The 3X Universal Investment Strategy (UISx3) is a leveraged version of our core Universal Investment Strategy (UIS), an evolved, intelligent version of the classic 60/40 equity/bond portfolio that can adapt to current conditions, shifting portfolio weight away from stocks in difficult markets and adding weight to equity in bull runs.

The 3x leveraged version of the strategy employs SPXL, TMF and UGLD, which are the leveraged versions of the S&P 500 ETF, the Treasury 20+ year ETF and the Gold ETF. Unlike the base UIS, the leveraged version only uses TMF and UGLD to hedge SPXL exposure.

The UISx3 is appropriate for investors who are comfortable taking on higher risks in exchange for the potential for of higher returns. Because leveraged ETFs are used, we recommend allocating no more than 15% of your total portfolio to this strategy.

- SPXL - Direxion Daily S&P 500 Bull 3X Shares ETF
- TMF - Direxion Daily 30-Year Treasury Bull 3x Shares ETF
- UGLD - VelocityShares 3x Long Gold ETN

'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.'

Using this definition on our asset we see for example:- Looking at the total return, or performance of 243.5% in the last 5 years of Leveraged Universal Investment Strategy, we see it is relatively larger, thus better in comparison to the benchmark SPY (77.1%)
- During the last 3 years, the total return, or increase in value is 151.6%, which is greater, thus better than the value of 51.7% from the benchmark.

'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:- The annual performance (CAGR) over 5 years of Leveraged Universal Investment Strategy is 28%, which is larger, thus better compared to the benchmark SPY (12.1%) in the same period.
- Looking at annual performance (CAGR) in of 36.1% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (14.9%).

'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:- The historical 30 days volatility over 5 years of Leveraged Universal Investment Strategy is 19.9%, which is greater, thus worse compared to the benchmark SPY (13.3%) in the same period.
- Looking at historical 30 days volatility in of 18% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (13%).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (9.6%) in the period of the last 5 years, the downside risk of 13.9% of Leveraged Universal Investment Strategy is higher, thus worse.
- Compared with SPY (9.4%) in the period of the last 3 years, the downside risk of 12.5% is higher, thus worse.

'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 (0.72) in the period of the last 5 years, the Sharpe Ratio of 1.28 of Leveraged Universal Investment Strategy is higher, thus better.
- During the last 3 years, the risk / return profile (Sharpe) is 1.87, which is higher, thus better than the value of 0.96 from the benchmark.

'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:- Compared with the benchmark SPY (1) in the period of the last 5 years, the downside risk / excess return profile of 1.84 of Leveraged Universal Investment Strategy is larger, thus better.
- During the last 3 years, the ratio of annual return and downside deviation is 2.69, which is larger, thus better than the value of 1.32 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (3.97 ) in the period of the last 5 years, the Ulcer Index of 9.51 of Leveraged Universal Investment Strategy is greater, thus worse.
- Looking at Ulcer Ratio in of 7.98 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (4.1 ).

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Applying this definition to our asset in some examples:- The maximum drop from peak to valley over 5 years of Leveraged Universal Investment Strategy is -23.5 days, which is smaller, thus worse compared to the benchmark SPY (-19.3 days) in the same period.
- During the last 3 years, the maximum drop from peak to valley is -23.2 days, which is smaller, thus worse than the value of -19.3 days from the benchmark.

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Which means for our asset as example:- Looking at the maximum days under water of 265 days in the last 5 years of Leveraged Universal Investment Strategy, we see it is relatively greater, thus worse in comparison to the benchmark SPY (187 days)
- Compared with SPY (139 days) in the period of the last 3 years, the maximum days below previous high of 265 days is higher, thus worse.

'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 (42 days) in the period of the last 5 years, the average days below previous high of 71 days of Leveraged Universal Investment Strategy is larger, thus worse.
- Looking at average days under water in of 62 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (37 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 Leveraged Universal Investment Strategy 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.