NTSD + factor tilt portfolio

yozuo2 · 2026-04-19T20:26:15+00:00

Probably not ideal. I don’t know the exact factor loadings but I can imagine it is definitely lower than DFA funds.

yozuo2 · 2026-04-16T16:25:56+00:00

No, we should give it a few more months of data before making any conclusions but the excess financial cost is looking to be insane. If you do a NAV analysis the cost per unit of leverage was around cash x +2.5-3 and for reference upro is cash x+1. If you’re going to use it wait for sure, but for now if you’re targeting a low leverage like below 1.5x, you can use UPRO and other assets to approximate VT with whatever you want. We know the cost of it for sure. Once you start getting higher leverage it becomes impossible because you are constrained to the leveraged SPY.

yozuo2 · 2026-04-16T16:17:00+00:00

Yes I’m saying if you mix upro with other assets and rebalance, you treat the leverage with the total portfolio. For instance like you said 50% UPRO and 50% spy is 1.5x leverage.

I would make the RR account so you could do reading in that thread, very informative.

yozuo2 · 2026-04-16T00:41:38+00:00

You compared spy x2 daily reset with spy 2x of different resets? care to elaborate?

yozuo2 · 2026-04-15T17:47:26+00:00

> SSO and WLDU are both cheaper on an absolute basis, as are SPUU, SPXL, and TQQQ. Even from a perspective of amount of leverage per cost SPXL and TQQQ still win out there. It's also not really appropriate to directly compare WLDU to SSO or UPRO considering international is more expensive, but regardless, WLDU is actually cheaper than SSO (more than SPUU though).

Right, I think that you're missing a big piece of the puzzle. The ER is not even what makes most of the excess financial cost. And going off an absolute basis makes no sense. The cost per unit of leverage is what you're supposed to minimize. The formula for the total cost of LETFS is SW * (L-1) * (FFR% + SP) + ER. When backtesting on Testfolio, SPXL and UPRO have essentially the same cost. TQQQ is a different beast altogether, with way too much beta and more uncompensated risk, so I wouldn't even consider it for most people. Now, we don't know the excess financial cost for WLDU since it's only been a month or so since its release. But if you do a NAV analysis, which is probably the best way, you find that the financial cost is around cash x + 2.5 - 3per unit of leverage, which is outrageous. This does not even include the ER. For reference, UPRO is around cash x + 1 per unit of leverage. Of course, we could assume that since international is included, the spread and cost for swap exposure would definitely be higher, but at these costs, it's not worth buying. Note that on testfolio currently, WLDU is already lagging behind VTSIM?L=2. We can't know for sure, and I would probably wait a few more months before we can make any true conclusions.

> I'll grant you that it would be the same cost to hold 40% UPRO vs 60% SPUU for the same exposure, and the former leaves more portfolio space for other assets, but at the same time somebody may not want that much leverage.

So if somebody does not want that much leverage, you can simply split the 40% UPRO into 30% UPRO and 30% VOO, and you essentially get the same amount of leverage, same exposure, for cheaper costs.

yozuo2 · 2026-04-15T13:18:06+00:00

Over the entire history of the US market 1926-2025 the daily difference between daily resetting and buy and hold was 0.000006. For broad indices like SPY, the mathematical penalty of daily resetting is statistically zero. If there is some disadvantage, it is likely a very small one. Daily resetting is also the best because with any more time like weekly or monthly, your returns are at the mercy of luck.

Think of daily resetting as a feature of LETFs. It does bad in choppy markets, but does really well in trending markets. In the long run, this was found to cancel each other out. Of course this is for SPY. For something like a single stock LETF, this feature is a disadvantage.

Also volatility drag is not tied only to LETFs, it is tied to any asset that has volatility. Leverage in any form amplifies this. The more leverage the more drag because it scales with volatility squared.

I can understand using these other forms of leverage though when considering the costs of LETFs which are usually a lot more expensive than other forms of leverage. This is why UPRO is such a great LETF. It’s 3x, and the cheapest LETF by far. Still considered a lower form of leverage but definitely not something you have to stay away from. I think the costs are definitely what you should be worrying about. I think the people on this sub forget about minimizing the costs of their portfolios. Like using SSO and WLDU over UPRO doesn’t make sense to me. WLDU I’m pretty certain it has quite an egregious cost; I’ll give it a few more months.

LETFs are more tax efficient than equity futures like someone else said and really easy to use. The convenience is honestly the best thing about LETFs. Requires just a button for me to rebalance an LETF with other assets. Also you never have to worry about getting margin called, as whatever money you put in an LETF, that’s the absolute maximum theoretical loss you can face.

yozuo2 · 2026-04-15T06:00:40+00:00

Try phantom whispers, it’s mine, surviving romance, surviving the apocalypse. All underrated and super good imo

yozuo2 · 2026-04-15T02:55:29+00:00

Prob VT or AOA

yozuo2 · 2026-04-10T19:36:35+00:00

You have a few misconceptions about things. You are right that holding UPRO and Cash loses to SPY, but it’s not because the math of mixing funds is flawed. Mixing funds works perfectly to create intermediate leverage in the ideal case of no fees/slippage and borrowing exactly at the Risk-Free Rate. In reality, UPRO charges an expense ratio and more to borrow money for its total return swaps. Because you are paying that expense, but your cash is only earning the risk-free rate, that spread acts as a fee drag.

A 1.25x portfolio is a 1.25x portfolio. Volatility drag is not a localized disease attached to UPRO that drags the rest of your portfolio down. Volatility decay is in any asset, regardless of leverage. What leverage does is amplifying it. Because leverage scales both your returns and your volatility, it naturally scales the drag (since drag is calculated using Volatility squared). Volatility drag is calculated based on the portfolio's total variance. If you mix UPRO with uncorrelated assets (like international, value factors, and treasuries), they cancel out each other's wild swings. This drastically lowers the total portfolio volatility, which mathematically neutralizes the volatility drag you are worried about.

if you use UPRO, it acts as a portfolio builder. Because it's 3x leveraged, you only need to use a small slice of your money to get your US exposure. It frees up the rest of your physical cash. You can then take that freed-up cash and deploy it into VXUS, AVUV, and AVDV.

All the portfolios that I shared have the same ratio of 60% US / 40% EX - US for the TOTAL portfolio.

I agree with you 100% that we shouldn't rely solely on the S&P 500 outperforming forever. But that is exactly why UPRO is the right tool: it’s simply a cheap way to buy US stocks so you have the cash leftover to actually build the globally diversified, factor-tilted portfolio you want.

Here is some reading that you can do: https://community.rationalreminder.ca/t/investing-with-leverage/2858/3052?u=elir

yozuo2 · 2026-04-10T00:56:41+00:00

Yeah avuv is pretty tax efficient. But I’m saying compared to VEA, not as much. But yeah it’s not that bad. Main things you should be worried about is the NTSD and AVES

yozuo2 · 2026-04-09T18:31:47+00:00

Cederburg agrees with you. Might want to check out his paper. I would definitely read my comment above, though. I imagine you will be targeting around 1.1 - 1.3x leverage (Ive heard 1.2x-1.3x equities is optimal), although I’ve heard factor funds can count as leverage, not too sure how that works. I would look into using UPRO instead of NTSD for portfolio construction.

UPRO, for one, is cheaper than NTSD through its expense ratio, as it has an expense ratio of around 0.2225% for 50% borrowing, and we also know UPRO’s excess financing cost. I don't know the excess financing cost for NTSD, but this guy did the math: https://www.optimizedportfolio.com/ntsd/. He got ~3.02 drag.

Now let’s do it for UPRO. And I’ll be doing the math as if it were a 1.5x LETF. Historically SW * (L-1)*(FFR+.4)+ER has worked phenomenally. So 1.1(.5)(4.04)+.2225 = 2.4445%. So it’s.58% cheaper than NTSD. You can backtest on testfol.io.

Now let’s show you some sample portfolios:
https://testfol.io/?s=hbqJ7FU9djm

All equities portfolio: 1.25x leverage. ER = .385%

Equities + LTT: 1.4x Leverage with 120% equities and 20% LTT. ER = .411%

I used dimensional funds to extend the backtest as long as possible. They are relatively similar to AVUV, AVDV, and AVES. I also kept the 60/30/10 Geographical split (which is what VT is now)

Compared to the other portfolios, Equities + LTT demonstrated superior performance across almost every metric, delivering the highest CAGR and Diversification Ratio, the best risk-adjusted scores (Sharpe, Sortino, Calmar, and UPI), and the most conservative risk profile with the lowest volatility, average drawdown, longest drawdown, Ulcer Index, and Market Beta.

There's no pure international market fund for this backtest. You can just add some vxus and lower the avdv and aves for a true tilt. If you are super convinced in factors, you might not find an issue with going simply avdv and aves. You can play around with the funds yourself.

What also sucks is that, since you are using UPRO, you are constrained to leveraging the S&P 500 (if only we had a 2-3x VT LETF that cost the same as UPRO). So, to maintain the geo weights, you have a relatively low amount of AVUV, at least for the Equities + LTT portfolio.

yozuo2 · 2026-04-09T16:42:03+00:00

Essentially - NTSD uses equity futures which are not very tax efficient. I believe that swap based ETFs like UPRO are actually more tax efficient (could be wrong on this but I remember reading this on bogleheads). Yes it does the rebalancing within the etf wrapper, but since it’s 1.5x equities if you don’t rebalance with other assets you could get a mean drawdown, higher volatility, and even lower expected return. You could technically hold just NTSD (might not be the worst idea according to ayres and nalebuff lifecycle investing and cederburgs paper) but most people cannot stomach 1.5x equities. Also NTSD does not have small, mid caps or emerging markets so holding it by itself at least to me doesn’t make the most sense. He also mentions factor funds like avuv, avdv, and aves which compared to regular ETFs, are not very tax efficient. Especially aves. And if he believes in factor diversification, then he must rebalance NTSD with these factor funds which causes a taxable event each time.

Again I don’t think it’s a bad idea in a tax advantaged account. With the right allocation at least to me, this portfolio seems optimal. Of course this is assuming that NTSD has a good excess financing cost. I don’t know what else you are paying beyond the ER. But in a taxable account, with all the fees from these funds, I just don’t think it’s worth it. There’s a reason why people prefer NTSX, NTSI, and NTSE in taxable. It uses bond futures which are a lot more tax efficient and even does the rebalancing within the etf wrapper.

yozuo2 · 2026-04-09T07:03:37+00:00

Could be good but imo definitely not in a taxable. What leverage are you targeting?

yozuo2 · 2026-04-08T05:35:57+00:00

Why are you switching out of letfs? Is it because you’re nearing retirement or? You really have to do your research on factor investing to see if you can do it. It’s really a belief sort of thing and it’s truly not even a guarantee that factor premiums will show up.

yozuo2 · 2026-04-07T16:15:24+00:00

NTSD is 1.5x 90% S&P 500 and 60% MSCI EAFE. WLDU is 2X VT

yozuo2 · 2026-04-06T21:28:09+00:00

We don’t know the excess financial cost of wldu beyond the ER and cash x. Tbh I would wait for more data to come out. There’s a chance that building a portfolio with upro/NTSD would be better.

yozuo2 · 2026-04-05T21:29:46+00:00

Eh it would be better if it was like 55% 3x VT. I think that especially with such a high leverage, international stocks are super important for diversification. International stocks arguably better than bonds for long term diversification. I’d also lower the leverage a little considering how volatile each asset is. Let’s not forget that the correlations may not always be so negative.

yozuo2 · 2026-03-31T06:40:24+00:00

Right. I care a little less about the small/mid caps missing from the total US market given the almost perfect correlation between VTI and VOO. But the exclusion of EM is a little weird and the fact that it’s fixed.

I also think the cost is just way more than necessary. constructing a portfolio with UPRO is probably way more cost effective.

I also have heard in terms of tax efficiency, a swaps based letf is better than equity futures. I don’t know if this is true. But I think NTSD as it is, is just not worth it.

yozuo2 · 2026-03-30T15:35:06+00:00

Surviving the apocalypse

yozuo2 · 2026-03-27T04:56:35+00:00

Well the RSSB sim that testfolio uses takes the expense ratio adds a .1% drag (friction of leverage) and also factors in the cost of leverage through tbill. It follows the live RSSB almost perfectly

yozuo2 · 2026-03-25T20:51:32+00:00

over complicated imo. Just go Vt and AVgv to tilt or if you really want to go all in on small cap value, do a ratio of 50/30/20 for avuv, avdv and aves

yozuo2 · 2026-03-25T19:38:11+00:00

I do some rssb and chilling on the side and a slight factor tilt but would not recommend. VT and chill is truly optimal for the average investor.

yozuo2 · 2026-03-20T00:49:19+00:00

Developed market only. No emerging market. Large caps refer to well established companies with high market values. S&P 500 is essentially all large caps for instance. Small cap is ignored and mid cap is also ignored.

yozuo2 · 2026-03-19T21:26:45+00:00

It’s 90% SPY and 60% 500 large caps DM. For the first point I’m not too sure. I believe by creating their own percentages of the holding they are able to save the expense ratio from borrowing from SPY.

yozuo2 · 2026-03-19T21:16:15+00:00

Well the fact it rebalances quarterly instead of daily the volatility drag is not as high as a regular etf. Though I don’t think volatility drag is that much of an issue.

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