Replies to post #47968 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

My IH userid LS7550 is reflective of long/short 75/50 as per Alfred Winslow Jones' original hedge fund

I believe you have similar in the US, where in the UK we have pension and current tax efficient account choices. With the pension fund (SIPP) we receive tax credits on the way in, is taxed on the way out, so for someone on a basic rate 20% tax rate each $80 they add into that account is uplifted to $100m but then you're taxed when you make withdrawals (and have to be over a certain age before you can start drawing from the account). Our ISA's are paid into out of taxed money, gains/withdrawals are tax exempt, and the fund can be drawn from at any age.

A long/short strategy can migrate capital value from one account to another, where the short is more inclined to lose value over time. Leveraging that and applying yearly AIM like 'cash' weighting to SDS (2x short stock) in SIPP, the rest in TQQQ (3x long stock) in ISA and the tendency over time is for the SIPP account value to decline substantially. So that combination potentially provides a means to have tax free on the way in, and out and where withdrawals can be made at any age. LS-150-100, but where each year AIM directs the actual weightings to each. Over the period in the following chart AIM cash (SDS allocation) averaged 50% (using my S&P500 real price AIM, which yields similar indications as iWave/MRI or vWave).



Those gains are without the additional 25% gain benefits from tax credits in SIPP (each $80 uplifted to $100 in reflection of 20% taxation)

I started the data from 2007 as that was just before the financial crisis hit, and was also a time point that had the AIM cash average 50%, making comparison with a constant 50/50 3x long/2x short a more direct (fair) comparison. AIM dynamics over that period uplifted a 15.3% annualized reward to 16.75% annualized.

The lower chart shows SDS alone, where over that period each $1 was in effect faded down to less than 1 cent, and where with the long/short style that value would have been migrated over to the tax free on the way out account.

Clive