This portfolio has been optimized for achieving the highest possible return while limiting the historical volatility to 7% or less over the analyzed period with the involved assets. The volatility limit of 7% equals about half the volatility, or risk, of the iShares 20+ Year Treasury Bond ETF - TLT.

As such it is a very conservative Portfolio suited for very risk adverse investors with conservative 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%)
- Short Term Bond Strategy (STBS) (0% to 50%)
- 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 investment’s overall performance.'

Which means for our asset as example:- The total return, or increase in value over 5 years of Volatility less than 7% is 57.5%, which is smaller, thus worse compared to the benchmark SPY (61.9%) in the same period.
- Compared with SPY (79.4%) in the period of the last 3 years, the total return, or performance of 43.6% is smaller, thus worse.

'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.'

Applying this definition to our asset in some examples:- Looking at the annual performance (CAGR) of 9.5% in the last 5 years of Volatility less than 7%, we see it is relatively lower, thus worse in comparison to the benchmark SPY (10.1%)
- During the last 3 years, the annual return (CAGR) is 12.8%, which is lower, thus worse than the value of 21.5% 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.'

Which means for our asset as example:- Compared with the benchmark SPY (21.5%) in the period of the last 5 years, the 30 days standard deviation of 6.5% of Volatility less than 7% is lower, thus better.
- Compared with SPY (21.2%) in the period of the last 3 years, the historical 30 days volatility of 5.9% 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:- The downside volatility over 5 years of Volatility less than 7% is 4.7%, which is lower, thus better compared to the benchmark SPY (15.5%) in the same period.
- Compared with SPY (14.1%) in the period of the last 3 years, the downside risk of 3.8% is smaller, thus better.

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (0.36) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.08 of Volatility less than 7% is higher, thus better.
- During the last 3 years, the Sharpe Ratio is 1.76, which is higher, 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:- Compared with the benchmark SPY (0.49) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.48 of Volatility less than 7% is higher, thus better.
- During the last 3 years, the downside risk / excess return profile is 2.75, which is greater, thus better than the value of 1.35 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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (9.15 ) in the period of the last 5 years, the Ulcer Ratio of 1.82 of Volatility less than 7% is lower, thus better.
- Compared with SPY (9.78 ) in the period of the last 3 years, the Ulcer Index of 1.68 is smaller, 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:- The maximum DrawDown over 5 years of Volatility less than 7% is -13.6 days, which is greater, thus better compared to the benchmark SPY (-33.7 days) in the same period.
- Looking at maximum DrawDown in of -4.7 days in the period of the last 3 years, we see it is relatively larger, 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). 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 below previous high of 300 days in the last 5 years of Volatility less than 7%, we see it is relatively lower, thus better in comparison to the benchmark SPY (305 days)
- Looking at maximum days below previous high in of 300 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (305 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.'

Using this definition on our asset we see for example:- Looking at the average days under water of 57 days in the last 5 years of Volatility less than 7%, we see it is relatively smaller, thus better in comparison to the benchmark SPY (65 days)
- Compared with SPY (80 days) in the period of the last 3 years, the average days below previous high of 81 days is greater, thus worse.

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 7% 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.