What Would Ohai Do?

Hello Ohai,

I hope you are reading. I am sending a message from planet leverage. What do you do when your SP500 does so well in a year? Do you rebalance back to the portfolio mix (either through no more contributions or sales)? I love the USA and all, but I don’t want all my eggs in one MAGA.


Judging by your question, you must have leveraged into this historic stock market rally. If so, congratulations; you have been rewarded for your conviction and risk appetite. Once you think about it, almost every person who becomes wealthy from entrepreneurship or real estate has used extreme leverage to magnify their returns. Modest leverage into something like SPX is still far less risky than buying commercial real estate with 10% downpayment, let alone starting a business with an 80% failure rate. More meaningfully, magnifying the returns of SPX is likely more risk efficient than either of these examples.

To answer your question, since my leverage has increased and is now closer to the upper limit, I have started to direct future contributions to fixed income positions. However, the overall strategy is not different. I still intend to maintain a leverage ratio of 1.5x to 2.0x and build up a fixed income reserve position for rebalancing if the market declines. In fact, the case could be made for taking even more risk as your portfolio increases in value, since you will able to tolerate larger dollar losses before your financial milestones could be impacted.

The other thing to consider is human capital as a percentage of your portfolio, as well as stability of your human capital. A secure job, high income, and superior education are tangible asset that balance risk in your financial investments. If you believe your career can be stable for the next few years and your household human capital is high, you will be able to tolerate more risk in your investment portfolio. However, if you were laid off, pursuing education, or were in another risky position, you’d probably consider reducing risk.

With regards to investment and life strategy in general - everyone has an activity that works or does not work for them. All I have to say is that I am happy with the way my outlook has turned out, and I hope you succeed in whichever method you choose.

grats ohai. what year did you start following this strat?

@Ohai - how do you get that leverage in (what I assume is) a brokerage account? Are you simply buying levered ETFs? Borrowing from the bank or on margin? Using options?


Lol, I looked up that thread on wsb, I think every single guy who took advantage of that loophole lost money, not one guy made a right call, sad

how do you lose this year?

only a third of all stocks lost money. the median return was 15%. Spy was up 30%.