Leveraged portfolios

I dont think anyone here could handle that psychologically. Just imagine that you have have half a million melting down to 15k. You would absolutely panic. You can only attempt to withstand that, if you have something like TMF going up at the same time. But 2022 has shown that both can drop severely at the same time also.

UPRO is a tactical tool that I am trying to use strategically :laughing:. It means that it should constitute only a small part of the overall stocks portfolio, and you should look at the whole portfolio, not just at individual components.

Furthermore, I would never use leverage in the consumption phase.

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I think it makes sense if you are young and have the risk appetite for it. But I wouldn‘t go as far as implementing a 1.5-2x leverage portfolio with it.

I bought it in September 2023 and currently at +45% (in CHF) with it lol.

Generally, it doesn’t make sense to stay leveraged with cash on the side.

Let’s look at 55% UPRO and 45% cash. The total allocation is 165% stocks and 45% cash. You get some interest on your cash. But then you pay interest on 2x 55% = 110%. The interest rate you get is of course less than the one you pay, so you lose the full spread on your cash allocation. It would have been better to only lend money for 65% and buy the rest directly. For example, 32.5% to UPRO and 67.5% to IVV.

UPRO likely owes USD and its interest rate plus some spread. If you increase UPRO to hold more CHF you basically go short USD and long CHF.

The benefit of holding CHF to your portfolio has to be quite large because you pay the total spread on each CHF. How much could that be? IBKR adds to or subtracts from the Benchmark a minimum of 0.5%. So 45% of your portfolio loses 1% ever year. So your whole portfolio now loses an additional 0.45% every year.

And because of interest rate parity it also gives no additional expected return. But if USD/CHF is sufficiently anti-correlated to US stocks you might beat 0.45%. But it needs to do so on average to only get back to 0.