I've been running about 240% equities using a 200 SMA strategy for almost two years with the bulk of my retirement fund, and I thought that I'd give some strategies that I've learned over the time that I did it. It's been a great time to test the psychology, because we've had Liberation Day and the Iran War, which have been real stress tests for this strategy.
I'm going to give four techniques that I came up with to help me manage having most of my life savings in a strategy that most people can't hold for a week. Here they are:
1. Training: 200 SMA is a psychological skill that requires training. I needed to get used to the movement of UPRO, so that it didn't worry me. I started my portfolio with 50% UPRO and 50% BTAL. This gave me the chance to watch UPRO move, while BTAL countered much of its action. I then shifted it 5% per month, until I reached 75% UPRO and 25% BTAL. This also had the advantage of being a kind of DCA in, since I started the strategy when SPY was significantly above its 200 SMA, making a big loss was possible. I then shifted BTAL into other diversifiers.
2. Looking at the Line: When I think about my "results", I only look at the 200 SMA line itself. After all, SPY will eventually hit that 200 SMA line again, and that's when I'm going to sell. So, that's my real results, assuming I don't bail out early. The 200 SMA line is much more stable than SPY and UPRO themselves, and is generally going up, at least while I'm invested in it. It makes the whole thing feel smoother. The 200 SMA is my ongoing result.
3. Staying Invested: When I rotate out, I now rotate to a 4-way mixture of stocks, bonds, managed futures and gold+Bitcoin. This keeps me from getting itchy, while giving me a hyper-resilient portfolio that does well in any investment environment. The first time I rotated out, I went to cash and ended up throwing a little money at Poland while I waited (actually a good investment, but that's not the point). At the end of the day, the 200 SMA strategy is about the on period not the off period, so there is some flexibility here.
4. When To Make Tweaks: I made a few tweaks over time as new ETFs came out, and of course I changed my downtime strategy entirely. The important thing is to make these decisions before they apply. Making changes in real time is a disaster. So, I decided to change my downtime strategy during uptime. I also decided a slight tweak to my rotation rules between rotations, well before they would apply.
So, that's what I came up with. Not only am I now happy with this strategy, I actually feel more comfortable with this strategy than with my TFSA that has much less exposure and no rotation. I know that I can get out of the market when it turns down, that I'll crush it when it goes up, and that I'm on a freeroll for the occasional rough bounce like we faced in the Iran War. I hope others find this helpful.
None of the above is investment advice.
For reference:
200 SMA rules:
Rotating out at close when SPY drops below 200 SMA.
Rotating in at close when SPY is above 200 SMA for five consecutive days or by 3%, whichever comes first.
Uptime Portfolio:
75% UPRO, 10% RSSX, 6% ZROZ, 3% each MATE/CTAP/RSST
Dowtime Portfolio:
15% RSSX, 15% GLDM, 15% ZROZ, 15% VTIP, 15% SGOV, 5% each MATE/CTAP/RSST/HFMF/DBMF