PP Inspired Leveraged Portfolios

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modeljc
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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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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Wed Jan 01, 2020 11:51 am

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 12/31/19

Bullet: 33.04%
Barbell: 46.50%
Personal/real: 39.07%

It was an exceptional year.

For 2020 my allocation will be 60% ITTs or US AGG bonds/20% TQQQ/10% TMF/10% UGLD
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Re: PP Inspired Leveraged Portfolios

Post by ozzy » Fri Jan 03, 2020 8:28 am

Hi all,

My 2019 leveraged PP results are in. I implemented this 5 years ago and have gotten a 14.93% CAGR. I rebalance yearly. Last year was spectacular, a whopping 67.71%! Here's a 5 year screenshot: http://www.tightwadweb.com/3x2019.jpg

Take care.
-Ozzy
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Re: PP Inspired Leveraged Portfolios

Post by var » Sun Jan 05, 2020 8:14 pm

ozzy wrote:
Fri Jan 03, 2020 8:28 am
Hi all,

My 2019 leveraged PP results are in. I implemented this 5 years ago and have gotten a 14.93% CAGR. I rebalance yearly. Last year was spectacular, a whopping 67.71%! Here's a 5 year screenshot: http://www.tightwadweb.com/3x2019.jpg

Take care.
-Ozzy
ozzy,

just to clarify you keep the same allocation? and rebalance once a year?

great result.
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Re: PP Inspired Leveraged Portfolios

Post by ozzy » Mon Jan 06, 2020 6:37 am

Var - correct. I prefer the simple hands-off approach. Same allocation (45% UPRO, 35% TMF, 20% UGLD), rebalance yearly. The less I tinker the better. Its a roller coaster ride, but I only keep a portion of my net worth in the Leveraged PP.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Jan 06, 2020 3:13 pm

ozzy wrote:
Mon Jan 06, 2020 6:37 am
Var - correct. I prefer the simple hands-off approach. Same allocation (45% UPRO, 35% TMF, 20% UGLD), rebalance yearly. The less I tinker the better. Its a roller coaster ride, but I only keep a portion of my net worth in the Leveraged PP.
I ended up liking this so much I've kinda gone all in. Something around a 50/50 split between stocks and "other stuff" works quite well which is the allocation I report on. The astute reader will note that I'm essentially 60% Stocks 30% gold and 90% bonds. This is a mix that has done well over pretty much any time period. Part of my rationale as well is that I know, stomach wise, I could see any of the 3x ETFs get wiped out and step back in and retop...which I fully expect given historical performance for the three volatile components.

For those interested in this type of investing, there are some very good threads over on the bogleheads site that are closely related. I do have to smile as we've been at it much longer here.

Of note, NTSX is an ETF that I think should receive strong consideration if you are doing a UPRO/TMF mix. The cost is ~80% less than the 3x ETFs. If one equalizes for notional value held due to leverage, NTSX still comes out ~60% cheaper.

If the Nasdaq 100 wasn't my index of choice, I would be in NTSX
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Feb 03, 2020 7:17 am

Thus far 2020 is off to a great start...I’m ranging +6.5 to 9.2%
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Feb 28, 2020 12:03 am

Still up 6%, that is all.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Mar 09, 2020 11:40 am

Well today has been fun and insane. Who woulda thought, TMF +23% overnight? Spent a good chunk of the morning rebalancing out of long bonds.
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Re: PP Inspired Leveraged Portfolios

Post by ILoveMoney » Thu Mar 12, 2020 9:38 am

Thanks for the updates!
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Re: PP Inspired Leveraged Portfolios

Post by mdwilson1991 » Thu Mar 12, 2020 10:16 am

Kbg,

I'm confused by the many variations discussed over multiple years / threads.

What is your current allocation for a leveraged PP - and is it a fixed "non tactical" type?
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Re: PP Inspired Leveraged Portfolios

Post by blackomen » Thu Mar 12, 2020 2:13 pm

Equal-weight SSO, UGL, and UBT. Since you're foregoing cash, it's technically a 2.66x leveraged PP.

I used this from 2014 until like late last month after the VIX jumped over 30 and switched back to the standard PP (SPY, GLD, TLT, and SHY.) I've endured further losses but it would have been much worse had I been leveraged,not to mention it'll keep me up at night. But hey, I made almost 40% last year with these levered ETFs so I'm not complaining. According to ETF Replay, such a levered portfolio exhibits similar volatility as holding 100% Spy.

FYI, levered ETFs exhibit decay over time so you'll want to rebalance this one frequently, maybe at least a couple of times a year. At least when you rebalance, you'll be buying low and thus actually using the ETF decay to your advantage as well.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Mar 12, 2020 5:25 pm

My personal mix is:

60 unleveraged bonds, 20 TQQQ, 10 TMF, 10 UGLD

Kinda like PP vs. a GB.

Personally I'd dial it/the mix into whatever you feel comfortable with and stick with it.
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Re: PP Inspired Leveraged Portfolios

Post by var » Mon Mar 16, 2020 9:18 pm

Great stuff..

I sort of legged in to Levaraged PP.

I bought some UGLD and TMF. I didn't buy any 3X SPY because i thought the market was too high and weighted for a pullback.

So far so good.

I have been buy 3x SPY ETF as the market keeps dropping.


What are people using as rebalance bands for 3x PP? suggestions
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Re: PP Inspired Leveraged Portfolios

Post by var » Mon Mar 16, 2020 9:20 pm

I also noticed an tracking error with TLT and UBT today.

3.16.20
TLT +6.48%
UBT 9.94%
TMF +16.76
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Tue Mar 24, 2020 10:38 pm

I could not be more pleased at how this has performed.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Jun 05, 2020 10:28 pm

My personal mix is:

60 unleveraged bonds, 20 TQQQ, 10 TMF, 10 UGLD

Through the close on 6/5/20:

By the book: 10.46%

Personal version that includes a little market timing on my part: 13.30%

Basically I didn't get why LTTs would spike as high and as hard as they did...made no rational sense. As soon as I saw how much they popped I rebalanced out of TMF very near the top on 3/9 into the other assets. Then I rebalanced into TQQQ on 4/3 and rebalanced out of TQQQ on 4/23 and again yesterday.

Of note, in one account I have been experimenting with MNQ and MGC micro futures in place of TQQQ and UGLD. I do not recommend it for those who are not really familiar with both futures and how your brokerage handles margin. It has been a bit tricky and definitely more work. Doable for those who know what they are doing, but to repeat, definitely more work calculating equivalent holdings required. Basically you need to understand your broker's margin and liquidation policies very well and you need a spreadsheet to calculate mixed positions for the same asset. For example one could simulate TQQQ with MNQ and TQQQ, QLD or QQQ. Each of the latter will impact overall account margin and required cash balances.

The jury is out for me on whether I will stick with it or not. I'm going to do it for the rest of this year and review at the end of the year.
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Re: PP Inspired Leveraged Portfolios

Post by ozzy » Mon Jun 22, 2020 8:01 pm

Houston, we have a problem. UGLD is being de-listed, see article here:

https://www.prnewswire.com/news-release ... 80971.html

This is a real bummer. I've owned UGLD since 2014 and made good money with it. I'm going to sell it and pay tax, then replace it with UGL (2x gold).

To bring ya'll up to speed, I've been running my own version of a leveraged PP, which consists of: 45% UPRO, 35% TMF, 20% UGLD, rebalanced yearly.

Now, I'm thinking my new version will be: 40% UPRO, 30% TMF, 30% UGL, rebalanced yearly. Its very similar performance, here's the comparison between the old and new versions:

https://www.portfoliovisualizer.com/bac ... tion6_2=30
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Mon Jun 22, 2020 8:35 pm

Yeah we do. Thanks for posting I was just coming to post this.

In addition to UGL, I think DGP is worth a look. They both have their pros and cons.

DGP, cheaper, clearly better performing, no K-1...big downside it's an ETN, but so was UGLD. Personally, if one could digest UGLD then I think DGP is the better choice. In a taxable, probably need to dig deep into the tax implications. I can't remember if UGL would be a 1256. If so, then advantage probably to UGL in a taxable account.

While it is definitely more work, in one account I switched to MGC to get the hang of running the stock and gold components with futures vs. ETFs. I will likely switch the other account that I can do this to gold futures (MGC).
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Jul 16, 2020 10:06 pm

A quick update...thus far another "I need to pinch myself" year...accounts doing this are all 25%+ on the year.

Haven't decided yet, but I think I will probably ditch the futures. Too much of a hassle in a tax advantaged account. Another option may be to just keep the gold contract as the Nasdaq 100 ETFs are doing just fine and very efficient to trade.
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