Building a Strategic Portfolio System as a New Parent

When we had Flynn, I started to feel like I needed to build something that would last and that would also do well. We needed to build for the future, for a better tomorrow. So I went on a mission to find a good portfolio strategy that would be lower risk but also leveraged enough to produce real returns.

When Flynn Arrived

I'd been playing around with a strategy called "hedgefundie"¹ in my Alpha portfolio for a while. It's a 55% UPRO (3x leveraged S&P 500) and 45% TMF (3x leveraged long-term treasuries) portfolio. The idea is that stocks and bonds are negatively correlated, so when one goes down the other goes up, and by leveraging both you get high returns with some built-in hedging.

But when I really dug into the backtesting², I realized it didn't make it through the interest rate lowering environment very well. When rates dropped, those leveraged treasuries got crushed. I needed a different approach.

Scattered Portfolios, One Strategy

As I was researching alternatives, I realized I wasn't just managing one portfolio. Inwu and I had money scattered across multiple accounts: my Alpha trading account, our Nicola portfolios through CI Direct, some international exposure, cash sitting around. I'd been thinking about each one separately, but that's not actually how risk works. If I wanted to build the right overall profile, I needed to think about all of them holistically.

The CI Direct Nicola account was our safety net. It's been producing safe, uncorrelated returns for a long time, and I didn't want to mess with that. But in the Alpha portfolio, I could take more concentrated risks if I knew the rest of our money was stable. If I could figure out the right allocation across all the portfolios, I could get the risk-adjusted returns I wanted without having to actively trade or manage things constantly.

We had scattered portfolios and things I'd worked on individually, but we never created a holistic system until now.

Months of Backtesting

I spent months backtesting different approaches. Most of this happened while Flynn was sleeping or playing with Inwu. I'd be running simulations in Excel, testing different leverage ratios, looking at historical drawdowns.

One of the things I discovered was that Bitcoin and gold add a layer of interest rate insensitivity that treasuries don't. Gold especially seemed to be what we needed, with bonds taking a back seat on leverage and filling out the portfolio in other places. This was a breakthrough. Instead of relying on the traditional stock-bond correlation that hedgefundie uses, I could build something more robust to different interest rate environments.

Building for Automation

One of my core ideas was that I wanted to make this passive. I wanted to spend more time with Flynn and Inwu, not glued to a screen managing trades. This ties into my whole automation philosophy: put in a lot of upfront effort, build the system right, and then let it run.

Obviously I'll come back to review it, but I want to let this thing compound for years without constant tinkering. The system needed to be rules-based, systematic, and automated enough that the math tells me what to do rather than relying on gut feelings or market timing.

What I Built

After all that research, I landed on a four-portfolio system that works together holistically:

• Alpha Investing Core (30%): My passive leveraged strategy using UPRO, gold, Bitcoin, and some bonds
• Nicola Core (40%): Conservative, diversified portfolios through CI Direct
• World Custom (20%): International and alternative exposure
• Cash (10%): Emergency fund and liquidity

The idea is that I can take concentrated risks in the Alpha portfolio (30%) while keeping the majority of our wealth (70%) in more stable, diversified holdings. The whole portfolio uses about 1.2x leverage: aggressive enough to boost returns, conservative enough to sleep at night.

I built an Excel spreadsheet that handles monthly rebalancing automatically. It tells me where to contribute new money based on which portfolio is most underweight. The system buys low and sells high without me having to think about it.

For the detailed breakdown of allocations, exposures, and the rebalancing mechanics, I wrote a separate technical post: My Leveraged Multi-Portfolio Strategy Breakdown.

Being Honest About the Risks

I should be honest about the risks. When I ran backtests on the Alpha portfolio with its leverage and concentrated alternative bets, I saw significant drawdowns in historical stress scenarios, with 40%+ declines in bad markets. If that were my entire portfolio, I'd never sleep. But it's only 30% of our total allocation, and when you look at the whole portfolio, those drawdowns get substantially muted.

I'm a bit nervous about the leverage, I'll admit. But I'm willing to take the risks given how it all balances out on a grander scale across the portfolios. We have decades for this to compound. We both have stable incomes. We can weather drawdowns without panicking. And honestly, I can tolerate volatility in the Alpha portfolio because I know the full portfolio is balanced. Inwu can feel secure knowing 70% of our wealth is in traditional, diversified holdings.

Obviously my risk profile is higher than most, so note that too. Using 3x leveraged ETFs means you can lose money fast in volatile markets. You need a strong stomach for drawdowns, a long time horizon, an emergency fund outside the portfolio, and the willingness to stick with the strategy through pain.

What This Means

Becoming a father changed my relationship with money. I stopped thinking about investing as an intellectual exercise and started thinking about it as a responsibility, a long-term plan that needs to work through decades of market cycles, life changes, and unknowns.

I feel extremely proud of this work that I was able to do while learning and taking care of Flynn. I did most of this in the times when he was sleeping and when he was playing with Inwu. The urgency of new parenthood gave me the push to build this. The discipline of systematic rebalancing will let it compound over time. And the balance between aggressive and conservative allocations lets me sleep at night.

This multi-portfolio strategy isn't perfect. No strategy is. But it's thoughtful, backtested, balanced, and automated enough that I can focus on what actually matters: being present for Flynn while knowing our financial future is on solid ground.

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This is not financial advice. This is my personal strategy based on my specific situation, risk tolerance, and time horizon. Your situation is different. Do your own research, understand the risks, and consider working with a financial advisor.

If you're thinking about portfolio construction across multiple accounts, I'm happy to discuss approaches. Just know that leverage magnifies both gains and losses, so proceed with caution.

Footnotes

1. Hedgefundie's Excellent Adventure - A detailed explanation of the original UPRO/TMF leveraged portfolio strategy ↩

2. I use Portfolio Visualizer for backtesting portfolio strategies and analyzing historical performance ↩