r/letfs
Ideas to fix portfolio
Author seeks advice to optimize a £771k LETF-heavy portfolio to reach a £1.5m FIRE goal while managing downside risk.
- Total portfolio leverage of ~1.5x is manageable and strategically aligned with aggressive FIRE goals.
- Heavy allocation to 2x and 3x LETFs exposes the portfolio to severe drawdowns (70-80%) that the author explicitly wants to avoid.
I've got too many different LETFs. No hedges other than 1x equities and a little cash. I don't really have a strategy to deleverage either - although I guess you don't need it when total portfolio leverage is only c. 1.5x. The aim is to get to around £1.5m asap so I can FIRE. I'll probably deleverage at that point. I can tolerate volatility and drawdowns but not entire portfolio being down 70% or 80%.
I first got into LETFs a couple of years ago via this sub. Can you guys give me some ideas to clean up my portfolio. I only have access to UCITS funds. Thanks.
Portfolio:
- 1x global index in pension account (accessible in 20 yrs) = £225,000.
Don't want to leverage this account. Will leave as is.
- 1x global index in taxable account = £205,000.
Significant capital gains tax liability so will only sell £20k pa to move to tax free account.
Tax free account:
- 2x world = £60,000
- 2x Nasdaq= £27,500
- 2x S&P = £25,000
- 3x Nasdaq = £82,000
- 3x S&P = £65,000
- 1x active fund = £30,000
- 1x individual shares (fun money) = £20,000
- Cash = £32,000
TOTALS:
- 1x global index = £430,000
- 1x active shares = £50,000
- 2x LETFs = £112,500
- 3x LETFs = 147,000
- Cash = £32,000
Total portfolio = £771,500
I would consider adding AVGS (Avantis global small cap value, factor based) and removing the leveraged Nasdaq funds. Although the small cap value isn’t leveraged, you should still get higher long term CAGR compared to standard indexes. It is also meaningful size and value diversification. I personally believe Nasdaq investing is returns chasing. Not saying you won’t win there; I just think the risk is too high to focus on it. I would keep 3X S&P 500, enough to make overall portfolio leverage somewhere between 1.5-2x. I don’t know what your active management fund is; maybe consider replacing with managed futures to help hedge 3X S&P.
Thanks, I wasn't aware of that small cap value fund. I'm trying to resist the urge to get rid of all the different LETFs and just put all LETF money into 3x Nasdaq. Which would keep overall portfolio leverage below 2x and simply things, but would basically be return chasing.
The active fund is Scottish mortgage (more tech). I just keep it as my cost basis is less than £10k, I held it through a 60% decline in 2022 and it gets exposure to unlisted companies. But it's heavily Nasdaq correlated.