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Hedge Your Emerging Market Exposure With This Low-Volatility ETF

Well diversified portfolios should have an allocation to emerging market equities even when they are not favorable. There are many ways to get exposure to emerging market equities including both active and passive funds. A low volatility emerging market ETF provides exposure to the asset class with less volatility than a traditional investment. If you’re one of those investors that time your entry into certain asset classes or positions and take big positions when you do so, good luck to you. If you’ve been successful using this strategy then congratulations, you should probably start your own hedge fund and make an additional 2% and 20% of profits from other people’s money. If you’re like the rest of us however, the better strategy is to be diversified across all asset classes, all the time, and increase or decrease allocations to each based on the outlook for each asset class relative to others. One asset class that is not getting much love these days, and for good reason, is emerging market equities. According to the MSCI Emerging Market Index, these markets include China, Korea, Taiwan, Brazil, Mexico, Russia, and India, to name a few. (Note: Korea is not included in all emerging market indexes and may also be included in several developed market indexes). According to the iShares MSCI Emerging Markets ETF (NYSEARCA: EEM ) , emerging markets are down almost 17% over the last year. That would have been a painful decline in your portfolio if not well diversified with, say, the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) , which had a 2.7% return over the same period. While I have been telling clients to lighten up on emerging markets, by no means did that mean to sell all their positions. In fact, we might soon be getting to the inflection point where emerging markets become a good buying opportunity. Maybe we are already there. There are many experts, economists, analysts, and pundits that would argue that it is still too soon to buy EM. To which I say, you should already have some EM, even if it’s a small allocation. If emerging markets scare you but you might kick yourself if you miss the upside that usually happens too quickly to react, I have a solution. Instead of investing in emerging markets through EEM, why not invest in the iShares MSCI Emerging Markets Minimum Volatility ETF (NYSEARCA: EEMV ). It has a beta to the S&P 500 of 0.3 and a standard deviation of 10% over the last 3 years. Compared to EEM, with a beta of 0.6 and a standard deviation of 12.5%, this is one way to get some exposure and not lose any sleep at night. Over the last year, EEMV is down 13.2%, compared to EEM which was down 16.6%. (click to enlarge) Doesn’t seem like much of a difference and EEMV will tend to lag in a rapidly rising market, but for a conservative investor that doesn’t like volatility, it’s a great option. Over the long-run, low volatility strategies tend to do well relative to the comparable traditional strategy. After all, if you’re down 20%, you need a 25% return to breakeven, but if you’re only down 10%, your breakeven return is only 11%. Since EEMV was launched, it has outperformed EEM by over 15%, because it loses less when the markets decline. (click to enlarge) The difference between EEMV and EEM is quite simple: the volatility of each stock is evaluated along with the correlations between stocks. And then a number of constraints are applied to ensure adequate diversification and representation of the broad market while minimizing volatility. The underlying portfolios have slightly different allocations by country, sector, and top holdings, but both provide well diversified exposure to the broad market. EEMV is a much smaller fund with only $2.7 billion compared to the much larger EEM with $27 billion, but $2.7 billion is a good size fund and it hasn’t been around for very long. I anticipate that as emerging market equity volatility increases, more flows will be directed to EEMV instead of EEM. Bottom line here is that every portfolio should be well diversified including an allocation to emerging market equities, even when the consensus view is that it is still too soon. Stay underweight, stay defensive, and consider using the minimum volatility alternative. Source: iShares.com, PM101, Yahoo

How To Pick The Best Oil ETF

Summary Over the last 10 years, the number of oil ETFs has exploded with an increasing number of complex instruments available to investors to gain exposure to crude oil. Many such ETFs appear attractive to the profit-minded trader, but it is up to educated investors to determine which product is most appropriate given his/her objective, risk appetite, and timeframe. This article analyzes the most popular commodity and oil ETFs to determine which most effectively tracks the price of oil over a series of different timeframes. Commodities has arguably been the most challenging sector in which to turn a predictable profit over the past 10 years. Crude oil, the most popular commodity in the sector, has seen its price double, lose 75% of its value, double again and, most recently, drop by 50%. However, with great volatility comes great opportunity, and it is no surprise that oil prices earn front-page headlines on all major financial websites on a daily basis. For years, most small, individual traders were unable to trade crude oil. Direct trading of oil requires buying and selling of futures contracts, with one futures contract usually representing 1,000 barrels. With oil trading at an average price of $80/barrel over the past decade, a single contract would cost $80,000 — too risky for most recreational traders. Even with the necessary pocketbook, trading futures contracts is particularly dangerous in that they expire every 30 days, requiring a trader to cash out at undesirable prices or be forced to take physical delivery of the oil. That all changed in 2006 with the arrival of the United States Oil Fund (NYSEARCA: USO ), an ETF that bought and held oil futures contracts itself, and allowed traders to buy shares for under $100. Over the next 5 years, an explosion of new commodity ETF products hit the market that allowed investors myriad increasingly complex opportunities to gain direct exposure to oil. With so many products available, many investors do not understand exactly what sort of exposure they are purchasing and how closely it will actually track oil. This article does not attempt to convince you, the reader, to buy oil. Rather, it assumes that you have already made the decision to do so, and instead will discuss the most effective way to go long oil without buying futures contracts. With a market capitalization of $3.2 billion and average daily volume of 28 million shares, the United States Oil Fund is among the most the most popular commodity ETFs, and by far the most popular pure oil ETF. The ETF was launched in April of 2006 and was the first of its kind. It allocates about 75% of its holdings to oil futures contracts. Each month, it buys near-term futures contracts–which best approximate the spot price of oil–and then a week or two prior to expiration, sells them and simultaneously uses these funds to buy the next month’s contracts, thereby avoiding taking physical deliver of more than $2 billion worth of oil (or 40 million barrels) and maintaining constant exposure to the commodity. For this service, the fund charges an annual fee of around 0.7%. However, this process of buying and selling contracts is not without it complications. More on this in a moment. After witnessing the popularity of USO and its cousin the US Natural Gas Fund (NYSEARCA: UNG ), other ETF companies were quick to jump on the bandwagon with increasingly innovative and volatile products. In late 2008, ProShares upped the ante and introduced the Ultra Bloomberg Crude Oil ETF (NYSEARCA: UCO ), which utilized leverage to deliver 2x the daily movement of oil. That is, if oil (and USO) gained 2% in a day, UCO would gain 4%, and if oil lost 2%, UCO would lose 4%. Unsurprisingly, this product was embraced by daytraders due to the enhanced volatility that is their lifeblood. However, it was also traded by longer-term traders looking to capitalize on a prolonged rally in crude oil. Like clockwork, 4 years later in late 2012, the company VelocityShares decided that 2x volatility just wasn’t cutting it and released the exceptionally volatile VelocityShares 3x Long Oil ETF (NYSEARCA: UWTI ). As its name suggests, this ETF was designed to move 3x the daily price of oil. Despite their differences in leverage, all three products work similarly in that they buy futures contracts and roll them over each month, aiming to track the price of oil on a daily basis. That being said, the devil is in the details–and the interworkings of these ETFs have a lot of details that dictate whether these ETFs are effective in accurately tracking the price of oil. Let’s start simple. Figure 1 plots the price of oil versus the price of USO since its inception in April 2006. (click to enlarge) Figure 1: Crude Oil versus USO since inception in 2006, showing underperformance of ETF versus its underlying commodity Data source: Yahoo Finance; c hart created by author. Conveniently, both began the period at nearly identical prices of $68 per share or per barrel. Since then, oil has slid to $46/barrel as of September 22, 2015 while USO has slid much steeper to just $15/share. What explains this underperformance? While the previously discussed process by which USO rolls over its futures contracts each month guarantees continuous exposure to oil, it is not without its drawbacks. Were subsequent futures contracts equally priced, it would not be an issue. The fund would sell X number of soon-to-expire contracts and use these funds to buy X number of next-month contracts. However, futures contracts of commodities such as oil frequently trade in a structure known as contango where later contracts are more expensive than near contracts. This is understandable, particularly after oil has taken a large fall, that investors expect prices to rebound in the long term as uncertainty increases. Unfortunately for funds such as USO, this means that each month the fund is selling X number of contracts and buying X-Y number of contracts. Effectively, the fund is selling low and buying high. And as contango can routinely reach 1-2% per month during periods of wide contango, the fund sees a price-independent degradation of roughly this percentage. While this is relatively minor in the short term, it adds up and can be relatively devastating for long term holders, as seen in Figure 1. What about UCO and UWTI? Figure 2 below plots the performance of oil versus USO versus UCO versus UWTI since December 10, 2008. 2008 was used as it encompasses the full history of both USO and UCO. The price history of UWTI from 2008 to 2012–when it debuted–was reconstructed based on price history of USO and UCO. (click to enlarge) Figure 2: Crude Oil versus USO, UCO, and UWTI since 2008, showing massive underperformance of leveraged ETFs versus USO and crude oil Data source: Yahoo Finance; c hart created by author. If USO “underperformed,” then UCO and UWTI were decimated. UWTI dropped 99.3% from an estimated $1841 per share to just $11 per share while UCO dropped 92% despite oil squeaking out a 5% gain. This dramatic underperformance versus both oil and USO occurred for two reasons. First, the impacts of rollover discussed above are compounded due to leverage. If the monthly contango in the futures market is 2%, the attributable loss increases to 4% for UCO and 6% for UWTI, which adds up very quickly. Second, due to the leveraging process a phenomenon known as “leverage-induced decay” also weighs on performance. I will spare you all the math, but suffice to say, large moves in one direction followed by sharp reversals leads to under-performance of leveraged ETFs independent of the effects of contango. What does this mean for oil traders? Figure 3 below uses the data in Figure 1 and 2 above to calculate average, expected underperformance versus the price of oil sustained from holding USO, UCO, and UWTI over a yearlong period. Overall, 2000 different 1-year periods are used to generate this data (click to enlarge) Figure 3: Expected underperformance of USO, UCO, and UWTI based on the number of days the ETF is held, from 2008-2015 data Data source: Yahoo Finance; c hart created by author. A 22-day hold in USO is predicted to result in a 1% underperformance versus oil. That is, if oil gains 5% during this period, the ETF would be predicted to yield around 4%. On the other hand, it would take just 9 days to reach a 1% underperformance holding UCO and a mere 6 days to see a 1% underperformance holding UWTI. Over a typical year-long period, USO is expected to underperform by 10.9% compared to 22.2% for UCO and 37.4% for UWTI. It should be noted that the underperformances for UCO and especially UWTI are somewhat deceptive and in many cases may actually be much lower. For UWTI, when oil falls greater than 33.3% in a year, UWTI will inevitably “outperform” oil given that it cannot fall more than its predicted 100%, which skews the mean underperformances shown in Figure 3 to the upside. However, when sitting on an 80-90% loss, I expect any such “outpeformance” feels rather pyrrhic. Based on this analysis, it is clear that USO outperforms UCO and UWTI and comes the closest to accurately tracking the price of oil. UCO and UWTI have their uses among the day-traders and swingtraders, but should not be used as investment tools as the long-term drawdown is simply too great to justify its use. Sure, should oil double in a year, the 37% underperformance is acceptable given the predicted 300% gain, but if oil is flat on the year–which occurs much more frequently than that edge case–you are sitting on an inexcusable loss. Of the 3 ETFs, USO offers the best risk/reward profile and, in my opinion, is the superior product and the only one that should be considered for long-term investors. So far, I’ve limited this discussion to popular commodity ETFs that are designed to mimic the spot price of oil–so-called “pure oil” ETFs. As discussed, the big drawback of these products is that you CAN’T mimic the spot price of oil, not over the long term. Let’s now consider oil companies themselves. Major producing companies derive a substantial portion–if not all–of their income from oil sales. Therefore their share prices should be closely tied to the price of oil. The advantage of oil stocks over pure oil ETFs, of course, is that they are not subject to the same rollover losses as USO. If it can be determined that oil companies effectively track the price of oil on a day-to-day basis, it can be expected that they would do so over the long-term and not be subject to decay. Rather than analyze individual companies whose stocks are intermittently subject to forces not directly related to the price of oil such as earnings reports, lawsuits, and legislation, let’s instead consider a basket of oil companies to smooth out these events i.e. the oil sector ETFs. The 3 most popular oil sector ETFs are the Energy Select Sector SPDR (NYSEARCA: XLE ), the MarketVectors Oil Services ETF (NYSEARCA: OIH ), and the SPDR S&P Oil & Gas Exploration ETF (NYSEARCA: XOP ). XLE’s diverse holdings include large cap oil companies involved in all aspects of the petroleum industry such as Exxon Mobil (NYSE: XOM ), Chevron (NYSE: CVX ), and Schlumberger (NYSE: SLB ). OIH’s largest holdings, on the other hand, are more focused on oil service companies alone and include SLB, Halluburton (NYSE: HAL ), and Baker Hughes (NYSE: BHI ). Finally, XOP’s largest holdings include major exploration companies such as HollyFrontier (NYSE: HFC ), PBF Energy (NYSE: PBF ), and CVR Energy (NYSEMKT: CVR ). Figure 4 below plots the performance of each versus Oil and USO since 2009. (click to enlarge) Figure 4: Crude oil versus select oil sector ETFs Data source: Yahoo Finance; c hart created by author. Notice that the price of oil tends to form the upper bounds of this chart while USO forms the lower bounds with the 3 oil sector ETFs somewhere in between. Of the 3, XLE seems to be the best, handily outperforming both oil and USO over the 10 year period. This suggests that the oil sector ETFs are superior to USO in their ability to track oil without price-independent losses, as predicted. However, the key concept is correlation. Apple Computer (NASDAQ: AAPL ) has certainly outperformed oil and USO over the past decade as well, but given none of its businesses are related to oil, it has no correlation to the petroleum industry and is not a useful analogue. Correlation can be determined by looking at beta and the R-squared value. Figure 5 below shows a scatterplot between the daily percent change of the price of oil versus USO and XLE. (click to enlarge) Figure 5: Scatterplot comparing the daily percent performance of crude oil versus XLE and crude oil versus USO, showing a tighter correlation between oil and USO Data source: Yahoo Finance; c hart created by author. It can be easily appreciated that oil vs USO (the red dots) forms a tighter linear relationship than oil vs XLE (the blue dots), which is much more diffuse. Further, notice that the slope of the oil vs USO relationship is closer to 1:1 on the x- and y- axes while the oil vs XLE relationship is flatter. This illustrates the twin concepts of correlation and beta, respectively. Correlation is the idea that two entities are related. If entity A moves a certain magnitude, entity B moves a predictable magnitude in response. However, it does not have to be 1:1. For example, for every 10% that A moves, entity B might move 25%. Predictable, but not equal. Correlation is measured by the R-Sq value. In finance, beta is traditionally thought of as a measure of the volatility of a security or portfolio in comparison to the market as a whole. A stock with a beta of 1.0 indicates that a stock’s price movement will mimic that of the market – if the S&P 500 gains 5%, the stock will gain 5%; if the market is flat, the stock will be flat; and if the market falls 5%, the stock will fall 5%. A stock with a beta of 2 is more volatile than the market – a tech stock, for example – and will gain or lose twice that of the S&P 500 or whatever index is used as the benchmark. A beta of 0.5 is comparatively less volatile – a utilities stock, for example – and will gain or lose half of the market’s performance. While the beta is typically applied to compare a stock to a market or index it is a relatively simple calculation and can be used to compare any two equities or funds against each other. Equation 1 below shows the equation used to calculate beta: Equation 1: Beta = Covariance (Daily % Chg stock for which beta is being calculated, Daily % Chg underlying index)/Variance (Daily $ Chg Underlying index) In this case, we will be comparing the price of oil versus each of our ETFs. An ETF with a beta of 1.0 means that the ETF tracks oil on a 1:1 basis on a daily basis. Figure 6 below shows the R-Sq and beta values for USO, XLE, OIH, and XOP compared to oil. (click to enlarge) Figure 6: Betas and R-Sq values for USO, XLE, OIH, and XOP showing USO trumps the 3 oil sector ETFs by a large margin Data source: Yahoo Finance; chart created by author. Again, USO comes out on top in both categories. USO’s R-Squared with oil is 0.81, handily beating XOP which comes in second with an RSQ of 0.57 while its beta is 0.80, crushing XOP’s 0.43. Thus, while all three oil sector ETFs may outperform USO, they do so due to factors not directly related to the price of oil. This article is not about picking good investments. It is about selecting the ETF that best accomplishes a certain objective: to track the price of oil accurately over the short and long term. In conclusion, this analysis of several popular oil ETFs has determined that the United States Oil Fund is the best long-term investment in terms of accurately tracking the price of oil as well as minimizing losses due to futures contract rollover. That is not to say that the other ETFs might not have niche uses. UWTI and UCO are certainly effective trading vehicles for those trying to capitalize on an oversold bounce or socioeconomic-driven event over 3-5 days. Likewise, XOP, XLE, and OIH may be superior to USO for super-long terms investors with a Warren Buffet-like mindset who plan to hold for well-over 2 years and care more about historical performance than accuracy in tracking an underlying commodity. However, for the typical investor who is looking to capitalize on a steady rise in oil prices from a week to 2 years or so, I firmly believe the USO is the most effective trading vehicle to do so.

A Simple SPY Top-Off Portfolio

Summary A one-third UPRO, two-thirds cash portfolio mimics SPY (with some small tracking error and a net 0.32% expense ratio). Putting the two-thirds cash allocation in a short-term bond ETF like BSV allows you to recoup the 0.32% expense ratio, plus earn a little extra. Since UPRO’s inception in 2009, not including trading costs, the UPRO/BSV top-off portfolio has generated a CAGR of 15.3%, compared to SPY’s 14.3%. Going back to 1994, a 3x SPY/short-term bond portfolio has beaten SPY in 21 out of 22 years, with an average 3.1% annual outperformance. For S&P 500 investors, I see little downside to implementing a UPRO/BSV portfolio to consistently beat SPY. Background I’ve written a few articles on combining leveraged ETFs with cash or the underlying index to realize portfolios with certain properties (see for example Build Your Own Leveraged ETF ). There are a few neat things you can accomplish: Achieve any leverage between 0 and the highest multiple leveraged ETF available. Achieve a leverage multiple of an existing ETF by combining cash with a higher multiple leveraged ETF, potentially reducing your net expense ratio. Achieve net leverage of 1 by holding for example one-third of your money in a 3x leveraged ETF, and the remaining two-thirds in cash. The last point leads to the natural question: If I can mimic the SPDR S&P 500 Trust ETF ( SPY) while tying up only 33% of my available balance, why not put the remaining 67% to work in a low-risk fund that generates a few extra percentage points in growth every year? One-Third UPRO, Two-Thirds BSV The ProShares UltraPro S&P 500 ETF (NYSEARCA: UPRO ) is a leveraged ETF that aims to multiply daily S&P 500 gains by a factor of 3. It has an expense ratio of 0.95%. The Vanguard Short-Term Bond ETF (NYSEARCA: BSV ) is a short-term bond fund with an expense ratio of 0.10%. Let’s take a look at how a one-third UPRO, two-thirds BSV portfolio would have performed over these funds’ mutual lifetimes. (click to enlarge) Sure enough we get a nice little top-off with the UPRO/BSV strategy. The compound annual growth rate was 14.3% for SPY, 15.3% for UPRO/BSV rebalanced daily with no fees, and 14.8% for UPRO/BSV rebalanced whenever the effective leverage went below 0.9 or above 1.1 (with a $7 trading fee). Sharpe ratios were 0.058, 0.063, and 0.061, respectively. Of course, the greater your portfolio’s balance, the more your growth would look like the blue curve rather than the red one, since you can rebalance very frequently without trading costs hurting you very much. I know, an extra 1% isn’t that much. But just like a 1% expense ratio can really hurt you over time, a 1% boost every year can really make a big difference. If you go year by year you see that UPRO/BSV tends to tack on an extra 1-2% to SPY’s annual growth, although it doesn’t always. Annual growth of SPY and UPRO/BSV portfolios. Year SPY BSV UPRO/BSV (no fees) UPRO/BSV (fees) 2009 22.3% 2.1% 23.7% 23.4% 2010 13.1% 3.8% 15.5% 14.0% 2011 0.9% 3.0% 2.3% 2.2% 2012 14.2% 1.5% 14.9% 14.2% 2013 29.0% 0.2% 28.3% 28.1% 2014 14.6% 1.4% 14.9% 14.9% 2015 -7.1% 1.4% -6.6% -7.2% One-Third 3x Leveraged ETF, Two-Thirds VBISX We can only look at UPRO/BSV back to 2009, but it’s easy enough to switch UPRO for a hypothetical 3x SPY ETF, and switch BSV for the Vanguard Short-Term Bond Index Fund Investor Shares (MUTF: VBISX ), so we can go back further. For the 3x SPY ETF, we’ll assume no tracking error and a 0.95% annual expense ratio, mimicking UPRO. The correlation between daily gains for the simulated 3x SPY ETF and UPRO since UPRO’s inception is 0.997. The correlation between monthly gains for BSV and VBISX since BSV’s inception is 0.963. Let’s see how one-third 3x SPY, two-thirds VBISX would have performed since 1994. (click to enlarge) The top-off portfolios achieved nearly double the balance of SPY over the 20.5-year period. Sharpe ratios were 0.033 for SPY, 0.043 for 3x SPY/VBISX with no fees, and 0.043 for 3x SPY/VBISX with fees. Of course it is important to note that VBISX has done really well since 1994, with a CAGR of 4.4%. Note that the top-off portfolio with fees beat SPY in 21 out of 22 years (all except 1994), and on average beat SPY by 3.1%. You can see the consistent annual outperformance below. (click to enlarge) Another way to visualize the outperformance of the top-off portfolio relative to SPY: (click to enlarge) A Portfolio Optimization View I came to the one-third 3x SPY, two-thirds short-term bonds portfolio from the perspective of mimicking SPY by combining a 3x leveraged ETF with cash, but then putting the cash to work to gain an extra few percentage points. But you can also view the strategy from a portfolio optimization perspective. A short-term bond fund like BSV has positive alpha simply from the fact that it yields a certain small percentage annually from maturing bonds of various durations. So in periods when SPY is flat, BSV still tends to grow (i.e. it has positive alpha). Indeed if you regress monthly VBISX gains vs. monthly SPY gains going back to 1994, VBISX has alpha of 0.0036 (p < 0.001), meaning it gains on average 0.36% in months when SPY is flat. Typical Stocks/Bonds Story? It is well-known that holding both stocks and bonds tends to improve risk-adjusted returns. But if you hold an S&P 500 index fund in addition to bonds, your net beta drops below 1 and you often sacrifice raw returns. The UPRO/BSV approach is unique in that it keeps beta at 1 (assuming BSV has no correlation with SPY), while increasing both risk-adjusted and raw returns. Something like a free lunch. Upping the Ante A natural extension of the UPRO/BSV top-off strategy is combining UPRO with a longer duration bond fund. For example I like one-third UPRO, two-thirds BND, for a bigger top-off. But BND is much more variable than BSV, and also much more sensitive to rising interest rates. Another way to "up the ante" so to speak is to aim for some leverage greater than 1, say 1.25 or 1.5. You can still combine UPRO with BSV to get some extra growth at any leverage below 3, but the greater your net leverage, the greater your allocation to UPRO has to be, and the less you have left over to grow in BSV. Risks Many investors may not be comfortable with a portfolio that requires a significant allocation to a leveraged fund. Indeed, there are risks associated with leveraged funds. In particular: If SPY ever experiences an intraday loss of one-third its opening price, you could lose the entire balance in the leveraged ETF. While leveraged S&P 500 ETFs like UPRO have historically had very little tracking error, daily gains may occasionally deviate from the target multiple. In between rebalancing periods, you may suffer some irrecoverable losses due to volatility decay. It is important to note that while the top-off strategy uses leveraged ETFs, the target net leverage for the portfolio is 1. In that sense, the portfolio is not prone to the greatly amplified volatility (and potentially catastrophic drawdowns) usually associated with leveraged ETFs. It is very important to understand these issues before implementing the SPY top-off strategy. Indeed, many investors may decide that the potential for slightly higher annual returns does not justify the added risks. I personally believe that the risk/reward for the strategy is favorable. Conclusions A one-third UPRO, two-thirds BSV portfolio should behave very similarly to a 100% SPY portfolio, but often generate an extra 1-4% annual return. You'll have to monitor your effective leverage (multiply your UPRO allocation by 3) and rebalance when it deviates much from 1, but for a reasonably sized portfolio this should not detract much from your extra gains relative to SPY. Of course, you don't have to use UPRO and BSV. Other 3x S&P 500 ETFs and short-term bond funds should perform similarly. And if you want an extra boost, consider pairing the leveraged ETF with an intermediate or long-term bond fund, or a total bond fund. But your annual gains will be more variable, and you may suffer losses as interest rates rise. I am currently implementing the SPY top-off strategy with UPRO and BND, but may switch to UPRO and BSV in the near future for a more consistent, albeit smaller, bonus. Ideally, I'll beat SPY by a little bit every year, and eventually be happy.