This really makes me want to try it out in a VP! However, I worry that all the buying and selling required for the very frequent rebalancing will incur transaction costs that cut the returns down a lot. In a tax deferred account quarterly is a good hack, while annually is almost as good and if you ...

And a follow up to that fantastic last post... :D But kbg, I'm afraid of leverage, everyone says it's bad. Kbg: It is bad when used inappropriately. However, one could do better than a PP by simply using leveraged ETFs at half the weight. A 12.5% allocation to SSO, UBT and DGP = 25% and 7.5% DD over...

Had the opportunity to review the thread from its beginning and there was a lot of discussion about volatility decay. So let's check out almost 4 years of performance using SHY, DGP, UBT, SSO and their 1x counterparts SHY, GLD, TLT and SPY. Since 1/1/11 Annual Rebalance 1x 19.41/-8.90 DD 2x 50.07/-1...

If so, it would be cool because you could choose which PP suited you according to your risk tolerance: the low-volatility version of you couldn't even deal with -10% drawdowns, the high-volatility version for those with more intestinal fortitude and very long time horizons, and the standard one for...

It sounds like you've been listening to the Boglehead groupies?  Correct you are, sir!  Gold doesn't ever change in real value; only what it is measured against does.  If people demand paper assets more, then gold will go down in nominal price. Don't get me wrong...I am not a gold fan/bug per se, b...

This is a great post...I think it amply illustrates that if you stuff a bunch of volatility in a portfolio and rebalance it periodically it's some kind of cool magic. It's also why I have dash of XIV/SVXY in my PP.

What is the MaxDD with rebalancing annual and/or bands?

Can someone help me out here?  Why do people keep referencing the decade after the legalization of gold again as the ringer that won't be repeated again and therefore gold is not a useful asset? I'm cherry picking here but roughly from March 05 to Oct 11 the gold to stock returns were literally a 10...

Mid 4th quarter update...not sure why the SPY DD is different than posted earlier. A data issue likely. This has not been a good year for volatility or small caps. Just swapping UWM out for SSO bumps up the 2xPP to 13.7/-5.5 DD and the twist to 13.99/-10.75 DD. In any event it has been a good year f...

http://gestaltu.com/2013/10/dynamic-asset-allocation-for-practitioners-part-i-policy-portfolios.html http://mebfaber.com/2013/10/13/asset-allocation-strategies-3/ Two very interesting posts.  The top gets at what works when. The bottom is a comparison of various ports over time. Apologies if any wer...

Apropos of nothing, I ran some numbers.  These don't really mean anything, but I thought I would calc them just the same. (All numbers current to today - no inflation adjustments) Using 10 year daily data, dividends reinvested (purple verticals) I came up with these numbers: GLD: 9.72% CAGR, 40.52%...

And now for the fun...

2x w/Twist +13.70%
3x w/Twist +19.79%   

Excellent Mark! There are some interesting backtests out there that advocate a Cash or Bonds and XIV "Barbell Portfolio" meaning super safe and super risky/volatile with periodic rebalancing.

"Yet... There is something very cool about not having a mortgage." We have a study for that...http://b.3cdn.net/nefoundation/10b8aabd90c5771ff9_a0m6bvv5a.pdf 1. In general, credit card and ‘unmanageable’ debt is associated with lower well-being. This relationship, however, does not hold f...

This is not a hard question rationally. Expected PP return vs. mortgage cost with personal tax situation factored in for both sides of the equation. Frugal should get a calculator, done.

Just for fun let's do an update to capture the recent "unpleasantness." Assets: IWM, TLT, SHY, GLD (Classic PP w/small cap) and XIV (PP w/XIV Twist) 2x as above only 2x ETFs 3x as above only 3x ETFs 1x PP 4.71/-3.69 DD 2x PP 9.87/-6.92 DD 3x PP 14.60/-9.91 DD 1x Twist 4.43/-10.85 DD 2x Twi...

Volatility of the assets in the PP and how they interrelate...what doesn't suck in a PP at some point in time? If you are having a bond discussion open up three other discussions and all four miss the entire point and theory of the PP.

Third quarter results: VP 20% to each DGP = Gold SHY = Cash UBT = Long Bonds UWM = Stocks (Russell 2000) XIV = Short Volatility 2014 2xPP w/XIV Twist Performance YTD: 9.59%   - 8.90% Max DD 2014 2xPP Performance YTD: 5.75%   - 6.92% Max DD Not so good this quarter! SHY + 0.01% UWM - 16.67% DGP - 18....

Kev

One of the things I'm not sure people (who are freaking out when the market/PP goes down) really understand/visualize in their minds is what is going on underneath the hood. Study the rebalance column carefully and go take a look at some price charts. Lastly, take a look at SHY. Now on the next reba...

Run some historical scenarios on what you might lose if you don't rebalance. US Stocks are A) on one of their longer term bull runs and B) quite expensive by all measures that matter. They have been more expensive, but they are in the area where the markets normally correct.  One simple scenario...w...

A quick mid-quarter update.

Using 7/1 & 8/15 closing prices - 2.42% with a max DD of 7.22%.

UBT and UWM have essentially cancelled each other out at about +/- 10.5% respectively. XIV is down a little over 8% while DGP is down almost 4%. SHY is a skosh positive.

Great post.  I think the performance you posted speaks for itself. If one wants to hedge the SVXY/XIV for blue sky events, I suggest something very simple. Just hedge a certain percent of SVXY with VXX or UVXY and rebalance religiously. It will reduce your performance a bit, but it will protect you ...

I am interested, post away!

No problem. One can use timing on the VIX or use ZIV to mellow things out as well if the volatility of volatility is too intense. For those not wanting something high maintenance with a less bucky ride I would recommend ZIV vs. timing.  In any event...I've left lots of warnings on walking this path....