Today, March 3rd, 2026

Good morning to some, it's now close to the end of the first quarter of the year. The S&P500 appears to be down amidst escalating tensions with Iran, but sticking to the parameters it doesn't matter what the current (or forecasted) economic climate looks like. As long as the parameters are met (equity risk premium [ERP] >4%, age, and how close we are to our estimated present value of current savings and future retirement savings contributions) we move forward and ignore everything else.

Currently I have $29,746 in my Roth IRA. The last 3 months have been in SPY (unleveraged) since the ERP at the time was <4%. Now according to the latest NYU Damodaran report, it's sitting at 4.38% (https://pages.stern.nyu.edu/\~adamodar/). So based on this, my age, and how far away I am from where I want to be (my estimated present value of current savings and future retirement savings contributions), I will 2x leverage my portfolio.

The difference here is that I've accumulated enough cash where I feel more comfortable using futures at this time. This will make things a lot simplifier than LEAPs as I won't have to worry about the greeks or volatility affecting my leverage. I wouldn't say that I don't need to worry about volatility since my margin requirement might change depending on economic circumstances and the whim of my broker.

The product I'm using is /MESM6, which is the June expiration. It's not the front month, but the bid-ask looks somewhat comparable and I don't want to have to roll in 30 days when the front month expires. I bought 2 contracts of /MES, which puts my total account size ~$66,000. If you divide that number by my portfolio size, then we are sitting around 2.2x leverage. It uses 5K in margin (10K in overnight margin) to hold these two contracts.

For context, this is what should happen when the market goes up or down. Things can change based on the broker's margin requirements. Please see my paper with the google drive link attached for the full summary.

Let’s imagine that you have $100,000, and you put $40,000 on margin as a security deposit to hold /MES contracts, leaving you with $60,000 in free cash. Before the move, your $40,000 deposit controls $200,000 in notional value. This means your product leverage is 5x ($200,000 divided by $40,000 = 5). Your account leverage is 2x, because that $200,000 notional value divided by your total account size of $100,000 = 2. If the S&P 500 goes down 10%, the $200,000 notional value of your contracts goes down by 10% ($20,000), making the new notional value $180,000. Because futures settle in cash, that $20,000 loss gets subtracted directly from your free cash. Your security deposit stays locked at exactly $40,000 because margin is a flat fee per contract. This makes your new total account size $40,000 (margin) + $40,000 (cash) = $80,000. However, after the 10% down move if we do the math, we see two different outcomes: Your product leverage decreases because your exact same $40,000 deposit now controls only $180,000 in value ($180,000 divided by $40,000 = 4.5x). It is important to note that the exchange does not readjust the margin requirement every day to force it back to 5x; your product leverage is allowed to float at 4.5x until the exchange decides market conditions require an adjustment. But your overall account leverage increases, because your new $180,000 notional value divided by your shrinking new account size of $80,000 = 2.25x. Because your total account value shrank faster than the market, your overall account risk increases as the S&P 500 goes down.

Background

• Currently 28 years old

Reasons:

1. Went back up to 2x leverage from 1x leverage.
2. The authors have commented on a question regarding the CAPE ratio being higher than historical average and their calculator recommending 0% invested into stocks by saying that in today's times it would matter more to look at the equity risk premium to determine whether to de-leverage.
   1. In general, when the equity risk premium is <3% this indicates bonds may be a better investment, 4-6% suggests a 60/40 or a 70/30 stock to bond allocation, and >6% suggests potentially having a 100% stock portfolio. You will generally only see >6% during market downturns or recessions.
3. I am 28 years old. At this age per the book, I should still maintain my 2x leverage, given that the equity risk premium is now >4%.

First time buying futures in a Roth IRA. Hopefully my phone calls with IBKR and research have prepared me. That's all for this quarter, see you in June.

— 

Please see below for the current information regarding the trade. Which I will be updating every quarter (every 3 months). 

https://imgur.com/a/63OivFl

Performance:

Initial investment (June 2025): $15,611.64

Current investment: $29,746

Additional Cash added to initial investment so far: $12,347.87

Below, I outline the framework of lifecycle investing and describe how I plan to maintain and adjust this strategy to retirement.

What Is Lifecycle Investing?

Lifecycle investing, by Ayres and Nalebuff, argues that young investors underinvest in stocks because their total lifetime wealth (including future earnings) is much larger than their current savings. Since most young investors have little capital available for investment, but decades of future earnings, they should take on more equity risk early on through either leverage or loans. As you get older and approach your retirement age or if you get closer to your retirement goal, you should gradually reduce risk.

How to do this:

• First estimate total lifetime wealth and calculate your Samuelson Share.
• Use leverage through either margin, leveraged ETFs, futures, or deep-in-the-money LEAPs
• Reduce leverage over time, shifting to an unleveraged equity portfolio then add bonds/real estate and cash as retirement nears.
• Consider figuring out what price you need to restructure your portfolio after every restructure in case you need to do something before the end of the quarter. Essentially, you're looking for the price targets where your leverage exceeds 2.5x or goes below 1.5x

My Roth IRA and Leverage Implementation

Plan

• Quarterly Recalculation:
  • Update my present value of future income and recalculate the Samuelson Share.
  • Compare actual equity exposure to the target and rebalance positions to maintain roughly 2x leverage in my 20s.

1. De-leverage Schedule:
   • Ages 27–30: Maintain 2x leverage.
   • Ages 30–40: Gradually reduce leverage to 1.5x as investments increase.
   • Ages 40-50: Transition to a 1x (unleveraged) total equity allocation.
   • Ages 50–59.5: Begin incorporating bonds/real estate and cash, shifting toward capital preservation as retirement approaches.

Risk Management and Contingencies

• Time decay: I’ll monitor the LEAP’s theta and, if roll-over costs or time decay become excessive, consider swapping into fresh LEAPs or reducing leverage.
  • Not pertinent as of 03/03/2026 since I am now using futures instead of options.
• Market extremes: If the cyclically adjusted P/E (CAPE) ratio spikes above historical thresholds, I may temporarily deleverage to 1x-1.5x rather than fully exit equities. Note I am still considering this since the CAPE ratio has technically been above historical thresholds for a long time. I might just reduce to 1.5x leverage max but my age and progress towards my retirement goal will take precedence. 
  • Switching to looking at Equity Risk Premium after seeing a discussion on bogleheads with the authors.
    • https://www.bogleheads.org/forum/viewtopic.php?p=5644769#p5644769
• Rebalancing frequency: I plan to rebalance quarterly if my leverage deviates by more than 0.5x from its initial goal.

Summary

I’m leveraging my Roth IRA with futures positions for 2x equity exposure, in line with lifecycle investing principles for a 28-year-old. Annual recalculations of total lifetime wealth and the Samuelson Share will guide my leverage adjustments. Over the next decade, I’ll taper leverage and ultimately introduce bonds as retirement nears. Theoretically speaking, over at least 30 years I should see higher expected returns relative to buying and holding S&P500 while systematically reducing my risk during the years close to retirement by shifting it onto my younger years.

Extensive Summary

I created a google doc for those who are interested to read my full summary on evaluating and implementing this strategy that I will share for free: https://docs.google.com/document/d/1aC6q68xWeE9INiHoYlBDnQjpjJF3B17t/edit?usp=sharing&ouid=106910602602763266465&rtpof=true&sd=true