100k you just put in after a 50% drawdown going down another 20-30% (that happened in covid bear market) is going to be tough. Best to follow quarterly rebalance schedule if one start to have doubt about catching a falling knife.
I keep asking myself if apart from the quarterly rebalance, does it make sense also rebalancing when you portfolio shifts over a certain threshold like it would be the case in a crash? Or you just better stick with the planned quarterly rebalances?
chrisdds98
Posts: 500
Joined: Tue May 19, 2015 9:55 pm
Location: Austin, TX

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by chrisdds98 »

Fonfo wrote: Wed Aug 04, 2021 1:24 pm
jarjarM wrote: Wed Aug 04, 2021 1:15 pm
rchmx1 wrote: Wed Aug 04, 2021 11:09 am
tabby123 wrote: Wed Aug 04, 2021 8:34 am
Fonfo wrote: Wed Aug 04, 2021 8:06 am
Additional contributions: $1,500 / month, upon an eventual crash, I will contribute with up to 30k more.
This made me wonder. I don't keep much cash on hand, I pretty quickly invest whatever extra cash I have. In the event of a market crash, would it make sense to sell non-leveraged assets in my main taxable portfolio, realize a loss, and move that money over to my HFEA portfolio? Or is the risk that I time the crash wrong, and the market drops even more, enough reason not even to try this? Posing the question to folks smarter than me.
It's not about smarts, it's about risk assessment. Taking your approach is just making a bet. So ultimately it's just a matter of, in that moment, do you decide to take that bet. To relate an anecdote from the COVID "crash" which has no bearing on anything since past market movements say nothing about what will happen in the future, UPRO was trading around $80 in early Feb. When things started to crash after the 19th, someone who waited a while and bought a bunch at $40 would have been really stressed as it continued to drop to $20. But now UPRO is trading at $120+. So was that a bad bet just because they didn't capture the absolute bottom? Having the expectation that you'll consistently/reliably be able to recognize the bottom is a ridiculous ask imo.

My personal feeling is that it is worth at least considering taking such bets in the moment, as long as you know you won't panic sell if it keeps dropping in the short term.
+1 on the bolded statement, it's very important to establish your risk tolerance level beforehand. Individual component of this strategy has high volatility, especially during time of crisis. It's critical determine what your course action will be because watching the $100k you just put in after a 50% drawdown going down another 20-30% (that happened in covid bear market) is going to be tough. Best to follow quarterly rebalance schedule if one start to have doubt about catching a falling knife.
I keep asking myself if apart from the quarterly rebalance, does it make sense also rebalancing when you portfolio shifts over a certain threshold like it would be the case in a crash? Or you just better stick with the planned quarterly rebalances?
rebalancing bands have reduced total returns in the past by a few points.
User avatar
drumboy256
Posts: 673
Joined: Sat Jun 06, 2020 2:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by drumboy256 »

I’m curious, I’m putting new money into HFEA every two weeks at a pure 50/50 split. I plan on rebalancing 1st of the month every quarter….

What’s the end game for most people? I say that as I think it was yesterday and today I saw both UPRO and TMF both go up and both go down and eventually TMF win the day again. Knowing the risk factor and the swings, I’m curious if other people have a target in which they off ramp and shove it into VTI/VTSAX etc.

Having just thought about it tonight, I guess I’ll just leave it alone and keep contributing until I hit $1M. BTW, I’m only starting from less than $5k so, yeah.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | 20% IVV / 40% IBIT / 20% IXUS / 20% VGLT + chill
kongle
Posts: 1
Joined: Thu Aug 05, 2021 2:58 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by kongle »

Fonfo wrote: Wed Aug 04, 2021 8:06 am Hi! Just joined to the party.

Start date: 31/07/21
Approach: Fixed allocation - 15/25/60 TQQQ/UPRO/TYD (European alternatives)
Rebalancing frequency: Quarterly
Return (total / YTD): just started
Initial contribution: $10k (~10% of invested assets)
Additional contributions: $1,500 / month, upon an eventual crash, I will contribute with up to 30k more.
Portfolio location: Taxable, trade republic.
What are the European alternatives that you are using?
Fonfo
Posts: 15
Joined: Mon Aug 02, 2021 10:55 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Fonfo »

kongle wrote: Thu Aug 05, 2021 3:01 am
Fonfo wrote: Wed Aug 04, 2021 8:06 am Hi! Just joined to the party.

Start date: 31/07/21
Approach: Fixed allocation - 15/25/60 TQQQ/UPRO/TYD (European alternatives)
Rebalancing frequency: Quarterly
Return (total / YTD): just started
Initial contribution: $10k (~10% of invested assets)
Additional contributions: $1,500 / month, upon an eventual crash, I will contribute with up to 30k more.
Portfolio location: Taxable, trade republic.
What are the European alternatives that you are using?
TQQQ IE00BLRPRL42
UPRO IE00B7Y34M31
TYD IE00BKT09032

Cheers
Busdrvr
Posts: 221
Joined: Fri Jan 29, 2016 10:56 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Busdrvr »

Checking today I’ve gathered a 58% gain on a couple years worth of Roth contributions. Although I have tinkered with the allocations and rebalancing so my results are not optimal after starting to contribute in late 2019. So currently less than 2% of investable. Considering a much larger allocation in my 401 brokeragelink.

If you have more than 1M plus in investable and a large stake, what % are you currently comfortable allocating to the HFEA??

I know there are some here who started with 100k and have done……very well in 30 months..
Ramjet
Posts: 1464
Joined: Thu Feb 06, 2020 10:45 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Ramjet »

Reminder that Hedgefundie suggested: 1) a one-time contribution, 2) to view it as a lottery ticket independent of your normal portfolio, and 3) not to risk more than you can afford to lose

These are really good rules to help you stay the course for the long haul, especially for something as volatile as this

Why are so many people making monthly contributions?

I hope this isn't your entire portfolio
MattB
Posts: 1228
Joined: Fri May 28, 2021 12:27 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by MattB »

drumboy256 wrote: Wed Aug 04, 2021 11:18 pm What’s the end game for most people? I say that as I think it was yesterday and today I saw both UPRO and TMF both go up and both go down and eventually TMF win the day again. Knowing the risk factor and the swings, I’m curious if other people have a target in which they off ramp and shove it into VTI/VTSAX etc.
I've thought about this some and will continue to think about it over the next few years.

My current thought is that I should rebalance out of the leveraged positions into VTI/TLT or similar if, and hopefully when, I hit a certain number. Maybe rebalance everything out of the leveraged positions at one time. Maybe rebalance everything above a certain number out of the leveraged positions. It's hard to say at the moment. And, to be fair, the whole adventure may explode in my face and go to zero.

Either way, I have ten or twenty years to think about this.
Busdrvr
Posts: 221
Joined: Fri Jan 29, 2016 10:56 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Busdrvr »

Ramjet wrote: Thu Aug 05, 2021 2:50 pm Reminder that Hedgefundie suggested: 1) a one-time contribution, 2) to view it as a lottery ticket independent of your normal portfolio, and 3) not to risk more than you can afford to lose

These are really good rules to help you stay the course for the long haul, especially for something as volatile as this

Why are so many people making monthly contributions?

I hope this isn't your entire portfolio
So are you comfortable saying what your 1X contribution was, even as a % of your total?

And is that the only amount you will ever add?
Last edited by Busdrvr on Thu Aug 05, 2021 5:05 pm, edited 1 time in total.
Fonfo
Posts: 15
Joined: Mon Aug 02, 2021 10:55 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Fonfo »

Ramjet wrote: Thu Aug 05, 2021 2:50 pm Reminder that Hedgefundie suggested: 1) a one-time contribution, 2) to view it as a lottery ticket independent of your normal portfolio, and 3) not to risk more than you can afford to lose

These are really good rules to help you stay the course for the long haul, especially for something as volatile as this

Why are so many people making monthly contributions?

I hope this isn't your entire portfolio
Monthly contributions are just a simple way of doing rebalances without paying taxes in a taxable account.

I really don't know where all this fear to this strategy is coming from. At least the original strategy 60-40 which is closer to the all weather dailo leveraged portfolio is proved to be safe and actually you can pick any 5 year period and compare.
Last edited by Fonfo on Thu Aug 05, 2021 4:50 pm, edited 1 time in total.
MattB
Posts: 1228
Joined: Fri May 28, 2021 12:27 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by MattB »

Ramjet wrote: Thu Aug 05, 2021 2:50 pm Reminder that Hedgefundie suggested: 1) a one-time contribution, 2) to view it as a lottery ticket independent of your normal portfolio, and 3) not to risk more than you can afford to lose

These are really good rules to help you stay the course for the long haul, especially for something as volatile as this

Why are so many people making monthly contributions?

I hope this isn't your entire portfolio
I can't speak for other people. But I'm making periodic contributions for several reasons:

First, because I'm trying something new and want to experience how it works, for better and for worse, before I commit more than 1% of my investible assets to it. I started with $3k, which is literally a rounding error away from 0% of my investible assets, and will dollar-cost-average into it over the next several years. You can analogize this to an infant wading into a swimming pool for the first time.

Second, because I'm market-timing, in a sense. The stock market is at an all time high. The bond market has had a long bull run. And this strategy has a much higher likelihood of experiencing an unrecoverable loss than investing in a total market stock fund. Accordingly, I'm hedging my bets. I'd be more likely to lump-sum into this strategy with a few percentage points of my investible assets if p/e10s were lower, interest rates were higher, and the market had just experienced a 50% haircut. But that's not where we are. So, I'm being cautious.

Third, because it may reduce my tax burden for the first few years. I'm doing this in a taxable account for reasons that are beyond the scope of this comment. And I'm hoping that I can reduce if not avoid short term capital gains taxes for a few years by making periodic contributions.

It may turn out that I would have made more money lump-sum investing. If that's the case, great: I will have learned something, and I will have made more money than I would have made by investing my disposable income into VTSAX, as I have for the past 15 years. If that's not the case, okay: I will have learned something, and I won't have lost as much as I would have had I leaped into this with a more significant lump-sum.
jarjarM
Posts: 2511
Joined: Mon Jul 16, 2018 1:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by jarjarM »

Busdrvr wrote: Thu Aug 05, 2021 2:14 pm Checking today I’ve gathered a 58% gain on a couple years worth of Roth contributions. Although I have tinkered with the allocations and rebalancing so my results are not optimal after starting to contribute in late 2019. So currently less than 2% of investable. Considering a much larger allocation in my 401 brokeragelink.

If you have more than 1M plus in investable and a large stake, what % are you currently comfortable allocating to the HFEA??

I know there are some here who started with 100k and have done……very well in 30 months..
I'm one of those who put down $100k back in early 2019. It was always intended to be an isolated experiment and will remain so for the foreseeable future. Not planning on deleveraging it even if it does grow into a large part of my portfolio. Now if it does ever become 50% or more, I would be concern enough to mull over deleverage a bit which is why I'm glad it's in a tax deferred account so I don't have to worry about tax consequences.
User avatar
drumboy256
Posts: 673
Joined: Sat Jun 06, 2020 2:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by drumboy256 »

Ramjet wrote: Thu Aug 05, 2021 2:50 pm Reminder that Hedgefundie suggested: 1) a one-time contribution, 2) to view it as a lottery ticket independent of your normal portfolio, and 3) not to risk more than you can afford to lose

These are really good rules to help you stay the course for the long haul, especially for something as volatile as this

Why are so many people making monthly contributions?

I hope this isn't your entire portfolio
To be the every man dude in this thread, I'm using sub $5,000 to start out with and making monthly contributions to amp up the returns. As most have said, a lot of us (either lump sum 1X) is less than 1-5% total of their portfolios. I've day traded crypto long before I got in with HFEA's strategy so the volatility is expected plus it leaves me from tinkering with my work 401k. I also put in monthly contributions to DW's Roth as well so it's not like I don't have a vanilla index fund missing out (in addition to my company contribution to my 401k + company match).

To your point, anyone doing this in their Roth/Taxable as the ONLY way to grow wealth in the accumulation years, I would agree, this strategy is probably not the best path forward. If anything, this has been extremely educational in how markets work which is all about the learning experience for me. :sharebeer
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | 20% IVV / 40% IBIT / 20% IXUS / 20% VGLT + chill
Busdrvr
Posts: 221
Joined: Fri Jan 29, 2016 10:56 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Busdrvr »

jarjarM wrote: Thu Aug 05, 2021 5:34 pm
Busdrvr wrote: Thu Aug 05, 2021 2:14 pm Checking today I’ve gathered a 58% gain on a couple years worth of Roth contributions. Although I have tinkered with the allocations and rebalancing so my results are not optimal after starting to contribute in late 2019. So currently less than 2% of investable. Considering a much larger allocation in my 401 brokeragelink.

If you have more than 1M plus in investable and a large stake, what % are you currently comfortable allocating to the HFEA??

I know there are some here who started with 100k and have done……very well in 30 months..
I'm one of those who put down $100k back in early 2019. It was always intended to be an isolated experiment and will remain so for the foreseeable future. Not planning on deleveraging it even if it does grow into a large part of my portfolio. Now if it does ever become 50% or more, I would be concern enough to mull over deleverage a bit which is why I'm glad it's in a tax deferred account so I don't have to worry about tax consequences.
That’s fantastic! So, according to another poster I saw recently, you guys have hit 300k in the adventure. I think tax deferred and lump to start is the way to go. Rebalancing with contributions would get hard as it grows and taxes would be a drag.
jarjarM
Posts: 2511
Joined: Mon Jul 16, 2018 1:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by jarjarM »

Busdrvr wrote: Thu Aug 05, 2021 7:55 pm
jarjarM wrote: Thu Aug 05, 2021 5:34 pm
Busdrvr wrote: Thu Aug 05, 2021 2:14 pm Checking today I’ve gathered a 58% gain on a couple years worth of Roth contributions. Although I have tinkered with the allocations and rebalancing so my results are not optimal after starting to contribute in late 2019. So currently less than 2% of investable. Considering a much larger allocation in my 401 brokeragelink.

If you have more than 1M plus in investable and a large stake, what % are you currently comfortable allocating to the HFEA??

I know there are some here who started with 100k and have done……very well in 30 months..
I'm one of those who put down $100k back in early 2019. It was always intended to be an isolated experiment and will remain so for the foreseeable future. Not planning on deleveraging it even if it does grow into a large part of my portfolio. Now if it does ever become 50% or more, I would be concern enough to mull over deleverage a bit which is why I'm glad it's in a tax deferred account so I don't have to worry about tax consequences.
That’s fantastic! So, according to another poster I saw recently, you guys have hit 300k in the adventure. I think tax deferred and lump to start is the way to go. Rebalancing with contributions would get hard as it grows and taxes would be a drag.
True, if one expect to have significant out performance for this strategy, lump sum to start in a tax advantaged account is the best. Since there's lots of volatility of the individual components, contribution to the lower performing component should work well. Of course the tax drag will be somewhat significant if there's a need to sell and rebalance in the taxable account, hopefully one can do that in a low tax year. :oops:
Busdrvr
Posts: 221
Joined: Fri Jan 29, 2016 10:56 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Busdrvr »

jarjarM wrote: Thu Aug 05, 2021 5:34 pm
Busdrvr wrote: Thu Aug 05, 2021 2:14 pm Checking today I’ve gathered a 58% gain on a couple years worth of Roth contributions. Although I have tinkered with the allocations and rebalancing so my results are not optimal after starting to contribute in late 2019. So currently less than 2% of investable. Considering a much larger allocation in my 401 brokeragelink.

If you have more than 1M plus in investable and a large stake, what % are you currently comfortable allocating to the HFEA??

I know there are some here who started with 100k and have done……very well in 30 months..
I'm one of those who put down $100k back in early 2019. It was always intended to be an isolated experiment and will remain so for the foreseeable future. Not planning on deleveraging it even if it does grow into a large part of my portfolio. Now if it does ever become 50% or more, I would be concern enough to mull over deleverage a bit which is why I'm glad it's in a tax deferred account so I don't have to worry about tax consequences.
I see you are doing TAA for the EA…do you use portfolio visualizer in order to calculate? Have you compared that to the OG performance and if so what did you find…
jarjarM
Posts: 2511
Joined: Mon Jul 16, 2018 1:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by jarjarM »

Busdrvr wrote: Thu Aug 05, 2021 8:11 pm
jarjarM wrote: Thu Aug 05, 2021 5:34 pm
Busdrvr wrote: Thu Aug 05, 2021 2:14 pm Checking today I’ve gathered a 58% gain on a couple years worth of Roth contributions. Although I have tinkered with the allocations and rebalancing so my results are not optimal after starting to contribute in late 2019. So currently less than 2% of investable. Considering a much larger allocation in my 401 brokeragelink.

If you have more than 1M plus in investable and a large stake, what % are you currently comfortable allocating to the HFEA??

I know there are some here who started with 100k and have done……very well in 30 months..
I'm one of those who put down $100k back in early 2019. It was always intended to be an isolated experiment and will remain so for the foreseeable future. Not planning on deleveraging it even if it does grow into a large part of my portfolio. Now if it does ever become 50% or more, I would be concern enough to mull over deleverage a bit which is why I'm glad it's in a tax deferred account so I don't have to worry about tax consequences.
I see you are doing TAA for the EA…do you use portfolio visualizer in order to calculate? Have you compared that to the OG performance and if so what did you find…
I don't use PV since I didn't want to pay for it :P I built my own python sim to calculate the proper ratio. Now, so far depending on the exact rebalancing time, I think TAA will be either slightly ahead or a bit behind OG. Because of the high volatility, big part of the performance end up being the luck of rebalance timing :oops: However, IF you want to extend beyond UPRO/TMF to more components, I definitely recommend TAA or some sort of risk budgeting.
Ramjet
Posts: 1464
Joined: Thu Feb 06, 2020 10:45 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Ramjet »

Busdrvr wrote: Thu Aug 05, 2021 3:45 pm
Ramjet wrote: Thu Aug 05, 2021 2:50 pm Reminder that Hedgefundie suggested: 1) a one-time contribution, 2) to view it as a lottery ticket independent of your normal portfolio, and 3) not to risk more than you can afford to lose

These are really good rules to help you stay the course for the long haul, especially for something as volatile as this

Why are so many people making monthly contributions?

I hope this isn't your entire portfolio
So are you comfortable saying what your 1X contribution was, even as a % of your total?

And is that the only amount you will ever add?
Sure, I think it was 12%. Yes, the only contribution I'll make except for an account I did roll over that only had a few thousand dollars in it
perfectuncertainty
Posts: 386
Joined: Sun Feb 04, 2018 6:44 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by perfectuncertainty »

jarjarM wrote: Thu Aug 05, 2021 8:24 pm
Busdrvr wrote: Thu Aug 05, 2021 8:11 pm
jarjarM wrote: Thu Aug 05, 2021 5:34 pm
Busdrvr wrote: Thu Aug 05, 2021 2:14 pm Checking today I’ve gathered a 58% gain on a couple years worth of Roth contributions. Although I have tinkered with the allocations and rebalancing so my results are not optimal after starting to contribute in late 2019. So currently less than 2% of investable. Considering a much larger allocation in my 401 brokeragelink.

If you have more than 1M plus in investable and a large stake, what % are you currently comfortable allocating to the HFEA??

I know there are some here who started with 100k and have done……very well in 30 months..
I'm one of those who put down $100k back in early 2019. It was always intended to be an isolated experiment and will remain so for the foreseeable future. Not planning on deleveraging it even if it does grow into a large part of my portfolio. Now if it does ever become 50% or more, I would be concern enough to mull over deleverage a bit which is why I'm glad it's in a tax deferred account so I don't have to worry about tax consequences.
I see you are doing TAA for the EA…do you use portfolio visualizer in order to calculate? Have you compared that to the OG performance and if so what did you find…
I don't use PV since I didn't want to pay for it :P I built my own python sim to calculate the proper ratio. Now, so far depending on the exact rebalancing time, I think TAA will be either slightly ahead or a bit behind OG. Because of the high volatility, big part of the performance end up being the luck of rebalance timing :oops: However, IF you want to extend beyond UPRO/TMF to more components, I definitely recommend TAA or some sort of risk budgeting.
With all that profit from HFEA you can pay for PV (for both you and me) :-)
Hydromod
Posts: 1051
Joined: Tue Mar 26, 2019 10:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Hydromod »

jarjarM wrote: Thu Aug 05, 2021 8:01 pm True, if one expect to have significant out performance for this strategy, lump sum to start in a tax advantaged account is the best. Since there's lots of volatility of the individual components, contribution to the lower performing component should work well. Of course the tax drag will be somewhat significant if there's a need to sell and rebalance in the taxable account, hopefully one can do that in a low tax year. :oops:
This is the standard thinking: best in order of (i) Roth, (ii) tax-deferred, and last (iii) taxable.

There's no question that Roth is best.

It's not so clear that tax-deferred is necessarily better than taxable.

In tax-deferred, withdrawals are ordinary income, so large withdrawals can incur up to significant brackets.

In taxable, withdrawals are long-term capital gains, which is 15 or 20% (which can be significantly cheaper, depending on how much is withdrawn).

Tax-deferred rebalancing doesn't have a tax hit.

Taxable rebalancing can be done with LTCG, using relatively new shares with more modest gains (I think M1 does this automatically), which might correspond to 1 or 2% ER (consider x turnover during rebalance * y growth in basis * LTCG tax rate).

It may be worthwhile to take the early growth hit if you intend to consume at high levels and can meet the goal either way.

Just spitballing here.
jarjarM
Posts: 2511
Joined: Mon Jul 16, 2018 1:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by jarjarM »

perfectuncertainty wrote: Fri Aug 06, 2021 10:18 am
jarjarM wrote: Thu Aug 05, 2021 8:24 pm
I don't use PV since I didn't want to pay for it :P I built my own python sim to calculate the proper ratio. Now, so far depending on the exact rebalancing time, I think TAA will be either slightly ahead or a bit behind OG. Because of the high volatility, big part of the performance end up being the luck of rebalance timing :oops: However, IF you want to extend beyond UPRO/TMF to more components, I definitely recommend TAA or some sort of risk budgeting.
With all that profit from HFEA you can pay for PV (for both you and me) :-)
Hmmm, good point :beer
User avatar
Afrofreak
Posts: 223
Joined: Sat Feb 20, 2021 2:09 pm
Location: Ontario, Canada

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Afrofreak »

Afrofreak wrote: Sat Feb 20, 2021 2:44 pm
[...]

I'm 22 and want to achieve FI as soon as humanely possible, so I'm going all-in. This portfolio represents about 70% of my NW (with most of the rest being in cryptos that have been on a tear lately :D ) I'm also in the process of borrowing another $36K to invest. If we repeat the 2010s, I could retire already and just watch my money grow, but realistically I think I'll wait till this has ballooned to $250K minimum before pulling the plug and divesting a portion of it into a "safe" asset mix at every milestone I hit. For the time being I've set my sights on 10% every $250K ($25K @ $250K, another $50K @ $500K, etc.) into 70/30 ACWV/TLT to limit drawdowns and volatility as much as possible while still achieving a solid 8% return (according to historical averages).

[...]
Time for an update!

Start date: May 2020
Approach: Fixed allocation - 70/30 TQQQ/TMF
Rebalancing frequency: 1st of every quarter
Return (total / YTD): 145%/26% through end of July 2021
Initial contribution: $25K
Additional contributions: $2.8K per month
Current value: $180K

Well, that $36K that I intended on borrowing turned into $45K in the end. I have a $50K LOC @Prime (2.45% currently in Canada) and am leaving the last $5K in case of a major drawdown. Portfolio now consists of about 120% of my total NW. I was concerned about other people's fear of inflation and attempted to hedge by moving 10% of TQQQ into FAS for a few months, that ended up being a somewhat costly mistake. Currently in the process of selling FAS a third at a time to get it all back into TQQQ by next rebal. on the 1st of Oct. On the other hand, made some sweet crypto gains recently that I contributed to the portfolio as well and along with stellar returns it has now ballooned to just below $180K. We are quickly approaching the $250K mark that I originally set for myself to "retire" but given that I'm using borrowed money, I've moved the goal posts to $250K-$350K. My strategy for deleveraging has remained the same.
Just over $52K in total gains. Holy f*ck. So far, so good. I'm cautiously optimistic, as much as the general public seems to despise him, I have full confidence in J.Pow and the FOMC. Onwards and upwards!
NewEnglandVolley
Posts: 6
Joined: Sun Mar 15, 2020 7:37 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by NewEnglandVolley »

As of one week ago I've decided to go (IRA) all in on HedgeFundie's ride (55/45 UPRO TMF). Wish I had hopped on earlier in my non-taxable account but I guess late is better than never. Pushed in a full $150k of my tIRA that was previously in QQQ. In a week it's since gained roughly $4500 so I'm quite pleased thus far.
User avatar
PlantDaddy
Posts: 5
Joined: Sun Feb 14, 2021 3:03 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by PlantDaddy »

Decided to have a little fun and join the ride. This is new for me. I've always been a TSM index fund kind of guy.

Start date: 08/25/2021
Approach: Fixed allocation - 55/45 UPRO/TMF
Rebalancing frequency: 1st Monday of every quarter
Return (total/YTD): N/A
Initial contribution: $25K (~5% of invested assets)
Additional contributions: TBD
Current value: $25k
Account: Roth IRA

Good luck, everyone! :sharebeer
rchmx1
Posts: 523
Joined: Sat Oct 26, 2019 6:38 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by rchmx1 »

Welcome aboard to all the new people! :beer

Feel like updating again. Updated last in mid April when my return was +116% for the previous year. Now it's:

Start date: 3/18/2020
Total contributions: $12.4k
Current allocation: 52.1/34/13.9 UPRO/TQQQ/TMF
Total Return: 174.59%
401k at Schwab

Been increasing my TMF exposure a bit and plan to get a bit closer to a normal ratio during the next rebalancing period. But so far so good!
rangerrick9211
Posts: 9
Joined: Mon Oct 08, 2018 1:11 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by rangerrick9211 »

rangerrick9211 wrote: Tue Sep 29, 2020 10:21 am Revised adventure as TMF is not permitted due to employer independence reasons.

Start date: 09/2019
Approach: Fixed allocation - 35/20/45, UPRO/TQQQ/UBT
Rebalancing frequency: None - rebalance through DCA for now, but TQQQ needs to be reset
Return (total / YTD): 71.44%/31.75%
Initial contribution: $15k - 1.5% of assets
Additional contributions: $2,500/mo. (I accelerated through the dip)
Portfolio location: IB - Taxable
My update:
  • No rebalance: 55/25/20, UPRO/TQQQ/UBT mix.I plan on rebalancing soon.
  • Cost basis: $18.7k; Current value: $31.2k; Return: 66%
  • I have not been DCA'ing as originally planned. I also had to transfer from M1 into IBKR at some point in Q4 of '19 for compliance reasons. I'm guessing the cost basis is based on the in-kind transfer date and not what I purchased in M1. That would explain the lower returns relative to others starting in the same period.
Last edited by rangerrick9211 on Wed Aug 25, 2021 12:50 pm, edited 1 time in total.
User avatar
typical.investor
Posts: 5263
Joined: Mon Jun 11, 2018 3:17 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by typical.investor »

Start date: 4/10/19
Approach: US + Intl even split with bonds - 28% UPRO/22% int (EDC, DZK)/ 50%TMF
Rebalancing frequency: Quarterly initially but now closer to 5% bands or RBD
Initial contribution: $98k
Additional contributions: $3,500
Portfolio location: Taxable, Roth Schwab

Notes:
Over-rebalanced in 3.2020 crash from TMF into UPRO/EDC/DZK. (will revert to original allocation after the FED stops buying bonds)
DZK - International developed folded in 10.2020 and was rolled into EDC emerging

Currently: Fixed allocation - 51% UPRO/ 23% EDC (emerging)/ 27% TMF
Value: $330,000
Gain: 225%
CAGR: 58%
User avatar
Afrofreak
Posts: 223
Joined: Sat Feb 20, 2021 2:09 pm
Location: Ontario, Canada

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Afrofreak »

rchmx1 wrote: Wed Aug 25, 2021 9:51 am Welcome aboard to all the new people! :beer

Feel like updating again. Updated last in mid April when my return was +116% for the previous year. Now it's:

Start date: 3/18/2020
Total contributions: $12.4k
Current allocation: 52.1/34/13.9 UPRO/TQQQ/TMF
Total Return: 174.59%
401k at Schwab

Been increasing my TMF exposure a bit and plan to get a bit closer to a normal ratio during the next rebalancing period. But so far so good!
I don't think you could've picked a better start date. Holy moly.
Haku dan
Posts: 1
Joined: Mon Aug 16, 2021 10:06 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Haku dan »

Afrofreak wrote: Wed Aug 25, 2021 2:14 pm
rchmx1 wrote: Wed Aug 25, 2021 9:51 am Welcome aboard to all the new people! :beer

Feel like updating again. Updated last in mid April when my return was +116% for the previous year. Now it's:

Start date: 3/18/2020
Total contributions: $12.4k
Current allocation: 52.1/34/13.9 UPRO/TQQQ/TMF
Total Return: 174.59%
401k at Schwab

Been increasing my TMF exposure a bit and plan to get a bit closer to a normal ratio during the next rebalancing period. But so far so good!
I don't think you could've picked a better start date. Holy moly.
Yes: 3/ 23/ 2020. But that's about it!
rchmx1
Posts: 523
Joined: Sat Oct 26, 2019 6:38 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by rchmx1 »

Afrofreak wrote: Wed Aug 25, 2021 2:14 pm
rchmx1 wrote: Wed Aug 25, 2021 9:51 am Welcome aboard to all the new people! :beer

Feel like updating again. Updated last in mid April when my return was +116% for the previous year. Now it's:

Start date: 3/18/2020
Total contributions: $12.4k
Current allocation: 52.1/34/13.9 UPRO/TQQQ/TMF
Total Return: 174.59%
401k at Schwab

Been increasing my TMF exposure a bit and plan to get a bit closer to a normal ratio during the next rebalancing period. But so far so good!
I don't think you could've picked a better start date. Holy moly.
Unfortunately my initial contribution was much less than my total contributions, was only about 10% all of which went to UPRO. I DCA'd new money into my EA over the course of several months since I wasn't wanting to poach my normal investments. But yes, it was a very good time to get started with at least a small amount of money. I have a certain fondness for those first shares of UPRO I purchased on the 18th at $20.50 each. :happy
User avatar
LTCM
Posts: 412
Joined: Wed Sep 09, 2020 3:58 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by LTCM »

rchmx1 wrote: Wed Aug 25, 2021 4:09 pm Current allocation: 52.1/34/13.9 UPRO/TQQQ/TMF
14% bonds! Is that temporary or your own modification to the HFEA?
55% VUG - 20% VEA - 20% EDV - 5% BNDX
rchmx1
Posts: 523
Joined: Sat Oct 26, 2019 6:38 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by rchmx1 »

LTCM wrote: Wed Aug 25, 2021 8:43 pm
rchmx1 wrote: Wed Aug 25, 2021 4:09 pm Current allocation: 52.1/34/13.9 UPRO/TQQQ/TMF
14% bonds! Is that temporary or your own modification to the HFEA?
Definitely temporary. As I was DCAing new money last summer I was buying TMF when it was $40-50. It started to drop pretty significantly and I made the bet that it would continue to drop, so sold it all for a small loss and went all in on UPRO and TQQQ for most of the rest of 2020. I bought a little bit of TMF when it had dropped to around $30, which was a bit too soon to buy back in, and I've been buying small amounts in the mid-high $20s during the first half of 2021. Definitely risk, but it's all still a relatively small part of my portfolio. During the upcoming quarterly rebalancing date I plan to get back to a more conventional percentage of bonds.
MattB
Posts: 1228
Joined: Fri May 28, 2021 12:27 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by MattB »

I started a prospective test this morning, benchmarking a HFEA style portfolio that I hold in my Roth against equal sized investments in Vanguard's Total Stock Market ETF (VTI, e.r. 0.03) and WisdomTree's U.S. Efficient Core Fund (NTSX, e.r. 0.2), also held in a Roth account. The HFEA style portfolio I hold in my Roth is 20/20/45/15 UPRO/TQQQ/TYD/TMF, rebalanced quarterly.

The opportunity to do this easily came about by chance: I noticed the value of my HFEA style investment was roughly 2x the value of VTI that I hold in a separate Roth. And I was planning to reallocate part of the second Roth to NTSX. So, I directed half of the funds in VTI to NTSX.

The value of the resulting allocations will plainly show how my HFEA style portfolio is doing against two reasonable benchmarks, because their starting value is the same. It will also show how NTSX does against VTI, something else I've been curious about.

I'll use this post to track the value of the three allocations.

Date / VTI / NTSX / HFEA
9/3/21 / $78,162 / $78,138 / $78,248
Last edited by MattB on Fri Sep 03, 2021 12:16 pm, edited 1 time in total.
skierincolorado
Posts: 2377
Joined: Sat Mar 21, 2020 10:56 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by skierincolorado »

MattB wrote: Fri Sep 03, 2021 9:42 am I started a prospective test this morning, benchmarking a HFEA style portfolio that I hold in my Roth against equal sized investments in Vanguard's Total Stock Market ETF (VTI, e.r. 0.03) and WisdomTree's U.S. Efficient Core Fund (NTSX, e.r. 0.2), also held in a Roth account. The HFEA style portfolio I hold in my Roth is 20/20/45/15 UPRO/TQQQ/TYD/TMF, rebalanced quarterly.

The opportunity to do this easily came about by chance: I noticed the value of my HFEA style investment was roughly 2x the value of VTI that I hold in a separate Roth. And I was planning to reallocate part of the second Roth to NTSX. So, I directed half of the funds in VTI to NTSX.

The value of the resulting allocations, over time, will plainly show how my HFEA style portfolio is doing against two reasonable benchmarks. It will also show how NTSX does against VTI, something else I've been curious about.

I'll use this post to track the value of the three allocations.

Date / VTI / NTSX / HFEA
9/3/21 / $78,162 / $78,138 / $78,248
I calculate your AA across the three acounts to be 103/65/15 stock/ITT/LTT. Is this the AA you were aiming for overall? From an Ayres and Nalebuff lifecycle investing approach, it would be a bit conservative for somebody in their 20s or 30s with many working years ahead. But (in the long-run) it should be a noticeable improvement over a 100/0 or 90/10 portfolio and is a nice disciplined approach to leverage and diversification.
MattB
Posts: 1228
Joined: Fri May 28, 2021 12:27 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by MattB »

skierincolorado wrote: Fri Sep 03, 2021 9:55 am I calculate your AA across the three acounts to be 103/65/15 stock/ITT/LTT. Is this the AA you were aiming for overall? From an Ayres and Nalebuff lifecycle investing approach, it would be a bit conservative for somebody in their 20s or 30s with many working years ahead. But (in the long-run) it should be a noticeable improvement over a 100/0 or 90/10 portfolio and is a nice disciplined approach to leverage and diversification.
Eh. I think you're reading too much into it. I wasn't aiming for any particular allocation of stocks/ITT/LTT. Rather, I was aiming to allocate funds in my Roth equally across three different allocations. And I've done that. VTI and NTSX are, I believe, each reasonable investments for a Roth. HFEA and similarly leveraged stock/bond allocations are wildcards that may or may not turn out well.

Investing 1:1:1 in each of these allocations provides several interesting comparisons going forward and, perhaps more importantly, keeps me completely honest. If I were starting with different values, or adding to these investments over time, there would be a calculation between me and knowing if my foray into HFEA style investments was worth-while or not. Here, there is no place to hide. The value of these allocations will tell me directly whether I've made a bad decision or not, and in ten years or so, may guide investments that I make into the future.

Moreover, your view that I have a 103/65/15 allocation is incomplete. You can't collapse 2 or 3x-daily leveraged funds into an allocation like 103/65/15 without losing information. An investment that achieves any allocation, say 103/65/15, will perform differently depending on whether that allocation is achieved using margin, 2x or 3x-daily leveraged funds, or something else like futures.
skierincolorado
Posts: 2377
Joined: Sat Mar 21, 2020 10:56 am

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by skierincolorado »

MattB wrote: Fri Sep 03, 2021 12:35 pm
skierincolorado wrote: Fri Sep 03, 2021 9:55 am I calculate your AA across the three acounts to be 103/65/15 stock/ITT/LTT. Is this the AA you were aiming for overall? From an Ayres and Nalebuff lifecycle investing approach, it would be a bit conservative for somebody in their 20s or 30s with many working years ahead. But (in the long-run) it should be a noticeable improvement over a 100/0 or 90/10 portfolio and is a nice disciplined approach to leverage and diversification.
Eh. I think you're reading too much into it. I wasn't aiming for any particular allocation of stocks/ITT/LTT. Rather, I was aiming to allocate funds in my Roth equally across three different allocations. And I've done that. VTI and NTSX are, I believe, each reasonable investments for a Roth. HFEA and similarly leveraged stock/bond allocations are wildcards that may or may not turn out well.

Investing 1:1:1 in each of these allocations provides several interesting comparisons going forward and, perhaps more importantly, keeps me completely honest. If I were starting with different values, or adding to these investments over time, there would be a calculation between me and knowing if my foray into HFEA style investments was worth-while or not. Here, there is no place to hide. The value of these allocations will tell me directly whether I've made a bad decision or not, and in ten years or so, may guide investments that I make into the future.

Moreover, your view that I have a 103/65/15 allocation is incomplete. You can't collapse 2 or 3x-daily leveraged funds into an allocation like 103/65/15 while retaining information about how the allocation will behave. An investment that achieves any allocation, say 103/65/15, will perform differently depending on whether that allocation is achieved using margin, 2x or 3x-daily leveraged funds, or something else like futures.
A static 103/65/15 AA will behave exactly the same regardless of how it's implemented - ignoring fees and taxes. 50k of SPY behaves exactly the same regardless of whether it was purchased on margin, through a LETF, or with a futures contract (before fees and taxes). What you might be getting at is some implementations might rebalance more or less frequently and occassionally drift slightly from the target allocation. Since you're not rebalancing across the 3 accounts, your AA will drift permantently. Most likely, the HFEA will grow the fastest and your allocation will shift towards more leverage over time, especially in bonds, because the HFEA account is 120/135/45. After several decades, the HFEA will likely be the largest and your AA might be a lot closer to 120/135/45 than it is to today's 103/65/15. That could be problematic because mainstream advice would tell you to deleverage over time, not increase leverage. Of course you could offset this with reduced leverage in other accounts if you have them.

It's fine if you just want to set up a comparison. It's your money of course! I'm just pointing out your current allocation is 103/65/15. Over the coming years your total portfolio will behave very much like a 103/65/15. Over time the AA may drift slightly, and the behavior may change slightly. Over a decade or more the AA may shift significantly (or it might not). Since all three accounts are pretty close to 100% weight in stocks (100% vs 90% vs 120% respectively) the AA is not likely to change rapidly, unless there is a massive change in bond prices, since the primary difference between the 3 accounts is how much bonds they hold (0% vs 60% vs 180%).

I'd also be cautious about making future decisions based off the performance of just the next 10, or even 20 years. AA decisions should be based off of multiple business cycles - preferably 50+ years of data. They're all "reasonable" investments as you say, but mainstream advice would say to pick an AA for your total nw appropriate to your age, income, current nw, and risk tolerance. 103/65/15 might be that AA (or it might not be), but it's certainly good to know what your total AA is.
User avatar
Tinkerer-in-Chief
Posts: 85
Joined: Mon May 25, 2020 4:20 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Tinkerer-in-Chief »

Start date: 05/05/2020
Approach: Fixed allocation - 50/25/25 UPRO/TMF/BLV
Rebalancing frequency: Quarterly in May, August, November, February
Money-weighted Total Return: 79%
Money-wighted CAGR: 55%
Portfolio location: Fidelity, split across taxable and Roth IRA

I've also simulated a parallel benchmark portfolio invested in Vanguard Total Stock Market ETF (VTI) including reinvested dividends. See below for graphs comparing the money-weighted total returns and compound annual growth rates of the two portfolios. Calculations are only made (roughly) monthly, so it is not high resolution, but hopefully it will give the reader a sense of how volatile 2.5x leverage is compared to 100% US stock market.

Total Return

Image

CAGR

Image
(This graph starts in July, 2020 to remove garbage CAGR data which doesn't illustrate much of anything besides the noise produced by extrapolating annual returns from measurements taken over very short time periods).
This space intentionally left blank.
horizon
Posts: 23
Joined: Sat Sep 04, 2021 10:02 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by horizon »

Good luck everyone on this journey. In my case, it was kind of bad experience. I put 50% of the IRA in TQQQ early 2020 and can not handle the drawdown during Mar 2020. So, I cut loss my TQQQ position and had to build it back again. If I left them there alone, my IRA would be 3 times bigger. I do feel bad about myself cut loss TQQQ that time.
Hope everybody have a nice ride with the 3x ETF.
Hydromod
Posts: 1051
Joined: Tue Mar 26, 2019 10:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by Hydromod »

horizon wrote: Sun Sep 05, 2021 10:08 pm Good luck everyone on this journey. In my case, it was kind of bad experience. I put 50% of the IRA in TQQQ early 2020 and can not handle the drawdown during Mar 2020. So, I cut loss my TQQQ position and had to build it back again. If I left them there alone, my IRA would be 3 times bigger. I do feel bad about myself cut loss TQQQ that time.
Hope everybody have a nice ride with the 3x ETF.
I feel for you. If I had left the portfolio untouched since 2/20/2020 until now, it would be up 3.4x instead of 2x (albeit extremely overbalanced to TQQQ).

But I learned an awful lot about how to handle 3x LETFs in order to not make the same mistakes again, and I expect that over the next ten years I may be far better off because of these very expensive lessons.

Hopefully you will be able to use the pain as motivation to do better next time.
User avatar
drumboy256
Posts: 673
Joined: Sat Jun 06, 2020 2:21 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by drumboy256 »

horizon wrote: Sun Sep 05, 2021 10:08 pm Good luck everyone on this journey. In my case, it was kind of bad experience. I put 50% of the IRA in TQQQ early 2020 and can not handle the drawdown during Mar 2020. So, I cut loss my TQQQ position and had to build it back again. If I left them there alone, my IRA would be 3 times bigger. I do feel bad about myself cut loss TQQQ that time.
Hope everybody have a nice ride with the 3x ETF.
Having traded Crypto, I was born in the red. Leverage ETFs are interesting because sometimes they both go up and both go down. It feels like a coin flip most days depending on what the markets are doing. I can’t wait for people that think LTTs are going to get crushed when rates rise won’t. But that’s for another thread.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | 20% IVV / 40% IBIT / 20% IXUS / 20% VGLT + chill
horizon
Posts: 23
Joined: Sat Sep 04, 2021 10:02 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by horizon »

drumboy256 wrote: Sun Sep 05, 2021 10:40 pm
horizon wrote: Sun Sep 05, 2021 10:08 pm Good luck everyone on this journey. In my case, it was kind of bad experience. I put 50% of the IRA in TQQQ early 2020 and can not handle the drawdown during Mar 2020. So, I cut loss my TQQQ position and had to build it back again. If I left them there alone, my IRA would be 3 times bigger. I do feel bad about myself cut loss TQQQ that time.
Hope everybody have a nice ride with the 3x ETF.
Having traded Crypto, I was born in the red. Leverage ETFs are interesting because sometimes they both go up and both go down. It feels like a coin flip most days depending on what the markets are doing. I can’t wait for people that think LTTs are going to get crushed when rates rise won’t. But that’s for another thread.
What is LTTs? Sorry I am new here so still learning.
rchmx1
Posts: 523
Joined: Sat Oct 26, 2019 6:38 pm

Re: Riding HEDGEFUNDIE’s excellent adventure

Post by rchmx1 »

horizon wrote: Sun Sep 05, 2021 10:46 pm
drumboy256 wrote: Sun Sep 05, 2021 10:40 pm
horizon wrote: Sun Sep 05, 2021 10:08 pm Good luck everyone on this journey. In my case, it was kind of bad experience. I put 50% of the IRA in TQQQ early 2020 and can not handle the drawdown during Mar 2020. So, I cut loss my TQQQ position and had to build it back again. If I left them there alone, my IRA would be 3 times bigger. I do feel bad about myself cut loss TQQQ that time.
Hope everybody have a nice ride with the 3x ETF.
Having traded Crypto, I was born in the red. Leverage ETFs are interesting because sometimes they both go up and both go down. It feels like a coin flip most days depending on what the markets are doing. I can’t wait for people that think LTTs are going to get crushed when rates rise won’t. But that’s for another thread.
What is LTTs? Sorry I am new here so still learning.
Long Term Treasuries, as distinguished from Intermediate Term or Short Term.
Post Reply