chris319 wrote: ↑Sun Sep 18, 2022 2:14 am
IMO no one should just own TQQQ by itself for any kind of long term hold; you also need an asset (or assets) that will likely zig when TQQQ zags. I can post some examples of it with such rebalancing assets that have--when rebalanced annually--yielded long-term portfolio CAGRs in the 13 to 20% range.
There's SQQQ which is the inverse of TQQQ. I think you'll find that adding SQQQ or a bond fund will put a drag on returns unless you switch back and forth. Then you have the complication of taxes and you need to have timing signals to make the switch.
You can dilute your holdings with bond funds and the like and "smooth out" the volatility but you do so at the expense of long-term returns. This can easily be demonstrated in portfolio visualizer.
Whatever you do, your simulation needs to have DAILY compounding like the actual funds do.
I wasn't talking about using SQQQ; long-term adding a short fund will of course hurt returns.
Using a bond fund (or gold, or managed futures, or small value, or EM value, or US large-cap deep value, or consumer staples, or healthcare stocks, etc) won't exactly hurt long term returns like adding SQQQ will.
No "timing signals" are needed. You set your chosen allocation of TQQQ and the other fund/s and rebalance once a year on Dec 31st (or Jan 1st if you prefer).
Regarding taxes....no one should do something like this outside of a tax-sheltered account anyway unless they just love paying capital gains taxes.
It's 4 AM here and I need to get to sleep so I will post some more on this tomorrow; suffice it to say that I did find the results of the daily simulation in Excel for the 1990s years. Am still looking for the ones for the 2000-2002 period but will re-do them in Excel if I cannot find them.
Finally, regarding your assertion about rebalancing into non-TQQQ assets "hurting long term returns". Maybe if we have a perfect bull run like 2009 to 2021 and it just keeps going on and on and never ever ends then that would be the case. Otherwise, if we get a run of bad years like 2000-02, or 1973-74, or 1969-70, or even "two bad years sandwiching two kind of OK years" like 1981 to 1984 then NOT rebalancing into the other assets could leave your TQQQ portfolio so tiny after the declines that it never really recovers no matter how well the NASDAQ-100 does. Remember that a 25% loss requires a 33.33% gain just to break even; a 50% loss requires a 100% gain to break even; a 75% loss requires a 300% gain, etc....I'll leave it to you to do the math as to what kind of gain would be required to overcome a loss of "one million dollars shrinking to a few hundred dollars" as would've been the case if you'd held TQQQ over 2000-02 and never rebalanced it with anything else. You still wouldn't have recovered (or anything close to it) even by the high on 12-31-2021...and that was before TQQQ lost some 70% so far this year.
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