**Recommended for:** Capital preservation, liquidity and for investors close to or in retirement.

The Conservative Portfolio is appropriate for an investor with a low risk tolerance or a need to make withdrawals over the next 1 to 3 years. Conservative investors are willing to accept lower returns in exchange for lower account drawdowns in periods of market volatility.

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 offer a portfolio version for 401k plans which do not allow individual stocks - this is set with a moderate risk level, but actually results in a volatility which might also be acceptable for those looking for a conservative set. 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 40%)
- BUG Permanent Portfolio Strategy (BUG) (0% to 40%)
- Global Market Rotation Strategy (GMRS) (0% to 40%)
- Global Sector Rotation Strategy (GSRS) (0% to 40%)
- Hedge Strategy (HEDGE) (0% to 40%)
- Short Term Bond Strategy (STBS) (0% to 50%)
- Universal Investment Strategy (UIS) (0% to 40%)
- US Market Strategy (USMarket) (0% to 40%)
- US Sector Rotation Strategy (USSECT) (0% to 40%)
- World Top 4 Strategy (WTOP4) (0% to 40%)

'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:- Looking at the total return, or increase in value of 66.3% in the last 5 years of Conservative Risk Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (67.8%)
- Looking at total return, or performance in of 31.9% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (44.5%).

'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:- Compared with the benchmark SPY (10.9%) in the period of the last 5 years, the annual return (CAGR) of 10.7% of Conservative Risk Portfolio is lower, thus worse.
- During the last 3 years, the compounded annual growth rate (CAGR) is 9.7%, which is lower, thus worse than the value of 13.1% from the benchmark.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (21.4%) in the period of the last 5 years, the volatility of 7.2% of Conservative Risk Portfolio is smaller, thus better.
- Looking at historical 30 days volatility in of 5.8% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (18.8%).

'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:- Looking at the downside volatility of 5.2% in the last 5 years of Conservative Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (15.4%)
- Looking at downside volatility in of 4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (13.3%).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (0.39) in the period of the last 5 years, the Sharpe Ratio of 1.15 of Conservative Risk Portfolio is higher, thus better.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 1.23, which is higher, thus better than the value of 0.56 from the benchmark.

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Applying this definition to our asset in some examples:- Looking at the ratio of annual return and downside deviation of 1.59 in the last 5 years of Conservative Risk Portfolio, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.55)
- Compared with SPY (0.79) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.81 is greater, 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 Downside risk index over 5 years of Conservative Risk Portfolio is 2.07 , which is lower, thus better compared to the benchmark SPY (9.46 ) in the same period.
- During the last 3 years, the Ulcer Ratio is 1.97 , which is lower, thus better than the value of 10 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 DrawDown over 5 years of Conservative Risk Portfolio is -14.8 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 -5.2 days, which is greater, 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:- Compared with the benchmark SPY (352 days) in the period of the last 5 years, the maximum days below previous high of 227 days of Conservative Risk Portfolio is lower, thus better.
- Compared with SPY (352 days) in the period of the last 3 years, the maximum days under water of 227 days is lower, thus better.

'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:- Compared with the benchmark SPY (78 days) in the period of the last 5 years, the average days under water of 43 days of Conservative Risk Portfolio is lower, thus better.
- Looking at average days below previous high in of 55 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (102 days).

Historical returns have been extended using synthetic data.
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Allocations and holdings shown below are delayed by one month.

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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Conservative 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.