Staying fully invested with leverage for the whole 2021 was the best thing to do
Here we are, getting close to the end of a remarkable 2021 trading year.
I am anticipating some comments about this year and I will just change the numbers of this article after markets close on 31st.
There have been many ups and downs, but we can’t deny the amazing year the markets themselves h
ave made, with S&P500 +27% and Nasdaq Composite +23%.
What was the best option for Long Term investors - as we are - but TO STAY INVESTED all this time?
That’s exactly what HST model has suggested: with the only exception of one trading day (Feb-24th) that we spent going cash, HST model jumped from Aggressive Long to Moderate Long, building up an amazing return for the leveraged variant (+65.0% in theoretical application, but even better +79.7% if investors have played it with real ETFs as $TQQQ / $UPRO).
Ok, maybe you think it was easy to achieve such returns, using leverage in a good year for markets as 2021... but was it really that simple, without knowing the future day by day?
Not at all!
Example 1: there are many other models or strategies out there, pushing investors to catch every top and dip made by the indexes, even in years when Buy&Hold is the best option. Can you draw a line after a year and say if they have been really good at catching all tops and dips or - as I see so many times - if they were simply exiting lower and re-entering higher?
Example 2: what happens when a bear market arrives? Buying&Holding a leveraged ETF would destroy your capital. Did you know that 2021 would have been so good, with no bear markets, in advance?
HST model is at its third year of application with real money and during 2019, 2020 and 2021 it gave amazing returns.
But it has also been backtested on the hardest bear markets, long and short depressions, bubbles of any kind, countless political crisis.. still giving an AVERAGE annual return of 56% for 51 years.
For 51 consecutive years, an average of +56% ...compound...
Keep in mind, there are no guarantees, HST is taking high risks, especially when using leverage.
But it is undoubtably a model which can give great guidance to sail on financial markets with any kind of weather.
Predictions for 2022
I will do none: US economy is in great shape and no recession is in sight, but stock prices are so overstretched that a correction is possible at any moment, without changing the big picture of a healthy economy.
So we could see markets drop 10-15% in few days leaving no scars on the long term returns of “Corporate America”.
HST model will mostly ignore these movements (causing annoying and yet predictable drawdowns), and will intervene and push investors to cash only when the mood has really changed and we are going towards a recession, a bear market, or a significant correction.
That’s the way HST makes money in the long term.
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