I generally recommend the [Bogleheads](https://www.bogleheads.org/wiki/Main_Page) theory of investing. This involves investing in a few ETFs or mutual funds as a diversified portfolio. For example, a [3 fund portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio). I use [Schwab funds](https://www.bogleheads.org/wiki/Charles_Schwab), but any with low expense ratios will suffice. This is a set and forget strategy that requires very little work.

An important piece is figuring out your [asset allocation](https://www.bogleheads.org/wiki/Asset_allocation) for each fund. The simplest setup is just use a [target date fund](https://www.bogleheads.org/wiki/Target_date_funds), picking your expected retirement year. [SWYGX](https://www.schwabassetmanagement.com/resource/swygx-fact-sheet) is one such Schwab fund with a target retirement date of 2040.

TDFs follow a [glide path](https://www.bogleheads.org/wiki/Glide_paths) that generally invests in stocks when you are young (higher risk), and moves towards bonds as you get older (less risk). You can push the target year later than your normal retirement year if you are comfortable with more risk for a longer time.

Target date funds are not a good idea for a taxable brokerage account. They are mainly only good for a 401k or IRA accounts for tax reasons. See [this thread](https://www.bogleheads.org/forum/viewtopic.php?t=408592) and [this SEC filing](https://www.sec.gov/newsroom/press-releases/2025-21) for why.

This brings up an important question: are there TDF-like funds that can be used in a taxable account? Yes, [iShares](https://www.ishares.com/us/strategies/what-is-a-target-date-fund) has some. [This reddit thread](https://www.reddit.com/r/Bogleheads/comments/1jc8h03/why_vanguard_does_not_offer_a_single_etf_that/) has some good pointers.

Though the above combination of stocks and bonds is perfectly reasonable, I like to diversify further into a few other categories. Mainly I add the following, either in ETFs, futures, or physical assets where applicable:

| Category | ETFs | Futures | Physical |

When trading options, liquidity matters, and Schwab ETFs do not have much option liquidity. For such cases, I might use different ETFs or futures to represent the same category. For example:

| International Developed | SCHF, VEA, SWISX | /MFS ([MXEA](https://www.ice.com/products/31196848/MSCI-EAFE-Index-Future)) |

Here is an example of my allocation as of June 2025:

Banks are going to give you complete shit return for holding your cash. A HYSA will give you better return, but sometimes suffer from bad checking account features. For example, Wealthfront has very bad check-writing abilities.

Most brokerages are also not going to give you much for your cash. Excess cash in your brokerage should be put into a money market fund. For example, at Schwab you can use [SWVXX](https://www.schwabassetmanagement.com/products/swvxx). The key point is many brokerages won't automatically sweep to this for you, so it requires you to do trades. Fidelity has better auto-sweep services. You can find good money market funds at [Yieldfinder](https://yieldfinder.app/money_markets).

If you don't do this yourself, your brokerage will love your idle cash sitting around which they will use to invest and earn them, and not you, money. Every bank, brokerage, and fund wants to hold your money, pay you very little interest, and then go make money off of your money.

I generally hold very little cash because inflation quickly eats into its value. I'd rather put that money to better use. This brings me to the next point: putting capital to its best use.

One of the most important things I've come to realize is that you have to make efficient use of your capital. Tom Sosnoff and Tastytrade have some good videos on this:

1. 50 shares of SPY @ $590. This might cost $30k, give you $30k exposure in SPY, and provide no leverage.

In all cases but the first, you are paying less to have a higher exposure in the same market. Each has a different risk profile. In all cases you can lose money.

A fundamental question is how much leverage you want to use. Brokerages make it all too easy to over-leverage. I usually use a leverage ratio between 1.3 - 1.5. For example, if I have $100k cash, I may use that to invest a notional value of $130k in a diversified portfolio.

People use leverage all of the time for home loans, and it is not unheard of to use a 80% loan to value ratio for a mortgage, or a leverage ratio of 5. For a $500k home, you might put up $100k cash and take a $400k loan. You would likely do this at a reasonable interest rate, and your hope is the value of the home goes up faster than your interest charges. Your home value could fall, leaving you with a mortgage that is underwater, i.e. you owe more than the home is actually worth. All of this can apply to investing as well.

Books:

- Futures notional exposure

- Cash

The denominator should include the market value of the option contract itself.

When you have stocks, brokers will let you take a margin loan of at least 50% or more of your equity value. This gives you at least 1.5 leverage, at the cost of margin loan interest, which is usually terrible at most brokerages. For example, Schwab will charge you 13% interest as of today (June 2025). If you cannot make more than 13% on the investments you do with leverage, you won't even break even. Interactive Brokers will give you a much better rate, for example 5%. This is an easier number to beat on investment return.

One way to reduce interest charges is using a forex margin loan (sometimes called a carry trade). Your broker may have a much lower interest rate for borrowing in another currency like CHF. Say that is 1.5%. You can take a CHF loan, convert that to USD, and use the funds to invest in US stocks. However, you must now beat both the 1.5% margin interest as well as any forex rate changes. You also have to keep in mind the cost of conversion, which is more favorable to larger sums. For stable currencies like CHF, I've had good results for multi-year timeframes. However, if there is a big drop in USD value to the foreign currency, your loan repayment can be much bigger than you expected. Many people have done this with JPY due to its low interest rate.

You can use forex futures to lock in an interest rate for the loan. For example, buying a /6S future will offset any currency fluctuation with CHF. However, this adds some complexity.

A box spread is another way to take a loan, except it is not from your broker, but from the options market. This essentially gives you the best borrowing rate that your broker will never beat, but you will need to trade options which can be quite complicated if you are new to them. [This blog post](https://thefinancebuff.com/short-box-spread-vs-margin-loan-fidelity.html) describes the process. I created [this video](https://www.youtube.com/watch?v=mSmY9HNzeAo) and [slides](https://docs.google.com/presentation/d/1-CDrMKt7snfninR7kycAI7HIv2nGCyVBD-ozjVqwVUc/edit?slide=id.p#slide=id.p) going into the mechanics.

Options and futures can be used for their inherent leverage. There are many strategies to trade these, however this only focuses on their use as leverage.

Forum threads:

This gives me a notional exposure of $30k in the S&P 500 with a deposit of $2500. The $2500 is only the bare minimum, and it is usually advised to keep 2-5x of cash to handle downswings (see [Futures vs equities margin](#futures-vs-equities-margin)). So I set aside $10k as a safe amount of cash for this contract. That means I get a notional exposure of $30k at the cost of $10k. That is 3x leverage.

- [The Hidden Logic of Options | Put-Call Parity Explained with Legos](https://youtu.be/vYPulKD58fA?si=MnaT62VW2FJisOIN)

Futures margin is confusingly not the same as equities margin. When you buy or sell a futures contract, it costs nothing other than the commission. Instead, you put up in cash a good faith deposit. which is called its margin requirement. Every day, depending on whether the position moves for or against you, it is marked to market and funds are either deducted or added to your deposit. You get that deposit back, along with any profit or loss, when the contract closes.

Importantly, a futures contract requires actual cash. This is same for buying or selling a contract. The broker will let you borrow that cash from your equities account via a margin loan. This is different from an options trade which might only use your buying power and not require any cash or loan at all.

Explanation from a Schwab rep:

Forum threads:

- [Trading Futures, Should I Use All Cash Balance to Buy a Money Market Fund?](https://www.bogleheads.org/forum/viewtopic.php?t=201254)

The /10Y futures represents the current 10-year treasury yield. From what I understand about bonds, if the current yield is rising, it means newer bonds are worth more than older bonds. i.e. the return on newly issued bonds are greater than older issued bonds. The inverse should also be true.

ETFs like BND contain a mix of different types of bonds, but should be mostly older issued bonds. So what we should see is an inverse correlation of the /10Y future with the BND price. This indeed looks true based on a graph of BND with /10Y: