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.

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Which means for our asset as example:- Looking at the total return, or performance of 90.9% in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus worse in comparison to the benchmark DIA (100.2%)
- Compared with DIA (43.9%) in the period of the last 3 years, the total return, or increase in value of 36.8% is smaller, thus worse.

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Applying this definition to our asset in some examples:- Compared with the benchmark DIA (14.9%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 13.8% of Dow 30 Strategy is lower, thus worse.
- Compared with DIA (12.9%) in the period of the last 3 years, the annual return (CAGR) of 11% is smaller, thus worse.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark DIA (20%) in the period of the last 5 years, the historical 30 days volatility of 8.2% of Dow 30 Strategy is lower, thus better.
- Compared with DIA (23.8%) in the period of the last 3 years, the volatility of 9.2% 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.'

Which means for our asset as example:- The downside volatility over 5 years of Dow 30 Strategy is 5.7%, which is lower, thus better compared to the benchmark DIA (14.5%) in the same period.
- Compared with DIA (17.3%) in the period of the last 3 years, the downside risk of 6.4% is lower, 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:- The Sharpe Ratio over 5 years of Dow 30 Strategy is 1.38, which is larger, thus better compared to the benchmark DIA (0.62) in the same period.
- Compared with DIA (0.44) in the period of the last 3 years, the Sharpe Ratio of 0.93 is greater, thus better.

'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:- Looking at the ratio of annual return and downside deviation of 1.97 in the last 5 years of Dow 30 Strategy, we see it is relatively larger, thus better in comparison to the benchmark DIA (0.86)
- Compared with DIA (0.6) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.32 is higher, thus better.

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Which means for our asset as example:- Looking at the Downside risk index of 1.79 in the last 5 years of Dow 30 Strategy, we see it is relatively smaller, thus better in comparison to the benchmark DIA (6.29 )
- Looking at Ulcer Ratio in of 2.01 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (7.26 ).

'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.'

Applying this definition to our asset in some examples:- Looking at the maximum reduction from previous high of -13.6 days in the last 5 years of Dow 30 Strategy, we see it is relatively greater, thus better in comparison to the benchmark DIA (-36.7 days)
- Compared with DIA (-36.7 days) in the period of the last 3 years, the maximum drop from peak to valley of -13.6 days is greater, 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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (187 days) in the period of the last 5 years, the maximum days under water of 125 days of Dow 30 Strategy is lower, thus better.
- Looking at maximum time in days below previous high water mark in of 73 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (187 days).

'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 DIA (45 days) in the period of the last 5 years, the average days under water of 22 days of Dow 30 Strategy is smaller, thus better.
- Compared with DIA (39 days) in the period of the last 3 years, the average days under water of 19 days is lower, thus better.

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.