In this ETF Battle, Kreinces explains that Long-term Treasuries (TLT), and the 3x leveraged version (TMF), have repeatedly delivered critical portfolio protection when it was needed most.
Video: ETF Battles – TLT vs. BND
Watch David Kreinces, CIO of ETF PM, appear on ETF Battles with Ron Delegge at ETFguide and Mike Akins at ETF Action.
Over the trailing 10-years through mid-July 2020, Long-term Treasuries returned 117%, or 8% annualized, which was more than double the Total Bond Market (BND) return of 44%, or 4% annualized. However, the most impressive bond ETF performance was delivered by Long-term Treasuries 3x (TMF) which returned 310%, or 15% annualized.
While the annualized return of TMF was less than 2x the return of the unleveraged TLT, the 10-year total return of TMF was 2.6x greater due to the magic of compounding. This means that leveraged ETFs do not need to deliver their full target annual return multiple in order to be useful products at times. At ETF PM, we believe that using moderate leverage on strategically balanced indexes, as shown in the investable benchmarks, will prove to be far more effective long-term than employing old-fashioned unleveraged portfolio diversification.
Harry Markowitz explained that “diversification is a free lunch” and the investable benchmarks show that leveraged diversification can produce a carton of extra retirement nest eggs. Read more about these revolutionary core portfolios in our new book: “Investable Benchmarks: A Guide to ETFs, Technology, and Leverage.”
Given the extraordinary opportunity for investors in certain leading leveraged ETFs, we are now calling TQQQ the “American Dream ETF!” Binge-watch all of ETF PM’s appearances on ETF Battles and let us know which ETFs you want to see in the next episode!