**Recommended for:** Capital accumulation, savers and investors 10-20 years from retirement.

The Moderate Risk Portfolio is appropriate for an investor with a medium risk tolerance and a time horizon longer than five years. Moderate investors are willing to accept periods of moderate market volatility in exchange for the possibility of receiving returns that outpace inflation by a significant margin.

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 also offer a version for 401k plans which do not allow individual stocks. 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 50%)
- BUG Permanent Portfolio Strategy (BUG) (0% to 50%)
- World Top 4 Strategy (WTOP4) (0% to 50%)
- Global Sector Rotation Strategy (GSRS) (0% to 50%)
- Global Market Rotation Strategy (GMRS) (0% to 50%)
- NASDAQ 100 Strategy (NAS100) (0% to 50%)
- US Sector Rotation Strategy (USSECT) (0% to 50%)
- Universal Investment Strategy (UIS) (0% to 50%)
- US Market Strategy (USMarket) (0% to 50%)
- Dow 30 Strategy (DOW30) (0% to 50%)
- Short Term Bond Strategy (STBS) (0% to 50%)

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Which means for our asset as example:- The total return, or increase in value over 5 years of Moderate Risk Portfolio is 139.8%, which is larger, thus better compared to the benchmark SPY (64.1%) in the same period.
- Looking at total return, or performance in of 67.7% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (48.1%).

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Using this definition on our asset we see for example:- The annual return (CAGR) over 5 years of Moderate Risk Portfolio is 19.1%, which is greater, thus better compared to the benchmark SPY (10.4%) in the same period.
- Compared with SPY (14%) in the period of the last 3 years, the annual return (CAGR) of 18.8% is greater, thus better.

'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 (13.6%) in the period of the last 5 years, the volatility of 10% of Moderate Risk Portfolio is smaller, thus better.
- Compared with SPY (12.8%) in the period of the last 3 years, the 30 days standard deviation of 9.9% is lower, 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:- Compared with the benchmark SPY (14.9%) in the period of the last 5 years, the downside volatility of 11.2% of Moderate Risk Portfolio is lower, thus better.
- During the last 3 years, the downside risk is 11.2%, which is smaller, thus better than the value of 14.5% from the benchmark.

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Which means for our asset as example:- The Sharpe Ratio over 5 years of Moderate Risk Portfolio is 1.66, which is higher, thus better compared to the benchmark SPY (0.58) in the same period.
- During the last 3 years, the risk / return profile (Sharpe) is 1.65, which is larger, thus better than the value of 0.9 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.'

Using this definition on our asset we see for example:- Looking at the excess return divided by the downside deviation of 1.48 in the last 5 years of Moderate Risk Portfolio, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.53)
- Compared with SPY (0.79) in the period of the last 3 years, the excess return divided by the downside deviation of 1.46 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (4.02 ) in the period of the last 5 years, the Downside risk index of 2.23 of Moderate Risk Portfolio is smaller, thus better.
- Compared with SPY (4.09 ) in the period of the last 3 years, the Ulcer Ratio of 2.37 is smaller, thus better.

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Using this definition on our asset we see for example:- Looking at the maximum drop from peak to valley of -9.1 days in the last 5 years of Moderate Risk Portfolio, we see it is relatively greater, thus better in comparison to the benchmark SPY (-19.3 days)
- Looking at maximum DrawDown in of -7.5 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (-19.3 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) in days.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days under water of 106 days of Moderate Risk Portfolio is lower, thus better.
- During the last 3 years, the maximum days under water is 106 days, which is lower, thus better than the value of 139 days from the benchmark.

'The Average Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. 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 under water over 5 years of Moderate Risk Portfolio is 22 days, which is smaller, thus better compared to the benchmark SPY (41 days) in the same period.
- Compared with SPY (35 days) in the period of the last 3 years, the average days under water of 26 days is smaller, thus better.

Historical returns have been extended using synthetic data.
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Allocations and holdings shown below are delayed by one month. To see current trading allocations of Moderate Risk Portfolio, register now.

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- "Year" returns in the table above are not equal to the sum of monthly returns due to compounding.
- Performance results of Moderate 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.