The Dow 30 strategy is a good way to invest in the best of the Dow 30 blue chips while avoiding the old fashioned underperforming members of the Dow 30 index.

The strategy uses a risk-adjusted momentum algorithm to choose the top four Dow 30 stocks with a variable allocation to treasuries or gold to smooth the equity curve and provide crash protection in bear markets. The strategy combines well with our more conservative strategies, such as the Bond Rotation Strategy or BUG, or with one of our non-U.S. equity strategies such as World Top 4, to form a well balanced portfolio.

The performance of the Dow 30 strategy is quite similar to the simpler US Market Strategy, however in volatile markets, the stock picking Dow 30 can outperformed the Dow 30 index.

'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 performance over 5 years of Dow 30 Strategy is 73%, which is greater, thus better compared to the benchmark DIA (69.9%) in the same period.
- During the last 3 years, the total return is 27.4%, which is lower, thus worse than the value of 31.9% 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.'

Using this definition on our asset we see for example:- The compounded annual growth rate (CAGR) over 5 years of Dow 30 Strategy is 11.6%, which is greater, thus better compared to the benchmark DIA (11.2%) in the same period.
- Looking at annual return (CAGR) in of 8.4% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to DIA (9.7%).

'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 DIA (20.6%) in the period of the last 5 years, the historical 30 days volatility of 8.4% of Dow 30 Strategy is lower, thus better.
- During the last 3 years, the volatility is 9.5%, which is smaller, thus better than the value of 23.8% from the benchmark.

'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:- Looking at the downside risk of 5.9% in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (15%)
- Compared with DIA (17.4%) in the period of the last 3 years, the downside deviation of 6.7% 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.'

Applying this definition to our asset in some examples:- The Sharpe Ratio over 5 years of Dow 30 Strategy is 1.08, which is higher, thus better compared to the benchmark DIA (0.42) in the same period.
- During the last 3 years, the Sharpe Ratio is 0.62, which is higher, thus better than the value of 0.3 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.'

Which means for our asset as example:- The ratio of annual return and downside deviation over 5 years of Dow 30 Strategy is 1.54, which is higher, thus better compared to the benchmark DIA (0.58) in the same period.
- During the last 3 years, the ratio of annual return and downside deviation is 0.88, which is larger, thus better than the value of 0.41 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 DIA (6.57 ) in the period of the last 5 years, the Ulcer Index of 1.94 of Dow 30 Strategy is lower, thus better.
- Compared with DIA (7.42 ) in the period of the last 3 years, the Ulcer Ratio of 2.23 is lower, thus better.

'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.'

Using this definition on our asset we see for example:- The maximum drop from peak to valley over 5 years of Dow 30 Strategy is -13.6 days, which is higher, thus better compared to the benchmark DIA (-36.7 days) in the same period.
- Compared with DIA (-36.7 days) in the period of the last 3 years, the maximum reduction from previous high of -13.6 days is larger, thus better.

'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:- Compared with the benchmark DIA (187 days) in the period of the last 5 years, the maximum days below previous high of 125 days of Dow 30 Strategy is smaller, thus better.
- Compared with DIA (187 days) in the period of the last 3 years, the maximum days below previous high of 87 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 DIA (47 days) in the period of the last 5 years, the average days under water of 24 days of Dow 30 Strategy is lower, thus better.
- Looking at average time in days below previous high water mark in of 24 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (42 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 Dow 30 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.