This portfolio has been optimized to provide the highest Sharpe Ratio, which is a metric that compares the amount of return versus the amount of risk, based on historical data. Return is based on CAGR and risk is based on volatility. The portfolio is well suited for risk adverse investors with moderate growth expectations.

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%)
- 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 is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investmentâ€™s overall performance.'

Which means for our asset as example:- The total return, or performance over 5 years of Max Sharpe Portfolio is 95.1%, which is larger, thus better compared to the benchmark SPY (94.9%) in the same period.
- During the last 3 years, the total return, or increase in value is 36.8%, which is greater, thus better than the value of 22.5% from the benchmark.

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (14.3%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 14.3% of Max Sharpe Portfolio is higher, thus better.
- During the last 3 years, the annual performance (CAGR) is 11%, which is higher, thus better than the value of 7% from the benchmark.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Applying this definition to our asset in some examples:- The historical 30 days volatility over 5 years of Max Sharpe Portfolio is 11.9%, which is lower, thus better compared to the benchmark SPY (20.9%) in the same period.
- Looking at 30 days standard deviation in of 10.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (17.5%).

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

Using this definition on our asset we see for example:- The downside risk over 5 years of Max Sharpe Portfolio is 8.7%, which is lower, thus better compared to the benchmark SPY (15%) in the same period.
- During the last 3 years, the downside risk is 7.6%, which is lower, thus better than the value of 12.3% from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (0.56) in the period of the last 5 years, the Sharpe Ratio of 0.99 of Max Sharpe Portfolio is greater, thus better.
- Looking at Sharpe Ratio in of 0.81 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (0.26).

'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:- The excess return divided by the downside deviation over 5 years of Max Sharpe Portfolio is 1.36, which is greater, thus better compared to the benchmark SPY (0.79) in the same period.
- Compared with SPY (0.37) in the period of the last 3 years, the excess return divided by the downside deviation of 1.13 is higher, thus better.

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Using this definition on our asset we see for example:- The Ulcer Ratio over 5 years of Max Sharpe Portfolio is 3.24 , which is smaller, thus better compared to the benchmark SPY (9.32 ) in the same period.
- Compared with SPY (10 ) in the period of the last 3 years, the Downside risk index of 3.13 is lower, thus better.

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Using this definition on our asset we see for example:- The maximum drop from peak to valley over 5 years of Max Sharpe Portfolio is -18.2 days, which is greater, thus better compared to the benchmark SPY (-33.7 days) in the same period.
- During the last 3 years, the maximum reduction from previous high is -10.7 days, which is higher, 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) in days.'

Which means for our asset as example:- Looking at the maximum days under water of 159 days in the last 5 years of Max Sharpe Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (488 days)
- During the last 3 years, the maximum time in days below previous high water mark is 159 days, which is lower, thus better than the value of 488 days from the benchmark.

'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 Sharpe Portfolio is 30 days, which is lower, thus better compared to the benchmark SPY (123 days) in the same period.
- During the last 3 years, the average days under water is 33 days, which is lower, thus better than the value of 179 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 Sharpe Portfolio are hypothetical and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.