An Alternative to TQQQ: The Hedgefundie Portfolio
I swear to god mods don't move this nobody reads your investing forum and everyone talks about TQQQ here anyways.
Has anyone looked into this at all. It seems really promising as an alternative to the TQQQ philosophy on here. The premise is that you invest 55% into UPRO or TQQQ and 45% into TMF (3x 20 year+ treasuries). It outperforms the market while providing a hedge to prevent the massive drawdowns that occur with triple-levered equities. The premise is that in a post-Volcker America, treasuries and equities are inversely correlated, and when they do move in the same direction, it is almost always up. Unless our economic policy fundamentally changes (to a point where we would have to reevaluate all of our investments), this should continue.
https://www.bogleheads.org/forum/viewtopic.php?f=…
Here is a lot more info backed up by stats
I don't advocate for anyone to invest 100% of their savings into any triple-levered products. However, putting something like 20% of your portfolio (11% and 9% respectively into UPRO / TMF) seems like an interesting investment strategy considering the outsized returns and minimal drawdowns from this strategy.
edit: Additional reddit posts with some useful info if you're interested.
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I’d like to offer a more in-depth response when I have the chance to actually read the link, but I’ll point out one thing right away: it’s easy to see how successful this strategy has been over the years when when you remember interest rates have been on a near straight downward path for decades. When (if?) interest rates start creeping upwards, not only will the equity markets not be happy (especially the tech heavy TQQQ), but duration on the 20 year treasuries will cause them to be thwomped
The link I provided backtests from 1987, right before the crash (IE: assuming you invested at a market high and then got wrecked, so a very generous backtest). So therefore that specific backtest goes through high/increasing rate periods in the mid-late 90's and mid 2000's, and still seems successful. Also, the link has some probabilities given on how often both treasuries and stocks go down over specific periods, going all the way back to 1955, so it seems like there is significant evidence that this strategy can succeed in rising-rate environments, as we have experienced a ton of them since '55. There are also a shitton of other backtests done over different time periods by commenters but the links are a bit wonky so you'll have to look yourself.
Also, here's a reddit post on the strategy which talks about interest rates indepth.
https://www.reddit.com/r/financialindependence/comments/o7tnm5/my_guide…
Portions of it are quite interesting.
https://www.reddit.com/r/financialindependence/comments/oaiw3h/part_2_o…;
Here's part 2
Both posts have sections discussing interest rates.
Yeah, just adding to what the guys above me said, I believe the basic premise in holding TMF is just having a kind of insurance policy on UPRO in a form of an asset that is uncorrelated with the equity portion of the portfolio - for that purpose, the T-bonds are probably the best tool (especially the high-volatility 20y+ ones to more effectively counteract the downward movement of stocks). Moreover, to quote one of the guys analyzing this strategy on one of the websites discussing it: "We’re not talking about bonds held in isolation, which would probably be a bad investment right now. We’re talking about them in the context of a diversified portfolio alongside stocks, for which they are still the usual flight-to-safety asset during stock downturns. Specifically, for this strategy, the purpose of the bonds side is purely as an insurance parachute in the event of a stock crash. Though they provided a major boost to this strategy’s returns over the last 40 years while interest rates were dropping, we’re not really expecting any real returns from the bonds side going forward, and we’re intrinsically assuming that the stocks side is the primary driver of the strategy’s returns. Even if rising rates mean bonds are a comparatively worse diversifier (for stocks) in terms of future expected returns during that period does not mean they are not still the best diversifier to use."
I always forget there's an investing forum on here.
I haven't looked into this recently, but I've found that post before and on the Bogleheads subreddit too. I don't have an opinion on it unfortunately, I'll let those smarter than myself express theirs.
If you believe in big tech dominating the next decade, and forever thereafter, then concentrated bet in tqqq is the way to go
If you are wrong, then hopefully you have a good enough job to buy the dip. Stocks only go up in America.
I made an algo last year that automatically balanced TQQQ and TMF every day through reinforcement learning for fun. It was very effective in dodging and even notching huge gains during the big drawdowns but did not do so well in bull markets, especially with nonzero transaction costs.
I mean, dodging drawdowns is kinda the goal, right. That's where the really good strategies seem to shine. It's not outperformance during bull markets which sets you apart but outperformance during bears. You can always adjust TQQQ/TMF ratios if you wanna do better in bull markets and experience greater drawdowns. Also, I'm assuming you did 50-50 so 55-45 might be better for bull markets. Good point on rebalancing though, although I think daily is a bit much.
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I'm trying to avoid pre-clearing ETF trades.
Has anyone looked at UOPIX or leveraged mutual fund product? UOPIX is Nasdaq 100, 2x leverage, $15k minimum, 1.51% gross expense ratio.
https://www.profunds.com/media/fact_sheet/ProFundsFactSheetultranasdaq_…
Interested in thoughts on hedging ratio and outlook relative to TQQQ.
Why in the world do you have to clear ETF trades?
It is so dumb. Basically our compliance group wants to make it difficult to do any trade.
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