Researchers tend to find that over long periods of time, investors drastically underperform markets.

Over a 20-year period that was analyzed, researchers found that the average investor earned only three point six percent annualized. Meanwhile, balanced funds ranged from 6 to 7% on average, and the stock market an annualized return of 9.5%.

 Over long periods of time, that leads to drastically different results. And I don’t think that that is the ceiling of what is actually possible.

I’m Charles Tines. I’m the founder of Tines Capital. I’m a former engineer turned asset manager,  and my goal is simple. Make your money work as hard as possible for you

 So why is there this big gap between what markets tend to offer and what investors actually get? One is investors often remain too conservative,  too heavily invested in cash, not willing to take risks in bonds or stocks. Two, when investors are willing to take risks, they often buy in and sell out based upon fear and emotions and try to time the market.

 Three, investors also tend to pay  way too much in fees for things that  they do not need,  such as managers that are trying to pick individual stocks.  So the classic advice of be patient, consistent, buy, hold, keep your costs low, these are fantastic pieces of advice that if you get nothing else out of this video, I hope you really take that to heart 

But what I use goes even further. Look at this three times leveraged fund of the S&P 500 compared to the regular S&P 500.

 It grew a massive amount more than the regular stock market.  This is a real fund that existed starting around 2010.  But unfortunately, most of these types of funds that add a three times daily multiplier did not begin to exist until after the 2008 financial crisis and other previous big crises. Since periods like that were never covered by these types of funds in real life,  that’s why I’ve recreated them in synthetic versions to simulate what something like that might have done in the past

 When we look at that on a log scale, we can really  see how risky these funds are and how important it is that if you’re gonna use them, you know what you’re doing. Because these funds, if they existed, likely would have had a 20 year timeframe of negative returns.  They would have had a drop of over ninety-five percent in value, which is not something that any reasonable investor is gonna be able to stick through because it is way too intense.  But all’s not lost, and I think these are still powerful tools.

I believe there are ways to capture most of the upside while reducing some of the negative effects that these funds have. These types of funds have a lot of risk because of the leverage that’s inherent to them, the leverage decay, but fortunately, they never require me, the investor, or you, the investor, to actually take out a loan to hold them. And I think we can improve the returns quite significantly by doing a few things. For example,  this is the same back-tested simulation,  but this time it actually has a 200 day average price filter,  meaning that it looks at what the current price of the fund is, it compares it to the average price for the last two hundred days,  and if it is below that price, then we’re gonna reduce our holding to just one-third the typical size.

Here’s another simulation where instead of doing just three times stocks, fifty percent is allocated to three times stocks, and fifty percent is allocated to three times bonds with regular rebalancing.  

But when you start taking these things and combining them together, I think you can make really powerful portfolios that mix well with your existing 401(k)’s, real estate holdings. And you can use these in retirement accounts such as Roth IRAs and traditional IRAs, which can help shield these from the huge tax drags that you might have otherwise.  

if you are interested in seeing how things like this may work for you, I encourage you to reach out to us at TinesCapital.com give us a like, subscribe, and share this video with somebody that you think might be interested.

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