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Update on Classic Portfolio Allocations with Leveraged ETFs
February 5, 2021 • Posted in Strategic Allocation, Volatility Effects
Can investors use leveraged exchange-traded funds (ETF) as building blocks for long-term portfolios? In his January 2021 presentation package entitled “One Year Later. Leveraged ETFs in Portfolio Construction and Portfolio Protection”, Mikhail Smirnov updates multi-year performance of a monthly rebalanced partially 3X-leveraged portfolio consisting of:
- 40% ProShares UltraPro QQQ (TQQQ)
- 20% Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF)
- 40% iShares 20+ Year Treasury Bond ETF (TLT)
The last three years are out-of-sample with respect to specification of this portfolio. He also looks at a more conservative portfolio of 20% TQQQ and 80% TLT, rebalanced monthly. Using pre-inception simulated and actual monthly total returns for these ETFs during January 1, 2005 through January 15, 2021, he finds that: (more…)
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