PP Inspired Leveraged Portfolios

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modeljc
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Re: PP Inspired Leveraged Portfolios

Post by modeljc » Sat Jul 21, 2018 10:22 am

ozzy wrote:
Fri Jul 20, 2018 10:04 pm
Hi all, adding my 2 cents. My leveraged PP is the following:

45% UPRO
35% TMF
20% UGLD

I keep it simple and just rebalance annually. Its returned 22.23% CAGR over the past 5 years (2013-2017), here's a performance screenshot:
http://www.tightwadweb.com/3x-2013-2017.jpg

So far, the first 6 months of 2018 its down -7.08%. No worries, I'm a long term buy-and-holder.
Thanks! I wonder if there is anyway you could backtest this for returns and draw down for another 35 year or so. I know the 3X leverage did not exsist in 1971 but would appreciate it if you could make some assumptions and do a back test.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sun Jul 22, 2018 9:47 am

Mark Leavy wrote:
Fri Jul 20, 2018 9:00 pm
kbg,

Have you walked away from volatility?

I moved some money into SVXY after XIV went tits up - using some back of the envelope calculations - but I'm no longer confident in my models - especially since SVXY went to 50% of inverse VIX tracking. I need to spend a weekend and really do the math to develop a more solid model, but I'm curious as to where you stand now that the dust has settled a bit.

Cheers - and thank you for the meaty posts that you have served up.
Mark
I did. I like ZIV but I do not like Credit Suisse. Not sure SVXY is really that compelling. It would be great if you would post what you find. I'd be interested. I miss the "make money when the market if it is doing nothing" of volatility. It is helpful that way. TQQQ is my replacement...but not the same of course
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Sun Jul 22, 2018 9:54 am

modeljc wrote:
Sat Jul 21, 2018 10:22 am
ozzy wrote:
Fri Jul 20, 2018 10:04 pm
Hi all, adding my 2 cents. My leveraged PP is the following:

45% UPRO
35% TMF
20% UGLD

I keep it simple and just rebalance annually. Its returned 22.23% CAGR over the past 5 years (2013-2017), here's a performance screenshot:
http://www.tightwadweb.com/3x-2013-2017.jpg

So far, the first 6 months of 2018 its down -7.08%. No worries, I'm a long term buy-and-holder.
Thanks! I wonder if there is anyway you could backtest this for returns and draw down for another 35 year or so. I know the 3X leverage did not exsist in 1971 but would appreciate it if you could make some assumptions and do a back test.
CAGR of 17.5%, Max DD 16.01 rebalance annually since 2012
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Sep 07, 2018 5:31 pm

Classic 2x: 200K equivalent/16.667 each to the UPRO, TMF, UGLD and 50% to SHY/50K SHY and 150K (50K x3) equivalent everything else

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

KMix 2.1x: 45% VCSH, 28% TQQQ, 13.5% TMF, UGLD

Purchase price was at the close 12/29/17 through the close on 9/7/18

2x = -4.52%/-8.94%DD

1x = -1.09%/-4.16%DD

KM = 5.04%/-11.69%DD

A yawner since last update, goodnight.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Oct 05, 2018 5:45 pm

Classic 2x: 200K equivalent/16.667 each to the UPRO, TMF, UGLD and 50% to SHY/50K SHY and 150K (50K x3) equivalent everything else

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

KMix 2.1x: 45% VCSH, 28% TQQQ, 13.5% TMF, UGLD

Purchase price was at the close 12/29/17 through the close on 10/5/18

2x = -6.25%/-9.64%DD

1x = -2.04%/-4.16%DD

KM = 2.66%/-11.69%DD

It's going to be a bad PP year when two of your pillars are acting like cement shoes. Lots of complaining every where on the board but there is absolutely zero out of the norm here IMHO.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Nov 16, 2018 5:56 pm

Classic 2x: 200K equivalent/16.667 each to the UPRO, TMF, UGLD and 50% to SHY/50K SHY and 150K (50K x3) equivalent everything else

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

KMix 2.1x: 45% VCSH, 28% TQQQ, 13.5% TMF, UGLD

Purchase price was at the close 12/29/17 through the close on 11/16/18

2x = -8.30%/-12.95%DD

1x = -2.5%/-5.19%DD

KM = -5.31%/-15.04%DD

I was quite surprised to see the KM do as well as it has done. Of course the recent unpleasantness up'ed our max dds...and the standard PP just waddles along as usual. For the 100% stock crowd, SPY is up 3.71% with a 10.1% max dd.

Overall, it has not been the best of investment years. TMF and UGLD are down 24 and 27%ish. TQQQ and VCSH have their noses barely above water.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Thu Nov 29, 2018 8:04 pm

Classic 2x: 200K equivalent/16.667 each to the UPRO, TMF, UGLD and 50% to SHY/50K SHY and 150K (50K x3) equivalent everything else

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

KMix 2.1x: 45% VCSH, 28% TQQQ, 13.5% TMF, UGLD

Purchase price was at the close 12/29/17 through the close on 11/29/18

2x = -8.23%/-13.19%DD

1x = -2.38%/-5.19%DD

KM = -5.25%/-17.37%DD

Because I have time...but not much change since last post.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Fri Dec 28, 2018 9:03 am

Hi gang!

It was a good ride but it’s likely I will be bailing on the leveraged PP and next week’s post will also likely be my last performance post. Usually this time of year I have a good chunk of time off and and I go in depth on some financial topic. This year has been Risk Parity. Unleveraged it is just not interesting. However, with leverage it gets very interesting and is by every standard measurement a better approach than what I’m doing currently. So it’s very hard logically to continue. For sure I believe if one is going to do gold it needs to be a much smaller percentage (with a nod to the hard gold folks who hold for other reasons).

Not related, I moved a small amount of money as a test case to M1 Finance. Thus far, I like it a a lot. However, I’m not committing much until I see how their executions are.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Tue Jan 01, 2019 1:23 am

Classic 2x: 200K equivalent/16.667 each to the UPRO, TMF, UGLD and 50% to SHY/50K SHY and 150K (50K x3) equivalent everything else

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

KMix 2.1x: 45% VCSH, 28% TQQQ, 13.5% TMF, UGLD

Purchase price was at the close 12/29/17 through the close on 12/31/18

2x = -7.72%/-13.58%DD

1x = -1.75%/-5.37%DD

KM = -8.81%/-20.80%DD

Tough year for sure and not a great decade...1x coming in at a CAGR of 5.68 with four 7-8% max DDs using the ETFs noted above.

From where we could start using 3x ETFs in 2012 we get a 1x CAGR of 3.46/-8.06 and a 2x (per the above mix) of 5.39/-18.64. The KM is at 13.91/-20.80. By comparison 100% SPY was 12.3/-19.35. A 60/40 SPY/AGG returned a CAGR of 8.31/-11.62. Going back to 2005 however, the PP outperforms the 60/40 just barely with 60% less DD. Hopefully for those doing a by the book PP their patience will be rewarded again...and patience is a must with this portfolio...but perhaps not if one isn't really looking for great performance. If nothing, the PP remains a steady Eddy.

Well our little experiment here is done and unless someone revives this thread we will watch it sink into the oblivion that is just below the least current thread on the page...sort of like a ship slipping under the ocean's surface for the last time. Thanks for following and commenting.
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Re: PP Inspired Leveraged Portfolios

Post by HelloFox » Wed Jan 02, 2019 2:15 am

Thanks for all your posts here, Kgb. This is my favorite thread.

So are you gonna totally stop playing with the leveraged PP at all? I hope you would still update the thread somehow if you keep playing with this concept.
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Wed Jan 02, 2019 9:00 am

Thanks HF, you are too kind.

Over the holidays I spent some time researching risk parity portfolios. The KM portfolio I posted this past year is pretty close to a RP portfolio. If I continue to post on this thread it will likely be something very similar to the KM, slightly more refined and probably dialed down a bit in risk.

This thread and the other thread I posted on for a couple of years were interesting to do. Almost a blog but with far fewer readers. :)

I think leveraged ETFs are a fairly well known quantity by now and their characteristics are understood by those willing to put forth the effort. I think the primary challenge, particularly with 3x ETFs, is you still have to be prepared to see them go to near zero and be willing to top them off again and let them work their magic when bull conditions return. If I do any more exploratory work it will be seeing if there is a way to sidestep volatility without killing performance. If you are in a 3x ETF and don't expect volatility you aren't paying attention. However, when markets do go volatile volatility decay is punishing...this is the primary reason why short leveraged ETFs do so poorly. When you need them most, they too are getting creamed by volatility decay so you don't get the bang for the buck. Bull ETFs do extremely well during bull markets because they are compounding very nicely as bull markets are almost always low volatility affairs...not so much for their bear counterparts.
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Re: PP Inspired Leveraged Portfolios

Post by gaddyslapper007 » Wed Jan 02, 2019 11:34 am

thanks Kbg for all your posts on this subject.....I've read, re-read and re-re-read both threads of the leveraged PP several times over the years. Your efforts / comments have been much appreciated!
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Re: PP Inspired Leveraged Portfolios

Post by Jeffreyalan » Wed Jan 09, 2019 3:46 pm

Kbg wrote:
Fri Dec 28, 2018 9:03 am

Not related, I moved a small amount of money as a test case to M1 Finance. Thus far, I like it a a lot. However, I’m not committing much until I see how their executions are.
I have been using M1 Finance for a while now. I think it is perfect for a PP or something similar!
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Re: PP Inspired Leveraged Portfolios

Post by Kbg » Wed Jan 09, 2019 6:09 pm

Jeffreyalan wrote:
Wed Jan 09, 2019 3:46 pm
Kbg wrote:
Fri Dec 28, 2018 9:03 am

Not related, I moved a small amount of money as a test case to M1 Finance. Thus far, I like it a a lot. However, I’m not committing much until I see how their executions are.
I have been using M1 Finance for a while now. I think it is perfect for a PP or something similar!
Have you done any trade analysis? As in how is their execution?
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Re: PP Inspired Leveraged Portfolios

Post by Jeffreyalan » Fri Jan 11, 2019 7:38 am

Kbg wrote:
Wed Jan 09, 2019 6:09 pm
Jeffreyalan wrote:
Wed Jan 09, 2019 3:46 pm
Kbg wrote:
Fri Dec 28, 2018 9:03 am

Not related, I moved a small amount of money as a test case to M1 Finance. Thus far, I like it a a lot. However, I’m not committing much until I see how their executions are.
I have been using M1 Finance for a while now. I think it is perfect for a PP or something similar!
Have you done any trade analysis? As in how is their execution?
Honestly I have not really looked at my trades there and the prices I bought or sold at. For me it is the perfect account to just throw some savings in, never look at it and let it do its thing. I have a Desert Portfolio set up and from time to time I will transfer some funds into there..a few hundred dollars..and let it get divided up automatically between my chosen ETFs. From then on I don't look at it very much. So far they only have one trading window a day around 9-11 CST. They are toying with adding another one later in the day.
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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?
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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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