This portfolio has been optimized for achieving the highest possible return while limiting the historical volatility to 10% or less over the analyzed period with the involved assets. As a reference, the volatility limit of 10% is about two thirds of the volatility, or risk, of the SPDR S&P 500 (SPY).

As such it is a conservative Portfolio 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, 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.'

Applying this definition to our asset in some examples:- The total return, or increase in value over 5 years of Volatility less than 10% is 99.3%, which is smaller, thus worse compared to the benchmark SPY (101.5%) in the same period.
- Compared with SPY (29.7%) in the period of the last 3 years, the total return of 38.2% is higher, thus better.

'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.'

Applying this definition to our asset in some examples:- The annual performance (CAGR) over 5 years of Volatility less than 10% is 14.8%, which is lower, thus worse compared to the benchmark SPY (15.1%) in the same period.
- Looking at annual performance (CAGR) in of 11.4% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (9.1%).

'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:- The 30 days standard deviation over 5 years of Volatility less than 10% is 11.2%, 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% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (17.6%).

'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:- The downside deviation over 5 years of Volatility less than 10% is 8.1%, which is lower, thus better compared to the benchmark SPY (14.9%) in the same period.
- During the last 3 years, the downside deviation is 7.1%, 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (0.6) in the period of the last 5 years, the Sharpe Ratio of 1.1 of Volatility less than 10% is higher, thus better.
- Compared with SPY (0.37) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.9 is greater, thus better.

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Applying this definition to our asset in some examples:- Looking at the downside risk / excess return profile of 1.51 in the last 5 years of Volatility less than 10%, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.84)
- Compared with SPY (0.53) in the period of the last 3 years, the excess return divided by the downside deviation of 1.26 is larger, thus better.

'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.'

Applying this definition to our asset in some examples:- The Downside risk index over 5 years of Volatility less than 10% is 3.09 , which is lower, thus better compared to the benchmark SPY (9.32 ) in the same period.
- Looking at Ulcer Index in of 3.09 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (10 ).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -16.9 days of Volatility less than 10% is higher, thus better.
- Looking at maximum DrawDown in of -10.6 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (-24.5 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:- Looking at the maximum days under water of 243 days in the last 5 years of Volatility less than 10%, we see it is relatively smaller, thus better in comparison to the benchmark SPY (488 days)
- Looking at maximum time in days below previous high water mark in of 243 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (488 days).

'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.'

Which means for our asset as example:- Looking at the average time in days below previous high water mark of 42 days in the last 5 years of Volatility less than 10%, we see it is relatively lower, thus better in comparison to the benchmark SPY (123 days)
- Looking at average time in days below previous high water mark in of 56 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (177 days).

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 Volatility less than 10% 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.