We developed the Dow 30 Top 4 Strategy some years ago together with the Nasdaq 100 strategy. We waited to published it because the Nasdaq 100 Top 4 Strategy was outperforming the Dow Strategy in the technology driven bull market we've had in recent years. Going forward however, the Dow 30 Top 4 Strategy could be very beneficial, as stock picking becomes much more important in volatile, sideways moving markets.

The performance of the Dow 30 strategy is quite similar to the simpler US Market Strategy, however in volatile markets like this year, the stock picking Dow 30 outperformed. Notably, the February drawdown was only half of the US Market Strategy as the Dow Strategy excludes high volatility stocks.

'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.'

Which means for our asset as example:- Compared with the benchmark DIA (80.8%) in the period of the last 5 years, the total return, or performance of 126.3% of Dow 30 Strategy is larger, thus better.
- Compared with DIA (58.1%) in the period of the last 3 years, the total return, or increase in value of 58.2% is larger, thus better.

'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.'

Which means for our asset as example:- The annual return (CAGR) over 5 years of Dow 30 Strategy is 17.8%, which is larger, thus better compared to the benchmark DIA (12.6%) in the same period.
- During the last 3 years, the compounded annual growth rate (CAGR) is 16.5%, which is larger, thus better than the value of 16.5% 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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (13.3%) in the period of the last 5 years, the historical 30 days volatility of 8.4% of Dow 30 Strategy is smaller, thus better.
- During the last 3 years, the volatility is 8.1%, which is lower, thus better than the value of 12.8% from the benchmark.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Using this definition on our asset we see for example:- The downside volatility over 5 years of Dow 30 Strategy is 9.2%, which is smaller, thus better compared to the benchmark DIA (14.7%) in the same period.
- During the last 3 years, the downside volatility is 8.9%, which is lower, thus better than the value of 14.4% from the benchmark.

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (0.76) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.81 of Dow 30 Strategy is greater, thus better.
- During the last 3 years, the Sharpe Ratio is 1.74, which is higher, thus better than the value of 1.1 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.'

Which means for our asset as example:- Compared with the benchmark DIA (0.69) in the period of the last 5 years, the downside risk / excess return profile of 1.65 of Dow 30 Strategy is larger, thus better.
- During the last 3 years, the excess return divided by the downside deviation is 1.57, which is larger, thus better than the value of 0.98 from the benchmark.

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (4.21 ) in the period of the last 5 years, the Downside risk index of 2.02 of Dow 30 Strategy is smaller, thus worse.
- Looking at Ulcer Index in of 1.6 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to DIA (4.13 ).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (-18.1 days) in the period of the last 5 years, the maximum DrawDown of -9.7 days of Dow 30 Strategy is greater, thus better.
- During the last 3 years, the maximum reduction from previous high is -6.3 days, which is greater, thus better than the value of -18.1 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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (227 days) in the period of the last 5 years, the maximum days under water of 133 days of Dow 30 Strategy is lower, thus better.
- During the last 3 years, the maximum days below previous high is 103 days, which is lower, thus better than the value of 161 days from the benchmark.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. 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.'

Using this definition on our asset we see for example:- The average days below previous high over 5 years of Dow 30 Strategy is 26 days, which is smaller, thus better compared to the benchmark DIA (53 days) in the same period.
- Looking at average days below previous high in of 24 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (43 days).

Historical returns have been extended using synthetic data.
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- "Year" returns in the table above are not equal to 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.