The "common man" version of a leveraged Risk Parity portolio (40% stocks and 60% long term bond, Quarterly Rebalanced) can now be easily implemented using the 3X leveraged ETF's (UPRO=stocks, TMF=bonds).
The last ~10 years of performance seems to have benefited from:
- A period of rising stock and bond prices
- A period of negative correlation of daily stock/bond returns
- A period of friendly volatility regime that didn't affect the returns of the daily 3x leveraged ETF's
Given that the predictions of doom for long term holders of leveraged ETF's didn't pan out, naive investors might extrapolate the last 10 years of this particular implementation into the future.....
QUESTION: How can we properly test and asses the likelihood of future long term success of this portfolio?