This portfolio has been optimized for achieving the highest possible return while limiting the maximum Drawdown, that is the highest drop from peak to valley over the analyzed period, to 15%. As a reference, the maximum experienced drawdown of the iShares 20+ Year Treasury Bond ETF (TLT) over the same period has been 27%, while the SPDR S&P 500 (SPY) experienced a drop of 55%.

As such it is a aggressive Portfolio suited for investors with a higher risk tolerance and aggressive growth expectations.

Please note that the Maximum DrawDown refers to a single event, for analyzing the risk of losses you should also consider other related metrics like the maximum and average duration and the Ulcer Ratio. A more reliable measure for the downside risk of an asset over a period of time is the Downside Deviation or Volatility.

Please note that this portfolio might use leveraged ETF and single stocks. Should these not be allowed in your retirement account please see our 401k and IRS compatible Conservative, Moderate, and Aggressive Risk Portfolios. Contact us for special requirements.

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 100%)
- BUG Permanent Portfolio Strategy (BUG) (0% to 100%)
- Global Market Rotation Strategy (GMRS) (0% to 100%)
- Global Sector Rotation Strategy (GSRS) (0% to 100%)
- Maximum Yield Strategy (MYRS) (0% to 100%)
- Short Term Bond Strategy (STBS) (0% to 100%)
- Universal Investment Strategy (UIS) (0% to 100%)
- Universal Investment Strategy 2x Leverage (UISx2) (0% to 100%)
- US Market Strategy (USMarket) (0% to 100%)
- US Market Strategy 2x Leverage (USMx2) (0% to 100%)
- US Sector Rotation Strategy (USSECT) (0% to 100%)
- World Top 4 Strategy (WTOP4) (0% to 100%)

'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:- Compared with the benchmark SPY (67.8%) in the period of the last 5 years, the total return, or performance of 61.2% of Max Drawdown less than 15% is smaller, thus worse.
- Looking at total return in of 33.9% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (44.5%).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (10.9%) in the period of the last 5 years, the annual return (CAGR) of 10% of Max Drawdown less than 15% is smaller, thus worse.
- Looking at annual return (CAGR) in of 10.2% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (13.1%).

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Applying this definition to our asset in some examples:- The historical 30 days volatility over 5 years of Max Drawdown less than 15% is 7.6%, which is lower, thus better compared to the benchmark SPY (21.4%) in the same period.
- Compared with SPY (18.8%) in the period of the last 3 years, the volatility of 7.3% is smaller, thus better.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:- Looking at the downside risk of 5.5% in the last 5 years of Max Drawdown less than 15%, we see it is relatively lower, thus better in comparison to the benchmark SPY (15.4%)
- Compared with SPY (13.3%) in the period of the last 3 years, the downside volatility of 5.2% is lower, thus better.

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Which means for our asset as example:- Compared with the benchmark SPY (0.39) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.99 of Max Drawdown less than 15% is larger, thus better.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 1.06, which is greater, thus better than the value of 0.56 from the benchmark.

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Applying this definition to our asset in some examples:- Looking at the excess return divided by the downside deviation of 1.38 in the last 5 years of Max Drawdown less than 15%, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.55)
- During the last 3 years, the downside risk / excess return profile is 1.49, which is greater, thus better than the value of 0.79 from the benchmark.

'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 (9.46 ) in the period of the last 5 years, the Downside risk index of 2.43 of Max Drawdown less than 15% is lower, thus better.
- Compared with SPY (10 ) in the period of the last 3 years, the Downside risk index of 2.53 is lower, thus better.

'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.'

Which means for our asset as example:- Looking at the maximum drop from peak to valley of -13.5 days in the last 5 years of Max Drawdown less than 15%, we see it is relatively larger, thus better in comparison to the benchmark SPY (-33.7 days)
- During the last 3 years, the maximum DrawDown is -8.1 days, which is larger, thus better than the value of -24.5 days from the benchmark.

'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'

Which means for our asset as example:- Looking at the maximum time in days below previous high water mark of 196 days in the last 5 years of Max Drawdown less than 15%, we see it is relatively lower, thus better in comparison to the benchmark SPY (352 days)
- Compared with SPY (352 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 196 days is smaller, 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.'

Using this definition on our asset we see for example:- The average days below previous high over 5 years of Max Drawdown less than 15% is 34 days, which is lower, thus better compared to the benchmark SPY (78 days) in the same period.
- During the last 3 years, the average time in days below previous high water mark is 39 days, which is lower, thus better than the value of 102 days from the benchmark.

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 Max Drawdown less than 15% 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.