QE/QT effect on equity portfolios

Can you point to some scientific proofs that this is actually the case? I get that using leverage will improve your returns (that’s economics 101), but the higher return is bought by higher risk. From what I read through the lines is that you are, to some extent, trying to follow Hedgefundies approach.

Yes, people owning a house are less diversified and have a higher leverage, but there’s a little difference when it comes to margin calls. The probability that your house price decreases sharply within a few weeks is really low, and banks won’t immediately ask you for fresh money. Using leverage on stock market ETFs, the probability of a margin call is much higher.

The article you quoted is written from a guy who’s owning NTSX (WisdomTree), UPRO (3x leveraged S&P500) and TMF (3x leveraged 20+ year US treasury). He’s also a big fan of the Hedgefundie approach. I would have to check again, but I think Hedgefundies first try massively backfired for him. Yes, I know that Hedgefundi used higher leverage than you are currently using.

If you have done your due diligence and are ok with your approach, of course go for it. Personally, I wouldn’t feel comfortable with the information from the optimizedportfolio website only. I’d rather see someone like Ben Felix doing a video on using leverage to gain higher returns over the long-term.

I second this. Would also like to see a good article explaining it.

Same here as well.

Couldn’t agree more. If you are still at the start of your investment career, losing 50% of your money hurts, but you’ll be able to make up for it by your savings. Later on in the game, that’s not so easy. Unless you are earning 1+ Mio per year :slight_smile:

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Margin call probability when using leverage under 1.3 is basically 0, especially if you can contribute any amount of money in the meantime. I do however plan to cap my margin at around “1 year of power saving” in order to not be hurt too much by interest rate changes.

I also set a cap to 2-3% of max interest I am willing to pay. After that, I’ll pay the loan back.

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I checked myself if Ben Felix has some video on leverage, and guess what: he does:

For someone at the start of his investment career, it will increase return if you use leverage. So if you keep your margin cap at “1 year saving” I think you should be fine. Be sure to watch until the end for the warnings as well :slightly_smiling_face:

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I read a really detailed and well written paper a few months ago regarding 1.2 leverage, but I am not able to find it anymore… what a shame.

Regarding margin calls: I use portfolio margin, which would allow me 6:1 ratios, and I only use 1.25:1 I am pretty much as safe as one can be while using margin imho :smiley:

Well… Interest is deductible from your income - or at least from your dividend income. Not that complicated… the most important thing to keep in mind is: Keep dividend payments higher than deductible interest. But that’s really easy when:

  • interest is low
  • dividends are a lot higher than the interest
  • the loan is only a minor part of your total assets

So nothing much to say tax wise except for the government sponsoring you some money. It kind of makes sense though, since the money is invested.

I know those “theoretical” requirements, but: have you already declared your taxes since you are having a leveraged portfolio? Any unusual feedback from the twx authorities?

I started using margin at the beginning of this year, but I already checked the section in the “Schuldenverzeichnis”.

I don’t see them interfering here tbh… Real estate investors evade a lot more taxes, so why would they bother?

In any shape or form… Using “erhebliche Fremdmittel” is the criterion, not using any of it. 25% is not “erheblich”.