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 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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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sat Aug 31, 2019 9:40 pm

No, not really. This stuff is pretty volatile, so I'd suggest whatever you can live with and keep to the strategy. If in taxable, not more than once per year. I admit to some market timing with this particular portfolio. I don't think it has helped or hurt much.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Nov 08, 2019 1:43 pm

UST/TQQQ/VGSH 70/20/10 (The Desertish Risk Parity bullet)
VGSH/TQQQ/TMF/UGLD 50/25/12.5/12.5 (The PPish all-weather barbell)

2019 Performance
Close on 12/31/18 through the close on 11/07/19

Bullet: 30.11%
Barbell: 35.29%

It has been an exceptional year.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Nov 29, 2019 9:06 am

Not sure if I will posts stats but I flipped a large amount of a retirement account to 70% SCHR (ITTs) 20% TQQQ 10% UGLD. Accordingly, portfolio leverage is 160%. After a fair amount of analysis between ITTs and a STT/LTT mix I opted for simplicity as it really does not matter it seems which you go with.

Update (adding short backtest since 2012, no trading costs)

The above: 12.29 CAGR, -14.21 Max DD
1xETF PP: 4.96, - 8.07
1.6xETF PP: 6.82, -15.19 (using 2x ETFs and then scaled down for 1.6x leverage)
1.6xETF PP: 6.96, -15.74 (using 3x ETFs and then scaled down for 1.6x leverage)
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