With limited resources I am starting an account for my future generations benefit. Given current real estate prices and interest rates I no long need the savings account I have been building for a downpayment. This account is starting with $20,000 and will be fully margined at 2 to 1. So with $20,000 the account it will start investing in $40,000 worth of securities.
Assumptions: 15% long term average annual growth rate and 5.13% margin loan (interactive brokers).
Net return= 2x15% - 5.13% = 24.87%
These figures grow the $20,000 starting portfolio to be worth ~$1.6 million in 20 years.
If the combined portfolio declines 33% I will get margin called and forced to sell positions to cover which will break the compound growth.
The portfolio seems to be well diversified across strategies and market styles which should provide enough cushion from overall market corrections. I will need to do a deeper drive on correlations especially during passed bear markets to see how it will fair. If the positions are too correlated I will look to diversify one of the positions into the managed futures category such as MFUT Cambria Chesapeake Pure Trend ETF and or DBMF iMGP DBi Managed Futures Strategy ETF.
To your success,
Thomas Moore
Disclosure: The author is long ZIG, DEEP, KBWP, NIXT, VAMO. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.
