Why Accept Less If More Is Available?
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On paper, it doesn't make sense.
If growth is what we want, why do we create less?
For example, if we think that growth of principal is the way to be safe in retirement, why choose SPY?
Choosing SPY over regular growth stocks is already admitting defeat. Buffett and Munger have told us that many, many times.
But assuming we don't want to research and we've bought into the index fund industrial complex's mantra of diversified index funds/ETFs--and we're buying-and-holding--why on earth would we not use leverage?
If we want all that comes with long-term investing, why not do something better?
Here's what I mean.
About a year ago, I put together a portfolio of leveraged ETFs that beat the market. Using the time-tested idea of momentum, I only chose ones that could beat SPY over the long-term.
Here's the portfolio:
And here's how that portfolio has done versus SPY since September 2023:
It's absolutely destroyed SPY.
If growth is what we want, why would we ever choose far less growth?
It makes no sense.
But what about the drawdown, buddy! That's a big drawdown!
I hear you.
But, logically, what does drawdown have to do with anything? We're buying-and-holding, remember?
If we're trading, I get it.
What if we do this portfolio, watch it fall, and then sell?
In that case, we would make less than buying and selling SPY.
We're not doing that, though!
We're long-term investors.
Which means a leveraged portfolio will almost certainly beat a basic index fund.
By a lot.
And this portfolio shows that.
The biggest advantage we have as individual traders is the ability to choose the style we like -- and stick to it.
If we want income, then let's go for income.
If we want growth, then let's go for growth.
If we don't want growth and prefer lower drawdowns, then maybe SPY. However, SPY can still go down over 50%. Keep that in mind.
The bottom line?
More is available if we want it.
We just have to know what we want.
