Gyroscopic Investing

I have read Wonk's thread and all contributions by the community, with much interest.

It looks like the very early signs point in the direction of profitability for now.

I too will try this method for my VP. The only catch is that I live in Europe. So here's my shot at building a decent 3x33% 2XPP VP.

Let's first think about the ETF funds.

Stocks:
1. ETFS DAX Daily 2x Long UCITS ETF (EUR) | DEL2
2. db x-trackers Euro Stoxx 50® Leveraged Daily UCITS ETF 1C (EUR) | DBPF
3. db x-trackers S&P 500 2x Leveraged Daily UCITS ETF 1C (EUR) | DXSL2
4. ProShares Ultra S&P500 (USD) | SSO


--> I choose DXSL2. It's in EUR and has a larger basket than the DAX which has only 30 companies. Didn't find any leveraged funds for the MDAX.

Bonds:
I didn't find any 2X bond funds in EUR. The only one that might work due to it's average maturity is: GILTS Double Long Daily. Good for 50% of the PP. But then we are back at a 4x25% PP.

1. db x-trackers II UK GILTS Double Long Daily UCITS ETF 1C (GBP) | XULL


2. db x-trackers II US Treasuries Double Long Daily UCITS ETF 1C (USD) | XUTL


3. ProShares Ultra 20+ Year Treasury (USD) | UBT
(No graph.)


-->  Only suitable option is Ultra 20+ Year Treasury here. It's in US dollars but as far as I know there are no other options available.

Gold:
1. Commerzbank ETC 2x Gold Daily Long (EUR) | X002
2. ProShares Ultra Gold (USD) | UGL


--> Do you any problems with using an ETC? Neither fund does hold gold directly or physically. The ETC is in EUR and follows UGL quite exactly.

Conclusion

For now I pick.
Stocks: db x-trackers S&P 500 2x Leveraged Daily UCITS ETF 1C (EUR) | DXSL2
Bonds: ProShares Ultra 20+ Year Treasury (USD) | UBT
Gold: Commerzbank ETC 2x Gold Daily Long (EUR) | X002

I do have living expenses for an entire year set aside plus an emergency fund.

I will rebalance the portfolio, every 12 months with 30% rebalancing bands*, if and only if, a rebalancing band would be triggered.

*I will rebalance if any one of the three asset classes exceeds 43% (1.3*33%) or falls below 23% (0.7*33%) of the total portfolio

There you have it. Let me know what you think!

Thanks!!
- ILM

Keep us updated. 

I think these leveraged PP Variable Portfolios are interesting.

I have one using long dated call options that is a lot of fun to watch.

I setup another one (although this one is in a virtual account, so no real money) that uses long term call options on 3x ETFs. 

Thanks for your post AdamA

I am planning on doing monthly updates.... This is one of the few things I probably won't get sloppy about ;-)

For me this is more a proof of concept, so there's not a ton of money in this. No need to make relatively expensive mistakes.

Quick question though.

I was going to buy today, but didn't.

Reason being the bid / ask price for ProShares Ultra 20+ Year Treasury is out of whack.

Bid: 50.03
Ask: 57.10

--> That's about a 12% difference. So I will probably will have to look for a replacement if there is one.

For comparison purposes.

Stocks: db x-trackers S&P 500 2x Leveraged Daily UCITS ETF 1C (EUR) | DXSL2

Bid: 23.00
Ask: 23.20

Gold: Commerzbank ETC 2x Gold Daily Long (EUR) | X002

Bid: 34.390
Ask: 35.210


Never expected it for UBT to be out of whack, had figured if any it would be one of the European since UBT does 8X the volume.

Anyway, feel free to recommend a 2X Bonds ETF in US or EUR denominated. Thanks!

EDIT: Prices were out of whack because I looked at them after the markets closed. During the markets open things where just fine.

Hi,

I will double check your tickers...

Thanks!

Thanks Frugal! Sent you a PM awhile ago. Hope you got it!

I decided to go with this.

BGU 33%
TMF 33%
UGLD 33%

Wanted to buy in tonight but figured I might as well ask for a some input before making the plunge.

I went with this setup because it was very difficult to find good leveraged ETFs in Euro. Always a piece missing.

In the end I decided to go with a x3 EFTs instead of x2 ETFs. Hope that'll cover the exchange rates and I'll end up with x2 results in Euro.

My limited conclusion is that the products offered in the EU are too limited and I'll switch as soon as that changes.

ILoveMoney wrote: I decided to go with this.

BGU 33%
TMF 33%
UGLD 33%

Wanted to buy in tonight but figured I might as well ask for a some input before making the plunge.

I went with this setup because it was very difficult to find good leveraged ETFs in Euro. Always a piece missing.

In the end I decided to go with a x3 EFTs instead of x2 ETFs. Hope that'll cover the exchange rates and I'll end up with x2 results in Euro.

My limited conclusion is that the products offered in the EU are too limited and I'll switch as soon as that changes.

Hello

what is the used leverage?

Why you use leverage?

Regards!

This is a Variable Portfolio gamble.

It was brought to my attention by Wonk who started a thread about the play here.

20% annual returns over 40 years...interested?  (Read 17817 times)
http://gyroscopicinvesting.com/forum/va ... nterested/

It uses leveraged ETFs. Basically it amplifies the returns of the underlying index by x2 (2 times) or x3 (3times) depending on which ETF you choose.

It's like a permanent portfolio on steroids that uses no debt, the downside however is that there is still very little known about this strategy and numerous things could go wrong.

For me, huge upside, little downside as it uses no debt and it's well worth the gamble imo. We'll see...

I suggest you read trough the thread Wonk started and formulate your own opinion on the matter.

ILM,

Why don't you open a Portfolio Margin account at Interactive Brokers and with $110,000 you can borrow several hundred thousands dollars. You can make it simple and put $100,000 each in SHY, TLT, GLD, VTI for a total of $400,000. I prefer this method of using Portfolio Margin instead of using 2X or 3X ETFs like you have suggested.

See the link below.

https://www.interactivebrokers.com/en/i ... gin&p=pmar

Thanks for your suggestion Odysseusa.

It won't work for me though. I wouldn't be able to sleep at night knowing I could be in the hook for a nice portion of dough.

Second, reason, which is irrelevant really as I don't want any debt or chance at debt in the first place, this is a gamble with a smaller amount which may turn into a large profit over many years. So, yes, I wouldn't be able to open a margin account anyway. 

ILoveMoney wrote: Thanks for your suggestion Odysseusa.

It won't work for me though. I wouldn't be able to sleep at night knowing I could be in the hook for a nice portion of dough.

Second, reason, which is irrelevant really as I don't want any debt or chance at debt in the first place, this is a gamble with a smaller amount which may turn into a large profit over many years. So, yes, I wouldn't be able to open a margin account anyway. 

hi

1- You can't lose more than invested ?

2- With 2x / 3x leverage, will you accept 40% / 60% DRAWDOWN ?



Regards

1. No you can't lose more then you invested.

2. Where are you getting your numbers from?? Max drawdown for a standard PP was 5% or so I believe.

So, a x2 or x3 would have a max drawdown of 10% to 15% respectively.

ILoveMoney wrote: 1. No you can't lose more then you invested.

2. Where are you getting your numbers from?? Max drawdown for a standard PP was 5% or so I believe.

So, a x2 or x3 would have a max drawdown of 10% to 15% respectively.

no

that is yearly

you can have 20% during the year

@Frugal. I only care what the number says at the end of the year, all the rest is irrelevant.

ILoveMoney wrote: @Frugal. I only care what the number says at the end of the year, all the rest is irrelevant.

I would like to think like you...

ILoveMoney wrote: Thanks for your suggestion Odysseusa.

It won't work for me though. I wouldn't be able to sleep at night knowing I could be in the hook for a nice portion of dough.

Second, reason, which is irrelevant really as I don't want any debt or chance at debt in the first place, this is a gamble with a smaller amount which may turn into a large profit over many years. So, yes, I wouldn't be able to open a margin account anyway. 

You can try a smaller amount with $10,000 and open an account with Interactive Brokers. They will let you borrow up to $10,000 at less than 2% interest right way. Anyway...good luck...okay.

@ Frugal.

It's obviously easier to say then do I don't have that much practice thinking that way anyway but I'll just have to assume this gamble is going to fail. That way when it happens I won't be disappointed that much. Try for the best but expect the worst. I'll just have to get used to it.

@ Odysseusa

Thanks for the info. 

Put a small order in today just to observe how things will play out in real time.

Eventually went with the x2 setup.

So we'll see what happens next.