Monday, February 27, 2023 3:02:14 PM
This is a PV example (US data) comparing 20/80 SPXL (3x leveraged S&P500) and IEF (7 - 10 year treasury ETF) to that of 60/40 SPY/IEF
On the basis that ETF's could fail, potentially along with their custodian with them - perhaps due to some complex fraud, you might hold Treasury bonds directly instead of IEF, which has the benefit of being fully protected, no matter how much $$$ is invested.
Similar overall reward, but with 80% in the safest asset (Treasury bonds), instead of just 40%.
In that link I left it set at yearly rebalanced. In practice the higher the leverage the more often you should rebalance. 2x and once/year is generally sufficient, 3x and 6 monthly is a reasonable choice. 10x and you're looking at monthly rebalancing (basically what Zvi Bodie does, where he holds monthly Traded Options that reflect 10x leverage, so for instance for a conventional 60/40 stock/bond allocation he'd instead hold 6% in 10x leveraged stock exposure, leaving 94% in safe (treasury) bonds).
Clive
On the basis that ETF's could fail, potentially along with their custodian with them - perhaps due to some complex fraud, you might hold Treasury bonds directly instead of IEF, which has the benefit of being fully protected, no matter how much $$$ is invested.
Similar overall reward, but with 80% in the safest asset (Treasury bonds), instead of just 40%.
In that link I left it set at yearly rebalanced. In practice the higher the leverage the more often you should rebalance. 2x and once/year is generally sufficient, 3x and 6 monthly is a reasonable choice. 10x and you're looking at monthly rebalancing (basically what Zvi Bodie does, where he holds monthly Traded Options that reflect 10x leverage, so for instance for a conventional 60/40 stock/bond allocation he'd instead hold 6% in 10x leveraged stock exposure, leaving 94% in safe (treasury) bonds).
Clive
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
