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done with this discussion but i suggest you don’t tell people 60/40 will outperform 100% equities based on the fact you took a mortgage as that is not what is meant by a leveraged 60/40 .
it will always be a traditional 60/40 unless options , derivatives or futures are used to leverage only certain components of that portfolio.
no 60/40 will beat 100% equities over typical accumulation periods without using the products i mentioned to leverage the components internally .
a mortgage or not only makes for a smaller traditional 60/40 or a larger traditional 60/40 and it will not beat the same dollars in 100% equity funds
Why tout 100% equities on the retirement forum? I was 100% equities in 2000 and 2008. Fun times. That's how I learned my risk tolerance wasn't what I thought it was. We have 2000 incoming. The market would be down if not for the magnificent 7. Which means? It means when it gets flushed down the toilet it's going to be more like 2000 than 2008.
Why tout 100% equities on the retirement forum? I was 100% equities in 2000 and 2008. Fun times. That's how I learned my risk tolerance wasn't what I thought it was. We have 2000 incoming. The market would be down if not for the magnificent 7. Which means? It means when it gets flushed down the toilet it's going to be more like 2000 than 2008.
you are imaging things that were never said ..
i never touted 100% equities for retirement .
this whole silly argument started when it was said that a leveraged 60/40 beat 100% equities .
that is only true i said if it’s a PROPERLY LEVERAGED 60/40 and that means with derivatives. options or futures applying that leverage not a mortgage as leverage.
i said if not done in that manner 100% equities will always beat 60/40 over typical accumulation periods ,
so i have no idea where you got this i am touting 100% equities for retirement
this whole silly argument started when it was said that a leveraged 60/40 beat 100% equities .
that is only true i said if it’s a PROPERLY LEVERAGED 60/40 and that means with derivatives. options or futures applying that leverage not a mortgage as leverage.
i said if not done in that manner 100% equities will always beat 60/40 over typical accumulation periods ,
so i have no idea where you got this i am touting 100% equities for retirement
I guess I learned misstating misunderstandings from you.
for those interested in the leveraged 60/40 portfolios spoken about here and the pitfalls of going that route here is a look at 3 versions in the article below
supposedly a leveraged 60/40 can deliver the performance of 90-100% equities but with less risk .
but is it true in practice or is it another situation of looking good in theory and on paper but with hidden dangers ?
this would be a do it yourself version
20% UPRO, a 3X leveraged S&P 500 fund
13.33% TYD, a 3X leveraged Intermediate-Term Treasuries fund
66.67% in DBMF managed futures fund
this is why i say this discussion is not fit for a 401k discussion as these leveraged funds would never be a 401k option to do this and they are extremely complex .
but in any event since it was brought up , here is a roll your own leveraged 60/40 with the supposed power of 90% equities and the same volatility as 60/40 .
so this is what is meant by a leveraged 60/40 , not the fact you borrowed money to buy it .
i may actually try a bit of it for fun with a relatively small amount .
for those looking to try it , if you are doing it in a taxable account you may want to wait until after DMBF goes ex div
DBMF Investment Objective
The fund seeks long-term capital appreciation. The fund will employ long and short positions in derivatives, primarily futures contracts and forward contracts, across the broad asset classes of equities, fixed income, currencies and commodities.
The ETF will trade Ex-Dividend as of the close of market on December 27, 2023. The closing NAV on December 27 will be reduced by the ETF’s distribution of income. The total distribution amount is currently estimated to be $0.41 per share, subject to change until the ex-dividend date
No one was ever discussing "leveraged portfolios" in this thread except you MJ.
wrong , this whole discussion was started when mogul dreamer brought up leveraged portfolios as being superior to 100% equity ones
have you been reading the threads or just commenting on not understanding what was mentioned ? the reason you just said the above is because obviously you didn’t fully read moguls or understand moguls introduction of leveraged portfolios in to the discussion here .
the chart with the levered 60/40 didn’t reproduce when i copied the quote but you can see the leveraged portfolio charts in the original post where leveraged 60/40 is being discussed.
the levered portfolio i am playing with is based on the work of cliff asness who is mentioned in moguls post .
but that doesn’t mean these portfolios can be used in a 401k or should be used .
so noooooyoo , it wasn’t me that brought leveraged 60/40 in to the 401k discussion, i only expanded on it since i have had an interest in checking one out for a while outside the 401k box
Quote:
Originally Posted by moguldreamer
Legendary hedge fund manager Cliff Asness (who originally documented the momentum factor in his Chicago Booth PhD dissertation) published in the Journal of Portfolio Management in 1996 that for the exact same amount of risk as a 100% equity portfolio, one can instead have a levered 60/40 equity/bond portfolio that provides a higher compound annual return. Yes, a higher ROI for the same amount of risk. He uses his results to show that even very long term investors (e.g., 100-year investors such as university endowments) probably should not have 100% equities even in light of the historical superiority of equity returns relative to bond returns.
(He's financing the 55 cents of borrowing for each $1 invested by borrowing at whatever the then-current 1 month T-Bill rate is).
From 1926 through 1993, with the same initial investment of $1, the 100% equity portfolio grows to $800 while the levered 60/40 portfolio grows to $1291. Even though a 100% bond portfolio grows to only $40, using bonds in conjunction with stocks and leverage leads to an investment that grows to $1291. The investor who owns 100% stocks must bear the same risk and receive only $800.
Since then, several practitioners & financial advisors have extended the calculations for returns all the way through 2023, and the results are the same.
This is just a simple straight forward example; there are many others.
Last edited by mathjak107; 12-13-2023 at 01:42 AM..
wrong , this whole discussion was started when mogul dreamer brought up leveraged portfolios as being superior to 100% equity ones
have you been reading the threads or just commenting on not understanding what was mentioned ? the reason you just said the above is because obviously you didn’t fully read moguls or understand moguls introduction of leveraged portfolios in to the discussion here .
the chart with the levered 60/40 didn’t reproduce when i copied the quote but you can see the leveraged portfolio charts in the original post where leveraged 60/40 is being discussed.
the levered portfolio i am playing with is based on the work of cliff asness who is mentioned in moguls post .
but that doesn’t mean these portfolios can be used in a 401k or should be used .
so noooooyoo , it wasn’t me that brought leveraged 60/40 in to the 401k discussion, i only expanded on it since i have had an interest in checking one out for a while outside the 401k box
No. I did not read the whole conversation between WVNomad and Moguldreamer. I only caught the part where he was describing being 'effectively leveraged.'
My point is there is no need to keep whining about it and trying to censure people.
my point if you are going to comment on things i said and call me out on it , at the least you should understand the discussion and why i said what i did .
in this case you keep commenting about mortgages and arbitrage and in this case have nothing to do with what is being said and the type of leverage needed to create what mogul is talking about .
so in the future at least understand the topic before commenting on it , especially like you did above , telling me no one brought up leveraged 60/40 portfolios but me .
my point if you are going to comment on things i said and call me out on it , at the least you should understand the discussion and why i said what i did .
in this case you keep commenting about mortgages and arbitrage and in this case have nothing to do with what is being said and the type of leverage needed to create what mogul is talking about .
I missed that piece. Oh well. It's probably the first mistake I have ever made. I should have let you guys battle it out without my casual commentary.
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