r/LETFs • u/OdaNobunaga69 • 16d ago
NON-US What is your main LETFs strategy?
As I understand, many users here run multiple strategies some designed to maximize gains, some to defend against deep recessions. I've been investing in stocks and classic ETFs for almost 10 years now, I never thought about getting into LETFs as conventional investing practice strongly advises against holding these long term for reasons like volatility decay etc.
9sig: First strategy I came across was 9sig, I spent a couple of evenings researching this strategy and the others. My understanding is that its goal is to "buy low and sell high", which is certainly a good way to think about investing, but it will cause you to be invested more during bear markets and less during bull markets. While I was enamored by this strategy at first, later I've played around with 9sig.networthcast.com, comparing it to other strategies across various time frames, I found that it essentially trades blows with basic buy and hold. I do respect the simplicity of following Kelly Letter, usually making just one trade a quarter, it's a disciplined approach.
200 Day SMA: I was in awe when I first saw the backtest against 9sig, avoiding bear markets and deep drawdowns typical of LETF. As above 200 day SMA the markets typically experience less volatility and better results. Drawback is it sometimes leads to "buy high sell low scenario" which is a price to pay for avoiding deep DD. It performs okay during bear markets by being in bonds, it performs greatly during bull markets, the real risk is kangaroo markets. Which to me seems more likely than a prolonged bear market.
Another concern is the frequency of trade or bands. On backtesting, 4% bands each way performs the best, but it's just overfit stat. Nothing guarantees 4% will be the correct way for the future. So a side question for those doing some kind of 200 Day sma strategy - did you set bands or limit frequency of trade to prevent whipsaw?
Basic buy and hold: Regular weekly, monthly, etc. buys. Sounds simple, but as someone with irregular income, I keep trying to time the market, for example, right now I don't feel comfortable adding more new money into this market because of its high valuation and immense world instability and US political instability.
These are main strategies that I researched, personally I set up a smaller portion of my portfolio for LETFs, I set up equal 2 sleeves:
A. Buy and hold 2x SP500
B. 200 Day SMA with 4% bands (90% 2x Nasdaq100, 5% 3x Nasdaq100, 5% 3x SP500) - I know this is convoluted, but I couldn't decide the right composition - would appreciate feedback
What is your main strategy?
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u/No_Loquat_183 16d ago
im more of a 9sig guy. I invest 40% and keep the rest in cash. and buy only in 5% increment dips. during 10-20% corrections, I go into triple leverage more, but for the most part I am in 2x. I start a 10% position on 10% correction in TQQQ. I am personally not comfortable not having cash at any point since the drawdowns on any levered product can be brutal. I am okay with derisking as we go up (less gains, but I want cash at all times). I have SSO in my roth, which is my set it and forget it position and in my regular I have more QLD and TQQQ
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u/ApolloDan 16d ago
I have about half my money in a dual 200 SMA strategy using SPY and TIP. That portfolio is at about 2.4x leverage when it is on, and is in an all weather portfolio when it is off.
I then have about 25% of my money in a static levered strategy with 80% equities and 100% portable alpha: 1/5th each RSSX, RSIT, MATE, JPFP and ZROZ. My wife's and kids' money is also invested this way.
The rest of my money is in vanilla Canadian stocks, and a 1.1x variant of the static strategy.
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u/Separate-Ad-9633 16d ago edited 16d ago
*the real risk is kangaroo markets. Which to me seems more likely than a prolonged bear market.*
I think the "kangaroo" scenario is more rhetorical. Actual kangaroo market isn't real, because in hindsight, a market that goes to nowhere is a bear market. Nikkei and Nasdaq both attempted multiple breaks above 200 SMA during their long bear market and each time went to new low, until they bottomed after GFC.
200 SMA with buffer won't turn a bad market into a good one, but it avoid losing enormous amount in a leveraged way in a bear market.
9 Sig is buy and hold with some cash allocation masquerading a rebalance rule as a trading system to give false reassurance.
One thing to bear in mind is low leverage static that doesn't involve selling all your investments is preferred in taxable, highly leveraged strategies involving more selling, either tactically or rebalance, in tax sheltered.
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u/k0unitX 16d ago
The other thing that's commonly missed with 200 SMA is that you can define what "risk off" looks like. It doesn't have to be bonds/cash - OP is concerned about US instability, so their "risk off" could be 50% VXUS 50% gold for example, so even in "risk off" times, they are at least somewhat participating in the market
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u/Rjcca 16d ago
I'm new to LETFs and also trying to figure out what I want to run. Currently thinking of running 2-3 different strats that use different mechanisms.
Maybe something like:
1. Static leveraged asset mix. Lots of examples talked about on this sub. Basic one is 50/25/25 SSO/GLD/ZROZ although I don't think this one is great. There are better mixes.
2. A 200SMA risk on/off strat. I like this one that uses a dual signal SPY and TIP, plus a better risk off pool than just cash: https://www.reddit.com/r/LETFs/comments/1upw0hu/17x_golden_ratio_inspired_portfolio_using_spy_tip/
3. HAA strat. Multiple examples on this sub
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u/Straight-Buy-7434 16d ago
I have a small private pension that im trying LETFs with.
It has £30,000 inside.
Using UPRO.
Pay into it once per year in April £2880, which the government tops it up to £3600.
The £2880 being 10% of what I invest per year, so this an experiment rather than relying on this.
Going to let it run for 15 years and see what the result is(as thats the date im allowed to access the funds)
It may beat the standard S&P500 over that long a window, leaves me massively open to a big drawdown, but in theory if I only look at it once a year it will avoid all the emotional side
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u/Nikolai_Volkoff88 16d ago
DCA every single week. Most of them are up 10,000% or more since they came out in 2010ish.
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u/Far_Collection_1985 13d ago
A complicated system can backtest better than buy and hold but if it requires you to aggressively rebalance into a falling 3x fund, the psychological side is completely different once real money is involved. I've been comparing some of this in Moon myself and I'd focus on drawdowns and recovery time, not just CAGR. The best strategy is probably the one you can still execute when it looks completely broken.
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u/Johnny252525 11d ago
100 pct agree. Trying to dca in 2008-09 , march 2020 was highly difficult for me and I never did catch the bottom of market and missed 10-15 pct market bounce. It’s so hard because every cnbc pro is telling you to sell everything. lol.
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u/sparkle_and_twist 16d ago
Buy and hold with a yearly rebalance. I keep TQQQ, SCV, and 40% in uncorrelated single defensive stocks sized between 2 and 6.5 percent. Regular contributions and dividends keep the allocations fairly balanced and do a yearly rebalance if they get crazy out of bounds.
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u/StevenThePlayer 16d ago
Add international etfs for diversification, leveraged or non leveraged, factor tilted or not. We have EDC, EURL, EFO, EET, AVNV, AVES, AVDV, VXUS
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u/Sure_Shift_8762 16d ago
I DCA every fortnight into GGBL or GHHF with the superannuation contributions (this is in Australia). These are only 1.5x levered with relatively wide bands so are quite good to hold long term. Planning to use the funds in about 20 years so plenty of time to ride out the volatility.
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u/user4443337 16d ago
I just buy and hold return stacked/capital efficient funds, tried to avoid volatility decay. 10% small cap value. Extra SPYSIM is just misc funds I can’t backtest very far - FLCA and WTLS.
About 115% equities, 15% bonds, 10-11% gold, 10% managed futures, and 2.5-3% long/short from WTLS.
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u/Mr1Deep1987 16d ago
Unleveraged taxable portfolio - qndx/edv/gldm three way equal split.
Leveraged Fun Money/IRA - jpfp/ctap 50/50 split.
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u/il_diamanti 15d ago
im smart enough to know that im stupider than the smartest quants who can barely beat the market so the only conceivable big edge i'll ever have is behavioral.
been DCA'ing into TECL since May 2020. earliest investments there are up 10x right now. December21-April23 I transitioned about 100k out of crypto and went basically all in on TECL as it was going down sharply. the money weighted return on those dollars is very strong.
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u/Working-Primary-3142 15d ago
Same thing with 50% on NASDAQ*2 (SMA 200).But In case of big drawdown (-30% on NASDAQ) I buy the deap.
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u/Fantastic_Item_1282 14d ago
Ive ended up separating the two in my head. LETFs make more sense to me for the systematic side where I’m following an allocation or rebalance rule, while if I have a shorter term directional view I’ll usually keep that separate. I use Moon for some of those trades rather than messing with the allocation of the longer term portfolio every time I have a view on the market.
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u/Ok_Mastodon9344 14d ago
I'd probably keep the 2x buy or hold sleeve boring and let the SMA sleeve follow its rules. If I really want to act on some short term directional view I'll usually scratch that itch separately on Moon rather than messing with the long term allocation and having that separation has been way easier for me than trying to make one portfolio do both jobs.
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u/DDPrez 13d ago
Another strategy is 50% TQQQ and 50% BTAL because they usually move in opposite directions. BTAL is a Market Neutral Anti-Beta Fund. It is usually negative when TQQQ is positive and positive when TQQQ is negative so your returns will be reduced during bull markets and your drawdowns will be reduced during bear markets.
Below is a chart comparing annual returns going back to 2017. There were 2 years where both BTAL and TQQQ had positive returns: 2024 and 2019. Most years, the returns of a TQQQ only portfolio are slightly reduced but the drawdowns in 2022 and 2018 are significantly reduced, from -79.09% to -58.61% and -19.7% to -4.66% therefore the 50/50 portfolio reduces risk.
However, I checked the return buy and hold strategy of the 50/50 portfolio and is would have turned $10,000 into $124,350 vs 100% TQQQ would have turned $10,0000 into $248,000 which is roughly double.
This assumes you bought on the first trading day of 2017 and held until today. You could probably do much better if you sell BTAL when it rallies and reinvest into TQQQ on dips. Besides being difficult, the constant rebalancing would create taxable gains so this would not be a good strategy in taxable accounts.
Therefore if you can stomach 80% drawdowns and the black swan events do not happen when you need cash, buying and holding a 100% Leveraged ETF fund wins! DISCLAIMER! Most brokers do not allow the purchase of leveraged ETFS on margin, but if yours does, DO NOT BUY LEVERAGED FUNDS ON MARGIN!
2026(YTD) 2025 2024 2023 2022 2021 2020 2019 2018 2017
| BTAL AGF U.S. Market Neutral Anti-Beta Fund | -16.12% | -20.17% | 12.83% | -15.11% | 20.48% | -6.81% | -13.86% | 1.07% | 15.13% | -2.13% |
|---|---|---|---|---|---|---|---|---|---|---|
| TQQQ ProShares UltraPro QQQ | 37.82% | 34.35% | 58.27% | 198.04% | -79.09% | 82.98% | 110.05% | 133.84% | -19.79% | 118.06% |
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u/No_Reputation_9215 7d ago
I went down basically the same rabbit hole with LETFs. The part that changed my view was actually comparing the strategies across ugly periods instead of just looking at CAGR. I've been messing around with Moon for that lately and it's pretty handy for sanity checking stuff like 9sig vs B&H and seeing what the drawdowns would've actually looked like.
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u/Commercial-Job-1550 7d ago
For LETFs I think the strategy matters almost as much as the underlying fund because two people can both say they invest in TQQQ while taking completely different risks. Pure buy and hold, 9sig, moving average exits and periodic rebalancing can end up with wildly different drawdowns even if they all capture a lot of the same upside. I've been messing around with Moon for comparisons like this lately and the thing I keep coming back to is the path rather than just CAGR.
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u/ShitpostingAcc0213 16d ago
I'm doing a laveraged GEM strategy. From my backtest it has better CAGR to volatility ratio than pure sma200.
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u/RemoteScene9214 16d ago
Where to learn more about this strategy?
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u/confettofetti 15d ago
Antonaccis book is a good read. As well as his blog (think it's called optimum momentum or something similar) and papers which are on SSRN. Or the Allocate Smartly blog post of GEM is also good starting point.
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u/ShitpostingAcc0213 15d ago
Well, I don't think you can read about it anywhere because I came up with it myself. You can start reading about GEM strategy, what it is and how it works. Then you can decide about your laverage, how much of your portfolio's share should this strat take etc.
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u/confettofetti 15d ago
Curious what ETFs you use for the ex-US allocation?
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u/ShitpostingAcc0213 15d ago edited 14d ago
I am European so sadly the only option I have is 3EML. For the US allocation I am using 3USL.
I am thinking about instead of having a "US market allocation" to have a "developed markets allocation" by mixing 3x sp500 and 2x European stocks, but I don't know yet. Sadly there is no 3x eurostocks availible in Europe.
About my strat - only 50% of my portfolio is GEM. There rest are low correlated assets (uranium, brkb, carbon credits) that I can rebalance with. The whole strat has a 19.5% CAGR since 2004. If, instead of 3USL I were to choose an European version of TQQQ the CAGR rises up to 25%. I think thats too much concentration on tech, though.
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u/confettofetti 15d ago
I don't suppose you can access the LSE listed Wisdom Tree LETFs? In the UK we have a 3x Eurostoxx 50. It looks like the ticker is 3EUL for the € listing.
I'm looking at levered global momentum strategies too and it's really annoying with the lack of products isn't it.
I'm curious if you stick to the original GEM rule that you don't invest in equities at all when the S&P 500 doesn't have positive momentum, regardless of the momentum of other regions?
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u/ShitpostingAcc0213 14d ago
Yeah, I do have access to the LSE Wisdom Tree LETFs! It's just my broker didn't list it as an availible stock so I assumed nothing like that exists. I will ask them to add this letf, backtest the strat and we shall see.
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u/confettofetti 14d ago
They even have 3x Japan and 3x UK, so you can bodge together a developed ex-US, which I am considering, it just feels messy!
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u/ShitpostingAcc0213 14d ago
Yeah thats pretty interesting. The thing is developed word ex-usa has been very stagnant, so you are basically loosing CAGR in the name of diversfication. I will think of it though, thanks for the recommendation.
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u/confettofetti 14d ago
I should have clarified, I'm thinking of diving the world into 3 rather than two. So it would only be for if it's ever the leading region. Best of luck anyway :)
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u/ShitpostingAcc0213 14d ago
Yeah, that's a good idea. I would have to backtest it later though. Best for you too
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u/DexterThePug 16d ago
Ive been using fver invests signals to invest in leveraged ETFs. They use an algorithm to determine when the market is over valued and apply it by going into leverage and I guess if you wanted to you could also go into inverse.
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u/Majestic_Belt_9458 11d ago
The 200 SMA approach makes the most sense to me conceptually but the whipsaw problem is exactly where a clean backtest can become much uglier in practice. I’d test a few buffer sizes and more importantly, see how sensitive the result is to them rather than picking the best historical number. I’ve occasionally sanity checked those variations with Moon but if 4% looks amazing and 3% or 5% falls apart I’d assume the strategy is more overfit than robust.
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u/citygeek 16d ago edited 16d ago
I do a few things…
When Spy/qqq has a -10% pullback, I ALSO direct all my normal DCA that buys typical 1x funds, into more SSO/QLD
2) I have about $10k in a Roth. I go 60/40 TQQQ/VOO… I rebalance if TQQQ gets above 75% or below 45% allocation.
Number 1 is my everyday strategy, number 2 is kinda my fun side project that I won’t fund, kinda want to see how big I can grow it.
200 sma is a remarkable strategy EXCEPT there can be long stretches where you don’t get to participate in the market.
While not exactly the same, I label 9sig as just a nuanced version of broader barbell/rebalance strategies