Beat S&P500 with Leveraged ETFs? Does Hedgefundie strategy work?

Does the Hedgefundie strategy work? Can you beat S&P500 by investing in UPRO and TMF? How does this strategy work and can you make it better?
Link to HedgeFundie blog: https://www.bogleheads.org/forum/viewtopic.php?t=272007

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SCRIPT
Lot of my viewers, subscribers and leveraged ETF fans have read this blog from Hedgefundie. After reading that and watching my videos on leveraged ETFs, an obvious question I often get asked is – What is my opinion on Hedgefundie’s strategy. Let’s break this down

Fundie started her portfolio in Feb 2019 in M1Finance with an initial investment of $100,000. This is based on the pictures posted on the blog. She expects her portfolio will hit $10M in the next 25-30 years. The strategy is pretty simple. Invest in unrelated asset classes – stocks and bonds to attain diversification. Then allocate based on volatility, so if one goes down the other can somewhat compensate for the losses by going up. Finally, you throw in leverage which should in theory amplify your gains and hopefully beat the SP500. To manage this strategy, she is using leveraged ETFs UPRO that tracks S&P and TMF that represents long term treasuries. The idea is to have a hands-off approach to investing and let the portfolio grow in value over time.

The question is – Does this work? In the first 8 months, the portfolio took off and was up 43%. Fundie posted another performance update, this time in March 2020. This is when the pandemic wreaked the markets. The portfolio gave up all it gains and went negative. Actually, this strategy works. If fundie stayed the course, portfolio value as off last month would have been at 166K. A return of 66%.

Before you stop watching this video and implement this strategy for yourself it’s key to learn why this works and how you can make it better. Here is the bottomline, investors hate uncertainty, if they see it coming, they will park their money in long term bonds. For example, when pandemic hit, investors anticipated short term uncertainty. Demand for long term bonds went up and stocks dropped. The whole purpose of having TMF in the portfolio is to manage risk and somewhat limit the drawdown. In summary, it works but I am not into it. I have my own strategy to manage leveraged ETFs to generate high returns while still managing risk.

Let’s compare few scenarios. For all scenarios, I am taking data from 2011 – 2021. I am going to standardize initial investment amount to $100,000. Rebalancing will be semiannually, and buying the dip will be represented by throwing $5000 every quarter

Scenario 1 – The Fundie Way. If fundie had started her portfolio in 2011, as of 2021, it would be sitting at around $900,000.

Scenario 2 – The Think Finance Way. This is how I invest. The scenario assumes rebalancing semiannually and buying any dips $5000 every quarter. If I started this in 2011, today I would be sitting on a portfolio valued at $3M

Scenario 3 – Fundie + Think Finance Way V1. Let’s throw in rebalancing and buying the dip variable and keeping everything else the same in the Fundie scenario. If Fundie did that, the account value today would be at $2M.

Scenario 4 – Fundie + Think Finance Way V2. Let’s throw in rebalancing. In that case, the account value today would be at $1.2M.

In Scenario 5 - If Fundie, did nothing but just replaced UPRO with TQQQ, the account value would be at $3.3M.

Scenario 6. If you take a step further and throw in the think finance twist and rebalance and buy the dips, the value would have exploded to $4.2M.

Buying dips and rebalancing can further amplify growth in your portfolio

DISCLAIMER - I am not a Financial Adviser or Tax Professional, the information provided is my personal opinion and should not be considered professional advice. Ideas discussed on the channel are actions I am personally taking to hit my financial aspirations and not professional advice. I'm not responsible for any monetary gain or loss that may occur following information on the channel.

#thinkfinance #hedgefundie #LeveragedETFs

Видео Beat S&P500 with Leveraged ETFs? Does Hedgefundie strategy work? канала Think Finance