20% annual returns over 40 years...interested?

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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Fri Apr 14, 2017 12:47 am

So here's something I watch closely. In fact, besides decay closer than anything else. Does the leveraged PP pull away from a pure SPY portfolio when the market is going down. It better well or why the heck would anyone do this? Why, because these are exactly the times when we expect the leveraged PP to put some daylight between it and an all stock portfolio. Thus far this year I like what I am seeing.

My port mix is coming in at 9.43% this year vs. 4.47% on the SPY. Of course stinky old unleveraged gold is smelling quite nicely this year and beats both at 11.85% as measured by GLD. Gold has trended nicely this year thus UGLD is coming in at 37.05% and we're getting a boost over 3x leverage of around 1.5%.
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Tue Apr 18, 2017 8:46 pm

Three nice words we don't get to say very often in investing as 80+% of the time it is not the case...new account high.
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Re: 20% annual returns over 40 years...interested?

Post by Cortopassi » Tue Apr 18, 2017 9:14 pm

Same here with a non leveraged GB variant
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Re: 20% annual returns over 40 years...interested?

Post by modeljc » Sun Apr 23, 2017 2:49 pm

Kbg wrote:So here's something I watch closely. In fact, besides decay closer than anything else. Does the leveraged PP pull away from a pure SPY portfolio when the market is going down. It better well or why the heck would anyone do this? Why, because these are exactly the times when we expect the leveraged PP to put some daylight between it and an all stock portfolio. Thus far this year I like what I am seeing.

My port mix is coming in at 9.43% this year vs. 4.47% on the SPY. Of course stinky old unleveraged gold is smelling quite nicely this year and beats both at 11.85% as measured by GLD. Gold has trended nicely this year thus UGLD is coming in at 37.05% and we're getting a boost over 3x leverage of around 1.5%.

What rebalance bands do you use? I am looking at fixed bands using your logic to see if is has stopped falling? Question then is if you select to go with fixed bands on 50% SHY and 16.66 on SPXL,TMF and UGLD what is the approx band?
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Sun Apr 23, 2017 3:56 pm

I use 50% bands as in .5 or 1.5x of whatever the allocation percentage is.

So using my smallest XIV the bands would be 2.5 and 7.5 while the cash portion would be 22.5 and 67.while 16.66% would be 8.33 and 24.99.

My method is as follows:

Hit band...start watching

When the asset appears to be leveling out pull the trigger on the rebalance.

Major Caution Point: I do not over think this or try to project. The rebalance band has been hit and it is time to rebalance is the bottom line. So if I rebalance and the asset continues to go down. Oh well, so be it. Also, if it stalls at all I rebalance. One could be less seat of the pants by using a short MA or something...but again, the band has been hit. Just hoping to keep the falling knife from slicing off as much finger.

Over thinking it and missing last year's and this year's early in the year gold run would have put a serious dent in performance figures.

Third time...the rebalance band has been hit. :)

With 3xETFs, you hit rebalance bands much more frequently than with a standard PP and usually that is helpful as there tends to be at least one or more opportunities per year if for nothing other than seasonal effects.
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Re: 20% annual returns over 40 years...interested?

Post by modeljc » Sun Apr 23, 2017 5:27 pm

Kbg wrote:I use 50% bands as in .5 or 1.5x of whatever the allocation percentage is.

So using my smallest XIV the bands would be 2.5 and 7.5 while the cash portion would be 22.5 and 67.while 16.66% would be 8.33 and 24.99.

My method is as follows:

Hit band...start watching

When the asset appears to be leveling out pull the trigger on the rebalance.

Major Caution Point: I do not over think this or try to project. The rebalance band has been hit and it is time to rebalance is the bottom line. So if I rebalance and the asset continues to go down. Oh well, so be it. Also, if it stalls at all I rebalance. One could be less seat of the pants by using a short MA or something...but again, the band has been hit. Just hoping to keep the falling knife from slicing off as much finger.

Over thinking it and missing last year's and this year's early in the year gold run would have put a serious dent in performance figures.

Third time...the rebalance band has been hit. :)

With 3xETFs, you hit rebalance bands much more frequently than with a standard PP and usually that is helpful as there tends to be at least one or more opportunities per year if for nothing other than seasonal effects.

This is an important post for anyone that going into this. Thanks for XIV bands.
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Sun Apr 23, 2017 6:35 pm

Real money...do an amount that is comfortable and watch it for awhile. And my ever repeated caution: do not do this if you fixate on single assets. It will just cause you mental misery.
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Re: 20% annual returns over 40 years...interested?

Post by Dum » Mon Apr 24, 2017 2:21 am

I think this is a better way forward than the experiment I suggested using synthetic long equity done using LEAPS.
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Re: 20% annual returns over 40 years...interested?

Post by Cortopassi » Mon Apr 24, 2017 7:46 am

Probably. At least there are no defined expiration dates.
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Mon Apr 24, 2017 8:38 am

Some where on the boards, I think in the VP section, is a live money leaps demo that is in year 3 or 4 but they only post at the end/beginning of the year when they roll.
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Sun Apr 30, 2017 9:09 am

2.5x means 250K equivalent/25% each to SHY, TMF, UGLD, and SPXL/25K SHY and 225K (75K x3) equivalent everything else

2x means 200K equivalent/16.667 each to the above and 50% to SHY/50K SHY and 150K (50K x3) equivalent everything else

1.5x means 150K equivalent/8.333% each to the above and 75% to SHY/75K SHY and 75K (25K x3) equivalent everything else

1x means 100K/25% each to SHY, TLT, GLD, SPY

Purchase price was at the close 12/30/16 through the close on 4/28/17

2.5x = 11.95%/-6.63%DD (Quarterly rebalance...0/-0%DD)

2x = 8.12%/-4.70%DD (Quarterly rebalance...0/-0%DD)

1.5x = 4.29%/-2.61%DD (Quarterly rebalance...0/-0%DD)

1x = 4.36%/-2.24%DD

Personal mix = 10.42/-5.42% DD

SPY TR: 5.53%/-2.61% DD

Torture Port (SHY/XIV/TMF, 50/25/25) 12.16%/-3.78%
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Thu May 18, 2017 9:36 pm

Funny to read all the volatility posts on the board...and here we are in our 3x rocket and the whole thing was a big...meah.
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Re: 20% annual returns over 40 years...interested?

Post by clacy » Fri May 19, 2017 9:45 am

Kbg wrote:Funny to read all the volatility posts on the board...and here we are in our 3x rocket and the whole thing was a big...meah.

Can you clarify your point? If you are saying that all the panic about the vol decay from leveraged ETF's was overblown, I would agree.

Certainly there are some horribly designed leveraged ETF's (some of the energy ETF's for example). But in a case like the PP, where you have 3 volatile assets that low correlation, the volatility actually can help you since you're constantly re-balancing into and out of assets.
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Fri May 19, 2017 10:10 am

Much more simple comment, this portfolio barely moved this week.
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Fri Jun 02, 2017 5:26 pm

2.5x means 250K equivalent/25% each to SHY, TMF, UGLD, and SPXL/25K SHY and 225K (75K x3) equivalent everything else

2x means 200K equivalent/16.667 each to the above and 50% to SHY/50K SHY and 150K (50K x3) equivalent everything else

1.5x means 150K equivalent/8.333% each to the above and 75% to SHY/75K SHY and 75K (25K x3) equivalent everything else

1x means 100K/25% each to SHY, TLT, GLD, SPY

Purchase price was at the close 12/30/16 through the close on 6/2/17

2.5x = 19.68%/-6.63%DD (Quarterly rebalance...19.67/-6.64%DD)

2x = 13.24%/-4.70%DD (Quarterly rebalance...13.12/-4.73%DD)

1.5x = 6.85%/-2.63%DD (Quarterly rebalance..6.74/-2.65%DD)

1x = 6.92%/-2.24%DD

Personal mix = 12.06/-5.42% DD

SPY TR: 9.75%/-2.61% DD

Torture Port (SHY/XIV/TMF, 50/25/25) 22.27%/-5.20%
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Sat Jul 01, 2017 2:37 pm

2.5x means 250K equivalent/25% each to SHY, TMF, UGLD, and SPXL/25K SHY and 225K (75K x3) equivalent everything else

2x means 200K equivalent/16.667 each to the above and 50% to SHY/50K SHY and 150K (50K x3) equivalent everything else

1.5x means 150K equivalent/8.333% each to the above and 75% to SHY/75K SHY and 75K (25K x3) equivalent everything else

1x means 100K/25% each to SHY, TLT, GLD, SPY

Purchase price was at the close 12/30/16 through the close on 6/30/17

2.5x = 15.64%/-6.63%DD (Quarterly rebalance...15.92/-6.64%DD)

2x = 11.52%/-4.70%DD (Quarterly rebalance...10.67/-4.73%DD)

1.5x = 5.43%/-2.63%DD (Quarterly rebalance..5.49/-2.65%DD)

1x = 5.83%/-2.24%DD

Personal mix = 11.68/-5.42% DD

SPY TR: 9.17%/-2.61% DD

Torture Port (SHY/XIV/TMF, 50/25/25) 22.95%/-5.20%

Note: After some study/further review, I have switched to UPRO as the ETF of choice for the large cap leveraged ETF in my personal account. Rationale: Lower fees, liquidity just as good now. Of note, I am in the process of evaluating a switch to a less amped version of the Torture port vs. the leveraged PP. By all metrics it has done better than the leveraged PP...but we've been in a bull market since the VXX/XIV came on the scene. My basic planning assumption for this portfolio is that XIV will blow up at some point, so a 100% loss and the ability to roll with it must be an inherent aspect of the associated trading plan.
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Sun Jul 09, 2017 12:07 pm

If you are along for the ride with real money or just following for fun, this is a very good read.

http://ddnum.com/articles/leveragedETFs.php
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Thu Aug 10, 2017 7:38 pm

Down .9% today, would have been very slightly up but XIV was today's hammer in my version of the VPPP. A straight up 3x as mentioned would have been slightly north of positive...this is a good mix of assets and days like today demonstrate that.

On the downside it wasn't fun seeing my 500ish% profits on XIV get knocked down to 350ish% in a couple of days! :o

Repeat after me everyone: If I am doing this portfolio, I solemnly swear that I will never fixate on a single asset/ETF and that I will true and faithfully look only at the portfolio's overall results. So help me Harry.
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Re: 20% annual returns over 40 years...interested?

Post by Jeffreyalan » Sun Aug 13, 2017 2:16 pm

Are there any compelling reasons to add a MidCap or Small Cap 3x ETF to this portfolio? Or does an S&P 500 3x suffice for the stock portion?
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Mon Aug 14, 2017 10:52 am

In my personal version I split UPRO and TNA 50/50. Compelling reasons...no.

Last time I checked, and it has been awhile, the 3x midcap ETFs had poor volume which is a good reason not to use.
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Fri Aug 18, 2017 10:51 pm

2.5x means 250K equivalent/25% each to SHY, TMF, UGLD, and SPXL/25K SHY and 225K (75K x3) equivalent everything else

2x means 200K equivalent/16.667 each to the above and 50% to SHY/50K SHY and 150K (50K x3) equivalent everything else

1.5x means 150K equivalent/8.333% each to the above and 75% to SHY/75K SHY and 75K (25K x3) equivalent everything else

1x means 100K/25% each to SHY, TLT, GLD, SPY

Purchase price was at the close 12/30/16 through the close on 8/18/17

2.5x = 20.10%/-6.85%DD (Quarterly rebalance...20.60/-6.64%DD)

2x = 13.58%/-4.85%DD (Quarterly rebalance...13.76/-4.73%DD)

1.5x = 7.11%/-2.63%DD (Quarterly rebalance...7.13/-2.65%DD)

1x = 7.42%/-2.24%DD

Personal mix = 12.40%/-4.94% DD

SPY TR: 9.76%/-2.61% DD

Torture Port (SHY/XIV/TMF, 50/25/25) 19.49%/-8.69%DD (Quarterly rebalance...20.44/-6.14%DD)

Notes: Random update cuz the market has been a little more interesting as of late. Not a stellar year, but not a bad one either. Volatility drag has definitely been eating our lunch a bit this year while rebalancing quarterly has harvested a wee bit of the churn. As I've written here and elsewhere rebalancing in my view is more about risk control and your target portfolio than performance. The torture port is a great example as the main difference in performance is due to taking some of those XIV profits off the table before the recent tanking. TNA was a nice hold last year but has been a party killer this year and explains why my personal mix isn't hanging with the standard 2x stats....that and XIV.
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Sat Sep 09, 2017 1:49 pm

New highs for all my friends!

I'm showing

9.75% for the 1x ETF version

22.28 for the 2x leveraged version
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Re: 20% annual returns over 40 years...interested?

Post by Jeffreyalan » Mon Sep 11, 2017 8:14 am

I have had some "real money" in the 3x portfolio (with 5% XIV) for a few months and I am quite happy so far! Any thoughts as to how this compares to the Permanent Portfolio in a strong stock market downturn?

Jeffrey
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Mon Sep 11, 2017 11:07 am

The best way to simulate is to take a look at annual returns on https://www.portfoliovisualizer.com/ and multiply by 3 in a spreadsheet. It won't be exact but it should get you in the ball park so far as we can assume history is future. If you have a dose of XIV, add a bit of weight to your stock holdings and subtract from cash/wherever you take it from. I could do this for you, but better for you to get dirty with the numbers to build your own confidence/knowledge base or figure out it's not for you.

And realize intraday draw downs are going to be potentially quite a bit worse than the above will show. A good way to get an idea simply is look for a major bottom point historically and end the test there.

And of course we all know that 20-55% DD's are entirely possible in stocks and that if you multiply them by three you know ~how much your stock component is going to get whacked. Right? Everyone say: "Yes, kbg. You've told us repeatedly about this."
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Re: 20% annual returns over 40 years...interested?

Post by Kbg » Wed Sep 13, 2017 10:59 am

Mandatory reading if you have $$$ in this stuff. Comes out monthly.

https://seekingalpha.com/article/410607 ... -dashboard
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