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once a month… i just add a bit to bring up the ones to low for now rather then sell anything .
it really hasn’t been off more then a few hundred at the most.
rebalancing is important with these portfolios because of the risk parity.
you can let them run longer and set rebalance bands but jury is still out on what’s best
Good deal, I like the idea here but I sure don’t trust any one ETF. My assumption, in the interest of caution, is that they’ll all go to 0 at some point so I’ve always rebalanced out as they’ve run up.
I like the Carolina Reaper portfolio and may allocate some capital to it. I need to independently test more first though. So far my numbers aren’t aligning with PortfolioVisualizer.
I also want to experiment with other options, like adding NUGT into the mix if it adds utility to the portfolio.
You have to change your mindset a bit. Under normal rebalancing, you rebalance assets to your target percentages.
With a Risk Parity portfolio, you are not rebalancing assets in the normal sense - you are rebalancing RISK so that different asset classes have - wait for it - risk PARITY (as in, risk equality).
For some people it takes a while to fully comprehend the implication of risk PARITY.
You have to change your mindset a bit. Under normal rebalancing, you rebalance assets to your target percentages.
With a Risk Parity portfolio, you are not rebalancing assets in the normal sense - you are rebalancing RISK so that different asset classes have - wait for it - risk PARITY (as in, risk equality).
For some people it takes a while to fully comprehend the implication of risk PARITY.
this portfolio is easy because the actual risk parity is done by dbmf in dbmf .
my job is making sure we stay around .20 cents of each dollar in upro equaling 60% in equities , .133 cents in tyd bonds so there is a 60/40 allocation n function with the 3x funds and .67 cents in dbmf where they handle the risk parity
one thing i want to add is dbmf is not a leveraged fund like the others where it produces 3x what the underlying holdings do .
that is why we have .66 cents per dollar going into dbmf .
it needs 2x the money the stocks and bonds do so it can provide the risk parity with enough oomph .
so in this model the dollar weighting when you rebalance is pretty traditional as you just rebalance back to the original percentages in each .
dbmf is the largest holding by dollars yet the upro and tyd have more power for movement being 3x funds but they are just hedged enough to keep a tight range on portfolio movement .
it is a crazy use for these extremely volatile funds when each is used alone but very docile when it works together as one portfolio.
it takes daily swings of 3-5% in upro or tyd and makes it like watching paint dry most days
I watched a Macro Alf video recently on risk parity portfolios. The leveraged funds let you gain exposure to whatever you need without consuming so much cash. I scribbled down his numbers somewhere, it was something like 30% bonds, 30% dollar, 30% equities, some gold, and others.
the permanent portfolio has been around for 50 years and is
25% gold
25% cash
25% long term treasuries
25% equities .
mostly all asset classes moved down together and got hammered in 2022 .
so 3 out of 4 asset classes reacted very poorly to rising rates and were down badly
a true risk parity portfolio uses short and long contracts to actually hedge and not count on the supposed see saw action of various asset classes , which really have no see saw action to begin with.
in the carolina reaper there are future contracts being used to actually act like a hedge fund could.
2022 showed that even in what was known as a risk parity portfolio, the permanent portfolio and golden butterfly portfolio really had no risk parity going on
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