Joined 15 years ago
If it were possible (I recognize it isn't, due to margin limits), would it not be better to be 3x leveraged in your margin account, and simply buy the basic S&P and bond products? Wouldn't that avoid the "drag", and you'd end up better off?
https://capitalallocatorspodcast.com/wp-content/uploads/2017...
Edit: For more clarity - risk parity can make sense, but I don't think you ever need to use leverage on your equities to get risk parity. The fundamental insight of risk parity investing is that at commonly recommended ratios (50/50, 60/40) the risk (variance) from equities totally dominates the risk from bonds. So the risk parity advice is usually something with a much higher bond mix, but the entire portfolio is leveraged. But DO NOT use levered ETFs that recognize, say, 3x the DAILY movement of the S&P to do this. They don't do what you think. Read that link, or compute the following two scenarios:
1) Market goes up 1.1% on odd days, down 1% on even days. That yields about 9% (200 trading days). But a 3x daily etf product would only get you about 22%, not 27%.
2) Market foes up 1% on odd days, down 1.1% on even. That, sadly, means you lose about 11% on the year. If you use a 3x DAILY etf product, you lose around 75%.
Coronavirus Crisis Shows Marijuana Is ‘Essential’ and Pays High Taxes
One place where I am in less agreement is when the authors says that the government should be paid back and retain its share of ownership (I think that's what the article implied). The author wants this to be an equity investment. Those are not paid back. Any dividend would be shared in proportion to ownership (previous stockholders may have been quite diluted, of course).
And then my final question is, should the government retain equity indefinitely? Might we imagine paying out shares to citizens?
