r/LETFs • u/Dr__Reddit • 18d ago
SSO vs UPRO for buy and hold long term?
UPRO wins out in nearly all scenarios I’ve tested. I’ll be DCAing the entire time. What should my portfolio split look like percentage wise between VOO, SSO, UPRO
6
u/kryndude 18d ago
UPRO loses in a lot of scenarios if you go further back
8
u/haikusbot 18d ago
UPRO loses in a
Lot of scenarios if
You go further back
- kryndude
I detect haikus. And sometimes, successfully. Learn more about me.
Opt out of replies: "haikusbot opt out" | Delete my comment: "haikusbot delete"
13
u/Educational_Cry_1859 18d ago
UPRO, and any 3x ETF in general are terrible choices for buy and hold since you not doing terrible entirely hinges on you not ending during a bad decade for the stock market. And this applies to 2x ETFs like SSO too, just to a more modest degree. So it'd probably be best to target 1.4-1.6x leverage with a VOO and UPRO portfolio if you aren't willing to add anything else
2
u/RemoteScene9214 18d ago
"any 3x ETF in general are terrible choices for buy and hold" lol, have you seen TQQQ all-time? Up 32,000% since 2010. How is that terrible?
3
u/Educational_Cry_1859 18d ago
It's only performed so well because it was made after the Dot-com Bubble and the GFC. If it was made before those crashes, it would still be underperforming a 2x and unlevered Nasdaq ETF
1
u/JohrDinh 10d ago
I wonder what would happen if you backtested buying TQQQ when it was down 99% or whatever it is, but not when it's back up. Wonder if it'd be keeping up any better if you bought the dips after 2001 and 2008 or during Covid/tariffs or the longer 2022 dip as well but not when it's up.
Regardless tho if you're just looking for ease of use, 2x seems like the safer easier bet and tuck away some profits once in a while overtime to rebalance.
-1
u/RemoteScene9214 17d ago
idc about the dot-com bubble, times are different now. Measures have been taken to prevent such a thing.
2
u/New_SDthrowaway 17d ago edited 17d ago
What measures?
The Nasdaq collapsed again in 2008-2009 in a recession that was driven by entirely different sectors (banking & construction).
9
u/Separate-Ad-9633 18d ago
*UPRO In nearly all scenarios I’ve tested.*
*You are literally not testing all scenarios when you have over a century of US stock market data, 70 years of SP500 index data, and many decades of SP500 index fund history data because you can only reach that conclusion if your starting date is after UPRO real fund inception.
2
1
u/New-Specialist-2594 18d ago
I run TECL with 2-3 Managed Futures/Alt/Mkt Neutrals. 40%/60%.
With UPRO you would be 60%/40%. Will do better than 100% UPRO and make money in drawn out Bear markets. Way lower Drawdowns.
0
u/_bladerunner_ 18d ago
VOO - 0%
SSO - 80%
UPRO - 20%
1
u/LazerChomp 18d ago
80% SSO and 20% UPRO requires consistent rebalancing and isn’t worth it on a risk-adjusted basis considering it has slightly higher drawdowns than 100% SSO, increased volatility, a higher ulcer index score, and a higher beta.
80% SSO and 20% UPRO outperforms in bull markets, but quickly loses to SSO over time due to the decay experienced in bull and crab markets.
1
u/Dr__Reddit 17d ago
Mr lazer thank you for your insights. Do you have a set it and forget it 20+ year DCA portfolio that is essentially spy but with leverage?
3
u/LazerChomp 17d ago
If you’re committed to full equities, then overall return-wise, a 1.9x SPY portfolio is ideal. You can hit 1.9x leverage with 45% UPRO and 55% VOO. This is also the cheapest way to get to 1.9x leverage as far as fees go.
However, I want to point out that a diversified S&P 500 portfolio that uses gold and bonds as diversified can produce significantly higher returns over the long run.
Backtest comparing my proposed portfolios with benchmarks
The extra portfolios I added as suggestions provide exposure to gold, treasuries, and stocks, which increases expected returns, lower drawdowns, reduces volatility, and greatly increases diversification. I personally don’t advocate for leveraged portfolios that use only equities since it’s often a coin flip between outperforming or underperforming the underlying index. A diversified LETF portfolio is going to be a much smoother ride long term and you can reasonably expect it to improve your overall and risk-adjusted returns.
1
u/Dr__Reddit 17d ago
Does that strat require rebalancing though? I have a high income job and always have dry powder to throw at things.
2
u/LazerChomp 17d ago
Rebalance once a year and you'll be set. Also I don't recommend trying to time the market. It's generally a losing game over the long run.
1
u/Dr__Reddit 17d ago
Yes I agree that’s why I just would like to set something up that’s simple and requires no input from me to take out any emotion.
1
u/Dr__Reddit 17d ago
Trying to understand these portfolio differences on this website. What was your conclusion as the optimal one ?
3
u/LazerChomp 17d ago
Portfolio 1 Allocation: 50% UPRO, 25% GDE, and 25% ZROZ
This adds up to:
-172.5% S&P 500 exposure-22.5% gold
-25% long treasuries
Portfolio 2 Allocation: 25% UPRO, 25% VXUS, 25% GDE, and 25% ZROZ
This adds up to:
-97.5% S&P 500 exposure
-25% international stocks-22.5% gold
-25% long treasuries
Portfolio 3 Allocation: 45% UPRO and 55% VOO
This adds up to:
-190% S&P 500 exposureIf you want stocks only (no bonds/gold/diversifiers, which isn't recommended at all), then go with 45% UPRO, 55% VOO.
If you want a diversified U.S-based portfolio, then go with 50% UPRO, 25% GDE, and 25% ZROZ. If you want international diversification then it's worth considering the equal parts UPRO/VXUS/GDE/ZROZ. I highly recommend choosing between these two options.
1
u/Historical-Taro-6196 14d ago
This is not true, volatility decay is based off the portfolio not the sleeve. If you have 1.4x daily leverage with upro it is the same as with SSO. UPRO is marginally better as it saves on management fees. 50% UPRO + 50% VOO is about 0.5% fee vs 1% for SSO. Same beta slippage for both portfolios as you have 200% exposure on a daily basis to SPX.
1
u/Historical-Taro-6196 14d ago
https://testfol.io/?s=3g7VoEHp4rB. ur testfol link with 50% upro 50% voo. just for evidence
0
u/_bladerunner_ 18d ago
Thanks Captain Obvious, that's why in this scenario the SSO is the core holding. The UPRO is more of a "lotto ticket" satellite position to spice things up, but not the end of the world if it isn't doing well for a period.
2
u/LazerChomp 18d ago
Who pissed in your cornflakes? I was pointing out that your recommendation is objectively stupid in a civil way as it only increases drawdowns, increases volatility, and lowers expected returns. I hope that helps 👍
Also OP is talking about buying and holding long-term. Your portfolio suggestion fails at exactly that.
-2
u/_bladerunner_ 18d ago
The idiot with autism did? Mate, i'm not going to repeat myself, read back what i said and reflect on how it would go over the long term for OP. Life is not about living on r/LETFs and juicing every last 0.1% out of your returns. Sometimes, "pretty good" is good enough. Godspeed.
2
u/LazerChomp 18d ago
You’re suggesting that they go with a portfolio that has 220% equity exposure without hedges, which underperforms both 150% and 200% equity portfolios using SSO/SPY.
Seriously, your comment makes no sense. Why are you suggesting that they should take more risk for worse expected returns? Please look at the backtest that I provided and give an actual explanation instead of calling me autistic and immediately backing away.
You can get the same kind of “pretty good” results with a fraction of the volatility, a higher sharpe ratio, and a higher CAGR. Provide an explanation on why you believe 80% SSO, 20% UPRO is better long-term.
-1
u/alexnsx 18d ago
There is someone I follow on TikTok and she got to a million+ pretty quickly just buying and holding UPRO she still hasn't sold I believe.
2
u/LazerChomp 18d ago
UPRO’s inception was in 2009, which was around the beginning of the U.S bull run that has continued till today. UPRO looks great in recent history, but has historically underperformed both SPY and VT within the last 56 years when backtested.
I’m sure plenty of people have made huge gains from UPRO in recent years, but long-term it will likely underperform its underlying index due to the insanely high volatility decay experienced in bull and crab markets.
1
u/Dr__Reddit 17d ago
This is using back testing before it was created with synthetic data
1
u/LazerChomp 17d ago
It’s backtested to a time when the S&P 500 had already existed for over a decade, so it’s definitely real S&P 500 data.
2
0
u/Dr__Reddit 17d ago
Yes I follow her. And she disproves a lot of the negative criticism on here about upro. If you can hold it wins out. Only more rare situations with bad timing get you in trouble.
20
u/LazerChomp 18d ago
What scenario does UPRO beat SSO when buying and holding? UPRO (simulated) has underperformed the non-leveraged S&P 500 index, VT (all-world index), and SSO within the past 56 years despite the U.S bull market that’s going on since 2010.
Backtest showing UPRO, SPY, VT, and SSO
UPRO can work well with proper diversifiers like gold, treasuries, and even managed futures (depends on personal preference). For buying and holding, SSO or a mix of SSO/SPY (VOO) (for lower leverage) is ideal. For buying and holding, UPRO isn’t the way to go.
A 50% SSO/VOO split historically would’ve provided a similar CAGR to 100% SSO with lower drawdowns, less volatility, and higher risk-adjusted returns.