PP Inspired Leveraged Portfolios

A place to talk about speculative investing ideas for the optional Variable Portfolio

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Kbg
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Jan 31, 2019 5:05 pm

Hey it's the end of the month, time for some results reporting!

I implemented a leveraged Desert portfolio-ish at the end of last year. The mix is 70% UST, 20% TQQQ and 10% VGSH. I'm adding a little bit each month to it that will auto rebalance into the portfolio on M1.

YTD

Starting mix w/no changes: +4.41%
M1 reported portfolio gain: +7.30% (seems high, but that's the increase)
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Feb 01, 2019 1:28 pm

I'll post on the below from time to time:

2012-2018
UST/TQQQ/VGSH 70/20/10 (The Desertish Risk Parity bullet): 11.62/-14.33
VGSH/TQQQ/TMF/UGLD 50/25/12.5/12.5 (The PPish all-weather barbell): CAGR 11.92/-18.33

2019 Performance
Close on 12/31/18 through the close on 1/31/19

RP Bullet: 6.79%/-1.13%
AW Barbell: +8.27%/-1.60%

Let's call it a day folks, roll into BIL/SHV/SHY and we are almost guaranteed 10% with no risk this year. ;)
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Re: PP Inspired Leveraged Portfolios

Post by Jeffreyalan » Fri Feb 01, 2019 1:32 pm

Kbg wrote:
Thu Jan 31, 2019 5:05 pm
Hey it's the end of the month, time for some results reporting!

I implemented a leveraged Desert portfolio-ish at the end of last year. The mix is 70% UST, 20% TQQQ and 10% VGSH. I'm adding a little bit each month to it that will auto rebalance into the portfolio on M1.

YTD

Starting mix w/no changes: +4.41%
M1 reported portfolio gain: +7.30% (seems high, but that's the increase)

I am using my standard Desert portfolio at M1 as a savings account which works well since the portfolio has very low volatility. I am interested in how your leveraged one works out. Backtesting shows much more volatility than the standard one but with much higher returns. So I may decide to take a small % of my M1 Desert and move it to a leveraged one just to juice my returns a bit and have some fun watching it every day!
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Feb 01, 2019 5:32 pm

Jeffreyalan wrote:
Fri Feb 01, 2019 1:32 pm
Backtesting shows much more volatility than the standard one but with much higher returns.
That statement is about as certain as anything can be in finance & investing.
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Re: PP Inspired Leveraged Portfolios

Post by InsuranceGuy » Fri Feb 01, 2019 8:54 pm

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Last edited by InsuranceGuy on Mon Mar 08, 2021 6:22 pm, edited 1 time in total.
Kbg
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Feb 01, 2019 10:01 pm

Hopefully it works out for all of us doing this. Last year I had a rather painful experience when XIV blew up. So my lesson learned was stick to the big stuff. I'm not super concerned about leveraged ETFs in the Nasdaq100, Treasuries and Gold departments.. The main thing is that even in "normality" a 3x ETF has a very good chance of zeroing out in any given bad bear market. So, you have to be prepared for that and in my implementations I always have a big wad of ST govt bonds as part of the mix.
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Re: PP Inspired Leveraged Portfolios

Post by Jeffreyalan » Wed Feb 13, 2019 12:59 pm

Kbg wrote:
Fri Feb 01, 2019 1:28 pm
I'll post on the below from time to time:

2012-2018
UST/TQQQ/VGSH 70/20/10 (The Desertish Risk Parity bullet): 11.62/-14.33


Just because I like to know such things, how did you decide on 70/20/10 vs 60/30/10 or even just 70/30/0?
Kbg
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Wed Feb 13, 2019 9:15 pm

Cuz it’s risk parity and Desertish for those assets with some rounding thrown in. If you check out PortfolioVizualizer you can crunch the numbers. But there’s some interpolation due to different leverage amounts between the three. I looked at about every combo of QQQ and treasury bond ETFs I think one could and it’s the one I liked best for risk to reward.
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Re: PP Inspired Leveraged Portfolios

Post by Jeffreyalan » Wed Feb 20, 2019 12:45 pm

I have never looked under the hood of TQQQ or TMF. How much at risk are these funds of going to zero (or getting shut down) like the XIV was?
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Feb 22, 2019 7:16 pm

I will never answer this question on a public board and anyone investing in 3x ETFs should definitely do their own due diligence which is why I won't answer this question. If you are investing in 3x ETFs and have not done personal due diligence then you should sell them until you do.
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Re: PP Inspired Leveraged Portfolios

Post by clacy » Mon Mar 11, 2019 7:31 pm

CME to launch Micro E-mini equity futures. This makes a futures based portfolio easier to swing due to matching notional values of contracts.

https://activetrader.cmegroup.com/micro ... relaunch_1
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Mar 29, 2019 7:53 pm

2012-2018
UST/TQQQ/VGSH 70/20/10 (The Desertish Risk Parity bullet): 11.62/-14.33
VGSH/TQQQ/TMF/UGLD 50/25/12.5/12.5 (The PPish all-weather barbell): CAGR 11.92/-18.33

2019 Performance
Close on 12/31/18 through the close on 3/29/19

Bullet: 14.73%
Barbell: 15.49%
clacy
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Re: PP Inspired Leveraged Portfolios

Post by clacy » Thu Apr 25, 2019 11:33 am

On May 6th, the CME will be launching Micro E-mini futures contracts for S&P, Dow, Nasdaq and Russell 2000.

I think these will make holding a futures based PP (any type of portfolio really) much easier. They will be 1/10th the size of their standard Emini contracts.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Apr 26, 2019 6:24 pm

I think I will be moving to them for my leveraged QQQ component. I'm not in a hurry and plan on watching their volume to see if they catch on. My take is you have the following +/-s.

+ Cheaper
+ Less capital required that you can put into STTs for a bit of interest

- Hassle factor of having to roll four times a year

+/- Tax consequences depending on your situation and account type
+ For taxable accounts I absolutely LOVE LOVE LOVE Section 1256 tax reporting. So much easier than stocks at tax time.

+/- Volatility decay...who knows. There will be far less of it, but one also has to realize they will not get the gains of a daily reset leveraged ETF in a good market, in fact they could get far less returns. Given that all of this is totally path dependent I think I would concentrate making a decision whether to replace leveraged ETFs with micro futures on the knowable aspects vs. the unknowable.

Good reminder...I need to bust out the pencil and get to figuring out what I will do.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon May 20, 2019 10:27 pm

2012-2018
UST/TQQQ/VGSH 70/20/10 (The Desertish Risk Parity bullet): 11.62/-14.33
VGSH/TQQQ/TMF/UGLD 50/25/12.5/12.5 (The PPish all-weather barbell): CAGR 11.92/-18.33

2019 Performance
Close on 12/31/18 through the close on 5/20/19

Bullet: 14.66%
Barbell: 14.64%
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Tue Jun 04, 2019 8:18 pm

TQQQ - POP! Holy Cow 9.6% today
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Jun 13, 2019 1:16 pm

A joyous day! UGLD first time ever in the green.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sat Jun 22, 2019 11:05 am

6/20/19

Bullet: 23.40%

Barbell: 26.50%

Seems like a good day for performance cherry picking. :-)
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Aug 09, 2019 11:10 am

8/8/19

Bullet: 25.09%

Barbell: 29.19%

Personal: 30.55%
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Wed Aug 28, 2019 8:48 am

*pinching self* just shy of +35% this year.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Thu Aug 29, 2019 5:28 pm

Kbg wrote:
Wed Aug 28, 2019 8:48 am
*pinching self* just shy of +35% this year.
This a long post. Can you bring us up to date on your current allocations and %'s after XIV when off the board. What produced the +35%. Feels real good now. The old cat bird seat!!
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Aug 29, 2019 7:22 pm

52% STT, 16% TQQQ/TMF/UGLD

My ideal would be 25/12.5/12.5. However, with the market being both long in the tooth and very expensive no need to be greedy.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Fri Aug 30, 2019 11:05 am

Kbg wrote:
Thu Aug 29, 2019 7:22 pm
52% STT, 16% TQQQ/TMF/UGLD

My ideal would be 25/12.5/12.5. However, with the market being both long in the tooth and very expensive no need to be greedy.
Thanks. Do have have your rebalance bands set in your mind? When and how do you bank some of this gain. When you backtested this what does the down side feel like? Can it go off 35%?
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Aug 30, 2019 12:04 pm

It's hard to say and there are quite a few data issues so let's try some different backtests and I will assume 1.5x leverage of the primary assets and exclude cash.

N/N/N = Large Cap/LC, LT (Long-term treasuries), G (gold) followed by CAGR and Max DD
Portfoliovisualizer from 1978 - July 2019 https://www.portfoliovisualizer.com
50/25/25 10.03/-20.49; 1.5 leveraged 15.04/30.74 (nominal)

Portfolio Charts (IIRC Tyler's data starts in 1970)
75/37.5/37.5 11.1/-24 (real average annual returns)

Portfoliovisualizer from 2005 - July 2019 QQQ/TLT/GLD https://www.portfoliovisualizer.com
50/25/25 10.97/-21.48; 1.5 leveraged 16.46/32.22 (nominal)

The above is fairly consistent so let's say 15% and -35% is a good estimate nominal

If we do 50/50/50 (classic PP with 1.5 leverage overall portfolio/2x leverage for active assets)

13.97/-31.14 from PortfolioViz
10.06/-26 from PortfolioCharts

Again, none of this is really accounting for leverage costs or gains from cash precisely. However, all of them thump a 100% stocks only portfolio.

With the advent of micro futures I believe, tactically, the best way to do something like this (now) is probably to leverage up the stock and gold components, buy LTTs with a low cost ETF. In theory you should keep the Max DD in cash, but with the right brokerage you can specify a sell off plan if it should come to that. However, I have not transitioned to this yet and am still using 3x ETFs. I have not transitioned because I haven't had the time to nail down account management details. Finally, I've spent a fair amount of time trying to figure out treasury futures vs. an ETF or the actual bonds and I just don't think I get them at a sufficient level of depth at this time.
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Fri Aug 30, 2019 3:38 pm

Kbg wrote:
Fri Aug 30, 2019 12:04 pm
It's hard to say and there are quite a few data issues so let's try some different backtests and I will assume 1.5x leverage of the primary assets and exclude cash.

N/N/N = Large Cap/LC, LT (Long-term treasuries), G (gold) followed by CAGR and Max DD
Portfoliovisualizer from 1978 - July 2019 https://www.portfoliovisualizer.com
50/25/25 10.03/-20.49; 1.5 leveraged 15.04/30.74 (nominal)

Portfolio Charts (IIRC Tyler's data starts in 1970)
75/37.5/37.5 11.1/-24 (real average annual returns)

Portfoliovisualizer from 2005 - July 2019 QQQ/TLT/GLD https://www.portfoliovisualizer.com
50/25/25 10.97/-21.48; 1.5 leveraged 16.46/32.22 (nominal)

The above is fairly consistent so let's say 15% and -35% is a good estimate nominal

If we do 50/50/50 (classic PP with 1.5 leverage overall portfolio/2x leverage for active assets)

13.97/-31.14 from PortfolioViz
10.06/-26 from PortfolioCharts

Again, none of this is really accounting for leverage costs or gains from cash precisely. However, all of them thump a 100% stocks only portfolio.

With the advent of micro futures I believe, tactically, the best way to do something like this (now) is probably to leverage up the stock and gold components, buy LTTs with a low cost ETF. In theory you should keep the Max DD in cash, but with the right brokerage you can specify a sell off plan if it should come to that. However, I have not transitioned to this yet and am still using 3x ETFs. I have not transitioned because I haven't had the time to nail down account management details. Finally, I've spent a fair amount of time trying to figure out treasury futures vs. an ETF or the actual bonds and I just don't think I get them at a sufficient level of depth at this time.
Any thoughts on re balance?
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