Having based my portfolio on a 40-60 mix of leveraged and non-leveraged ETF’s, I aimed to build an investment strategy that was on auto-pilot and needed least monitoring. I did this by doing 2 things;

  1. Back-testing for last 10-12 years, evaluate max draw-down for 2008-09 period. You also have to take into account that some ETF’s that I selected were launched post 2008, but what was interesting for me to see here was the 2008 to 2015 run which is what I was building this portfolio for i.e recovery from a slump by beating S&P500 and Nasdaq-100 index and knowing I will not exit during the crash.
  2. Making sure that I do not need the funds for next 5-8 yrs at least, fully knowing that it can go all the way down to -60% to -80%. Backtesting showed the draw-down to -40% but as the thumb rule goes “past performance is not indicative of future results”.

Since I was in my 2nd year of this portfolio and taking a DIY approach, I found it very difficult to not track it on week/month basis and my last resort was to delete the Bloomberg app.

I also read this interesting article which helped me understand how better I can build a portfolio by reducing my dependency on leveraged ETFs. But for now I am all in for the thrill and reasonably confident that I have done my home work well before executing my buy’s