**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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (68.7%) in the period of the last 5 years, the total return, or performance of 156.9% of Moderate Risk Portfolio is larger, thus better.
- Looking at total return, or performance in of 79.5% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (47.9%).

'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.'

Which means for our asset as example:- The compounded annual growth rate (CAGR) over 5 years of Moderate Risk Portfolio is 20.8%, which is greater, thus better compared to the benchmark SPY (11%) in the same period.
- Compared with SPY (14%) in the period of the last 3 years, the annual performance (CAGR) of 21.6% is larger, thus better.

'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:- Compared with the benchmark SPY (13.3%) in the period of the last 5 years, the historical 30 days volatility of 9.8% of Moderate Risk Portfolio is lower, thus better.
- Compared with SPY (12.5%) in the period of the last 3 years, the 30 days standard deviation of 9.5% is lower, thus better.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (14.6%) in the period of the last 5 years, the downside volatility of 11% of Moderate Risk Portfolio is lower, thus better.
- During the last 3 years, the downside volatility is 11%, which is lower, thus better than the value of 14.2% 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 ratio of return and volatility (Sharpe) over 5 years of Moderate Risk Portfolio is 1.87, which is higher, thus better compared to the benchmark SPY (0.64) in the same period.
- Compared with SPY (0.91) in the period of the last 3 years, the risk / return profile (Sharpe) of 2 is larger, thus better.

'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.'

Which means for our asset as example:- Looking at the ratio of annual return and downside deviation of 1.66 in the last 5 years of Moderate Risk Portfolio, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.58)
- During the last 3 years, the ratio of annual return and downside deviation is 1.74, which is greater, thus better than the value of 0.81 from the benchmark.

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Which means for our asset as example:- Looking at the Downside risk index of 1.92 in the last 5 years of Moderate Risk Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (3.96 )
- During the last 3 years, the Ulcer Index is 1.9 , which is lower, thus worse than the value of 4.01 from the benchmark.

'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.'

Which means for our asset as example:- The maximum reduction from previous high over 5 years of Moderate Risk Portfolio is -9.1 days, which is greater, thus better compared to the benchmark SPY (-19.3 days) in the same period.
- Looking at maximum DrawDown in of -7.6 days in the period of the last 3 years, we see it is relatively greater, 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). 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'

Applying this definition to our asset in some examples:- Looking at the maximum days under water of 106 days in the last 5 years of Moderate Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (187 days)
- Looking at maximum days under water in of 106 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (139 days).

'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.'

Applying this definition to our asset in some examples:- The average days below previous high over 5 years of Moderate Risk Portfolio is 20 days, which is lower, thus better compared to the benchmark SPY (41 days) in the same period.
- Compared with SPY (36 days) in the period of the last 3 years, the average time in days below previous high water mark of 21 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.