**Recommended for:** Capital preservation, liquidity and for investors close to or in retirement.

The Conservative Portfolio is appropriate for an investor with a low risk tolerance or a need to make withdrawals over the next 1 to 3 years. Conservative investors are willing to accept lower returns in exchange for lower account drawdowns in periods of market volatility.

To be compatible with most retirement plans, this Portfolio does not include our Maximum Yield Strategy and leveraged Universal Investment Strategy. If you are using a more flexible account you can choose from our unconstrained portfolios in the Portfolio Library.

We offer a portfolio version for 401k plans which do not allow individual stocks - this is set with a moderate risk level, but actually results in a volatility which might also be acceptable for those looking for a conservative set. See details here.

While this portfolio provides an optimized asset allocation based on historical returns, your investment objectives, risk profile and personal experience are important factors when deciding on the best investment vehicle for yourself. You can also use the Portfolio Builder or Portfolio Optimizer to construct your own personalized portfolio.

Assets and weight constraints used in the optimizer process:

- Bond ETF Rotation Strategy (BRS) (0% to 40%)
- BUG Permanent Portfolio Strategy (BUG) (0% to 40%)
- Global Market Rotation Strategy (GMRS) (0% to 40%)
- Global Sector Rotation Strategy (GSRS) (0% to 40%)
- Hedge Strategy (HEDGE) (0% to 40%)
- Short Term Bond Strategy (STBS) (0% to 50%)
- Universal Investment Strategy (UIS) (0% to 40%)
- US Market Strategy (USMarket) (0% to 40%)
- US Sector Rotation Strategy (USSECT) (0% to 40%)
- World Top 4 Strategy (WTOP4) (0% to 40%)

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Which means for our asset as example:- Looking at the total return of 57.7% in the last 5 years of Conservative Risk Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (110.8%)
- Compared with SPY (50.8%) in the period of the last 3 years, the total return, or performance of 24.1% is lower, thus worse.

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:- Looking at the annual performance (CAGR) of 9.5% in the last 5 years of Conservative Risk Portfolio, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (16.1%)
- Looking at compounded annual growth rate (CAGR) in of 7.5% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (14.7%).

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (18.7%) in the period of the last 5 years, the historical 30 days volatility of 6.3% of Conservative Risk Portfolio is smaller, thus better.
- Looking at volatility in of 7.3% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (22.7%).

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Using this definition on our asset we see for example:- Looking at the downside risk of 4.7% in the last 5 years of Conservative Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.6%)
- During the last 3 years, the downside deviation is 5.6%, which is lower, thus better than the value of 16.5% from the benchmark.

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Using this definition on our asset we see for example:- The Sharpe Ratio over 5 years of Conservative Risk Portfolio is 1.12, which is greater, thus better compared to the benchmark SPY (0.73) in the same period.
- Looking at Sharpe Ratio in of 0.68 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.54).

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Applying this definition to our asset in some examples:- Looking at the excess return divided by the downside deviation of 1.49 in the last 5 years of Conservative Risk Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (1)
- Looking at downside risk / excess return profile in of 0.89 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.74).

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (5.58 ) in the period of the last 5 years, the Downside risk index of 1.93 of Conservative Risk Portfolio is lower, thus better.
- During the last 3 years, the Ulcer Index is 2.33 , which is smaller, thus better than the value of 6.91 from the benchmark.

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Applying this definition to our asset in some examples:- Looking at the maximum drop from peak to valley of -15.3 days in the last 5 years of Conservative Risk Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (-33.7 days)
- Looking at maximum reduction from previous high in of -15.3 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (-33.7 days).

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Using this definition on our asset we see for example:- Looking at the maximum days below previous high of 140 days in the last 5 years of Conservative Risk Portfolio, we see it is relatively larger, thus worse in comparison to the benchmark SPY (139 days)
- Compared with SPY (139 days) in the period of the last 3 years, the maximum days below previous high of 114 days is lower, thus better.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (33 days) in the period of the last 5 years, the average time in days below previous high water mark of 33 days of Conservative Risk Portfolio is higher, thus worse.
- Compared with SPY (36 days) in the period of the last 3 years, the average time in days below previous high water mark of 29 days is lower, thus better.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Conservative Risk Portfolio are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.