In the first part of this series
we examined the viability of investing in triple leveraged SPX via
UPRO, combined with bonds. We saw the viability of a simple combination of one third of an account holding
UPRO (basically attempting to match the markets returns on the whole)
combined with another instrument with a historical upside bias such as
Bonds (TLT) which, additionally offers hedging potential as it generally
moves up in times of crises (UPRO going down) easily beat the market
(18.17% annual return vs 13.37% SPY) since 2011.
In the second part of the series
we looked at short volatility instruments, such as XIV and ZIV. Unlike UPRO, they tend to
go up when the market is going sideways. Combinations of either XIV or
ZIV with bonds easily beat the markets too, but it was a pretty volatile
ride, especially for XIV, which I personally prefer to not be invested
in.
In the third part of the series, we analyzed the combinations of Triple leveraged S&Ps, Short Volatility and Triple Leveraged bonds. All in the same portfolio. The results looked attractive, in the 20% to 35% annual return range with better return to risk ratios than simply holding the SPX Index via SPY even with its dividends and all.
The question remains though:
How would these portfolios have performed during a serious market correction? Back in 2008 these instruments didn't exist but common sense tells us that triple leveraged SPX (UPRO) and short Volatility (ZIV or XIV) would have suffered massive, unbearable declines.
So, is this whole idea worth our time?
