The HEDGEFUNDIE Adventure (UPRO/TMF) - A Summary of HFEA
Get the portfolio here: https://optimizedportfolio.com/go/hfea
Here we dive into the famous “Excellent Adventure” from Hedgefundie and how to implement it.
// TIMESTAMPS:
00:00 - Intro
00:15 - Who is Hedgefundie?
00:29 - What is the Hedgefundie Strategy?
05:21 - Simulated Performance Backtests
05:36 - Diversifying Further? Probably Not.
06:34 - Alternatives
07:55 - How To Implement
08:27 - Disclosures
09:00 - Disclaimer
09:31 - Outro
// SUMMARY:
Hedgefundie was a member of the Bogleheads forum who created a now-famous thread on the forum proposing a 3x leveraged ETF strategy.
The Hedgefundie strategy – known as “Hedgefundie’s Excellent Adventure” or HFEA for short – is based on a risk parity allocation of leveraged stocks (3x S&P 500 index via UPRO) and leveraged long-term treasury bonds (3x ICE U.S. Treasury 20+ Year Bond Index via TMF).
The Hedgefundie strategy relies heavily on the negative correlation (or at least, uncorrelation) between stocks and long-term treasury bonds, wherein the bonds provide a buffer during stock drawdowns. Long-term treasuries are chosen because they are more volatile than shorter-duration bonds and because of their degree of negative correlation to stocks.
Consistent with the idea of Lifecycle Investing, this strategy is better suited for young investors with a long time horizon who can afford to be risky early in their investment horizon. Hedgefundie advocates for treating this strategy like a “lottery ticket” and not using it with a significant portion of your total portfolio value.
The proposed strategy calls for quarterly rebalancing. It is recommended to implement the strategy within a Roth IRA on M1 Finance, to avoid tax implications and to make regular rebalancing seamless and easy.
This is a risky strategy by its very nature. Read up on leverage and leveraged ETF’s before employing this strategy. Do not put your entire portfolio in this strategy.
Note that HFEA is the shorthand abbreviation for the strategy; it is not a ticker.
// Resources for this video:
► Read the blog post here: https://www.optimizedportfolio.com/he...
► Original forum thread: https://www.bogleheads.org/forum/view...
► Lifecycle Investing: https://papers.ssrn.com/sol3/papers.c...
► The Long Term Behaviour of Leveraged ETFs: http://www.ddnum.com/articles/leverag...
► Hedgefundie Risk Parity (40/60) Pie: https://optimizedportfolio.com/go/hfe...
► Hedgefundie 55/45 Pie: https://optimizedportfolio.com/go/hfea
► MotoTrojan 43/57 Variant: https://optimizedportfolio.com/go/mot...
► Leveraged All Weather Portfolio: https://www.optimizedportfolio.com/al...
#investing #hedgefundie #bogleheads #leverage #leveragedetfs
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Disclaimer: This is not financial advice, investing advice, or tax advice. The information presented is for informational, educational, and entertainment purposes only. Investment products discussed are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here: https://www.optimizedportfolio.com/te...
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