**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 plans which do allow single 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 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:- The total return, or increase in value over 5 years of Moderate Risk Portfolio for 401 is 64.4%, which is smaller, thus worse compared to the benchmark SPY (124.9%) in the same period.
- Looking at total return, or increase in value in of 29.9% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (60.5%).

'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 (17.6%) in the period of the last 5 years, the annual performance (CAGR) of 10.5% of Moderate Risk Portfolio for 401 is lower, thus worse.
- Looking at annual performance (CAGR) in of 9.1% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (17.1%).

'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.'

Using this definition on our asset we see for example:- Looking at the 30 days standard deviation of 9.3% in the last 5 years of Moderate Risk Portfolio for 401, we see it is relatively lower, thus better in comparison to the benchmark SPY (18.7%)
- Compared with SPY (22.6%) in the period of the last 3 years, the historical 30 days volatility of 11% is smaller, 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:- The downside deviation over 5 years of Moderate Risk Portfolio for 401 is 6.7%, which is smaller, thus better compared to the benchmark SPY (13.5%) in the same period.
- Looking at downside volatility in of 8.1% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (16.4%).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (0.81) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.86 of Moderate Risk Portfolio for 401 is greater, thus better.
- Compared with SPY (0.65) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.6 is lower, thus worse.

'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:- Compared with the benchmark SPY (1.12) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.19 of Moderate Risk Portfolio for 401 is higher, thus better.
- During the last 3 years, the excess return divided by the downside deviation is 0.82, which is smaller, thus worse than the value of 0.89 from the benchmark.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (5.58 ) in the period of the last 5 years, the Ulcer Index of 2.28 of Moderate Risk Portfolio for 401 is lower, thus better.
- During the last 3 years, the Ulcer Ratio is 2.84 , which is lower, thus better than the value of 6.82 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:- Looking at the maximum drop from peak to valley of -18.1 days in the last 5 years of Moderate Risk Portfolio for 401, we see it is relatively higher, thus better in comparison to the benchmark SPY (-33.7 days)
- Looking at maximum DrawDown in of -18.1 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (-33.7 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 time in days below previous high water mark of 94 days in the last 5 years of Moderate Risk Portfolio for 401, we see it is relatively lower, thus better in comparison to the benchmark SPY (139 days)
- Compared with SPY (128 days) in the period of the last 3 years, the maximum days below previous high of 94 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.'

Which means for our asset as example:- Compared with the benchmark SPY (32 days) in the period of the last 5 years, the average days below previous high of 21 days of Moderate Risk Portfolio for 401 is smaller, thus better.
- Compared with SPY (33 days) in the period of the last 3 years, the average days under water of 22 days is lower, 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 for 401, register now.

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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Moderate Risk Portfolio for 401 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.