Hi Clive,
thank you for your thorough reply and interesting ideas.
So let me get this right: assuming one's desired fixed income / equity asset allocation is 20/80, one can effectively achieve the same result by splitting the equity portion into 50% 2X LETF, and perhaps putting the rest in any fixed income instrument that beats the short term treasury rate. Let's assume one uses TIPS for the remaining 50%.
Did some testing using AGG (iShares total bond) for the FI portion, and SSO/TIP to replicate SPY, rebalanced yearly. The results have been quite interesting to say the least and they confirm what you said.
Jun 21, 2006 - today:
20/40/40 in AGG/SSO/TIP: 8.8%
100 in SPY: 7.7%
20/80 in AGG/SPY: 7.5%
March 9, 2009 - today
20/40/40 in AGG/SSO/TIP: 23.1%
100 in SPY: 23.3%
20/80 in AGG/SPY: 19.8%
May 1, 2013 - today (bad period for bonds):
20/40/40 in AGG/SSO/TIP: 13.1%
100 in SPY: 17.9%
20/80 in AGG/SPY: 14.6%
Overall, the results are quite satisfactory and that is without even trying to be more creative in the choice of bonds.
How would one go AIM'ing such a portfolio?
