David Loses Money Tracking my adventures in making money without earning it

Hedgefundie’s Excellent Adventure


This approach comes from a post on the Bogleheads forum in February 2019, where a user (called Hedgefundie) came up with an interesting approach to index investing. They had the idea of a portfolio based on a few simple rules:

  • Hold UPRO and TMF in a 55/45 ratio to each other. So 55% of your portfolio is in UPRO and 45% is in TMF.
  • At the start of every quarter, rebalance it to get it back to the 55/45 ratio.
  • Cross your fingers and wait for a long, long time.

UPRO is the S&P500 index with 3x leverage applied to it. TMF is 20+ year treasury bonds with 3x leverage applied to it. The idea is that these two holdings are negatively correlated a lot of the time – if the stock market crashes then odds are that bonds are going to go up, and vice versa. On days where they’re positively correlated, they usually go up rather than down. Applying this approach retrospectively over a long time period (like, decades) hypothetically leads to some absolutely insane gains, but nobody knows how it will go in the future.

It sounded like an interesting idea, so I set aside a chunk of cash and thought I’d give it a try. You can see how it’s doing below. An important thing to keep in mind is that I live in Australia, so exchange rates also play a factor in how up/down I’m going.

Current Financial Year Performance

I only started running HFEA on the 6th of July 2021, so the current financial year and all-time performance of each are the same. In future years you should see some changes here though.

All-time Performance

As usual, I am trying to beat the ASX200. Below is an all-time graph of performance so far (started on 6th July 2021).

The holdings are 55% UPRO and 45% TMF, rebalanced quarterly.

David Loses Money Tracking my adventures in making money without earning it