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Using One Third 3X Funds for Some SACEMS Assets

November 21, 2022 • Posted in Strategic Allocation

A subscriber suggested implementing several Simple Asset Class ETF Momentum Strategy (SACEMS) asset class proxies with allocations consisting of one third triple-leveraged (3X) versions of the proxies and two thirds cash, thereby accruing the targeted risk asset returns plus some return on cash. Specifically:

Other SACEMS assets are unaffected, and the approach still uses past returns for SPY, IWM and TLT to determine winners. To investigate the suggestion, we compare performance statistics for SACEMS Top 1, equal-weighted (EW) Top 2 and EW Top 3 portfolios without (Base) and with (1/3 3X) the alternative strategy. Using monthly dividend-adjusted returns for Base SACEMS assets and for SPXL, TNA and TMF as available during July 2006 through October 2022, we find that: (more…)

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