Episode 396: We're Talkin' Futures, Backtesting Considerations, And That Big Mo (Again)

Jan 22, 2025

Dive into the world of futures trading and leveraged ETFs, where complexities abound and strategies are debated. Discover how to roll over futures contracts and navigate concepts like backwardation and contango. Explore the balance of risk and reward with modern portfolio theory versus traditional strategies. Engage in lively discussions sparked by listener inquiries, and gain insights into the significance of historical data for smarter investing. Plus, a lighthearted mention of dental health reminds us of the importance of looking after ourselves while we invest.

Ask episode

AI Snips

Chapters

Transcript

Episode notes

ADVICE

Futures Trading Platform

Consider Interactive Brokers for futures trading, as Fidelity isn't ideal.
Explore futures with a small account before fully committing, due to the complexity.

ADVICE

Portfolio Evaluation

Evaluate portfolios using multiple calculators and time series for robust analysis.
Look for consistent outperformance across various scenarios and data sets.

ANECDOTE

Hedge Fund Strategies

Frank discusses how hedge funds use leveraged risk parity portfolios.
He contrasts these with simpler leveraged S&P portfolios for individual investors.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

In this episode we answer emails from Lucas, Martijn, and Alexi (a/k/a "the Dude"). We discuss futures contracts and the efforts required to use them, being careful about backtests and interpreting them, and more musings on Big Mo momentum.

Links:

Father McKenna Center Donation Page: Donate - Father McKenna Center

Martijn's Link: testfol.io/?s=aoTgPMqhGQA

Portfolio Matrix (Start Date Sensitivity): Portfolio Matrix – Portfolio Charts

The Dude's First Link: Asset Correlations

The Dude's Second Link: testfol.io/?s=aKrdp1uCnEu

The Dude's Third Link: testfol.io/?s=kUK5djVum0A

Amusing Unedited AI-Bot Summary:

Unlock the secrets of futures trading and leveraged ETFs as we tackle complex investment strategies, inspired by a thought-provoking listener email from Lucas. Discover how you can master the intricacies of futures contracts, from rolling them over to navigating market conditions like backwardation and contango, without getting overwhelmed. Learn why leveraged ETFs were created to simplify leverage acquisition, and get insider recommendations on the best platforms to embark on futures trading. Martain, another keen listener, challenges us with a debate on straightforward 1.5 times equities strategy versus modern portfolio theory, leading to a rich discussion on investment approaches.

Venture further into the world of leveraged risk parity portfolios and how hedge funds are using them to optimize risk-reward profiles during the accumulation phase. Comparing these advanced strategies to more straightforward leveraged S&P portfolios, we emphasize the essential role of historical data in shaping robust investment decisions. Be wary of the allure of short-term gains as we dissect the role of momentum funds in risk parity portfolios and the significance of diversification in securing stable outcomes. Through listener insights and expert analysis, this episode is a treasure trove for anyone seeking to broaden their understanding of strategic investing.

Support the show