This strategy selects the top three performers from our core strategies, based on the most recent 6 month performance, and allocates one third to each of them.

Note that very often the strategy will invest in the more aggressive of our strategies, which might not be suitable for all investors. You can create your version of this strategy with our Portfolio Builder. Simply select the top 2, 3, or 4 strategies and assign equal weights to each or adjust your allocations for your risk level. You will need to manually review and update the top performers periodically.

All of our current strategies are included in the algorithm.

'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.'

Using this definition on our asset we see for example:- Looking at the total return, or increase in value of 166.6% in the last 5 years of Top 3 Strategies, we see it is relatively higher, thus better in comparison to the benchmark SPY (98.3%)
- Looking at total return, or performance in of 32.4% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (27.2%).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (14.7%) in the period of the last 5 years, the annual return (CAGR) of 21.7% of Top 3 Strategies is larger, thus better.
- Compared with SPY (8.4%) in the period of the last 3 years, the annual return (CAGR) of 9.9% is greater, thus better.

'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:- Looking at the 30 days standard deviation of 10.8% in the last 5 years of Top 3 Strategies, we see it is relatively lower, thus better in comparison to the benchmark SPY (20.9%)
- Compared with SPY (17.7%) in the period of the last 3 years, the volatility of 9% 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.'

Using this definition on our asset we see for example:- Looking at the downside deviation of 7.3% in the last 5 years of Top 3 Strategies, we see it is relatively lower, thus better in comparison to the benchmark SPY (14.9%)
- Compared with SPY (12.4%) in the period of the last 3 years, the downside volatility of 6.2% is lower, thus better.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (0.58) in the period of the last 5 years, the Sharpe Ratio of 1.78 of Top 3 Strategies is larger, thus better.
- Compared with SPY (0.33) in the period of the last 3 years, the Sharpe Ratio of 0.82 is higher, thus better.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (0.82) in the period of the last 5 years, the downside risk / excess return profile of 2.62 of Top 3 Strategies is larger, thus better.
- Compared with SPY (0.47) in the period of the last 3 years, the excess return divided by the downside deviation of 1.19 is larger, thus better.

'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.'

Using this definition on our asset we see for example:- Looking at the Ulcer Index of 4.13 in the last 5 years of Top 3 Strategies, we see it is relatively lower, thus better in comparison to the benchmark SPY (9.32 )
- Looking at Ulcer Ratio in of 4.92 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (10 ).

'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:- Looking at the maximum drop from peak to valley of -14.3 days in the last 5 years of Top 3 Strategies, we see it is relatively larger, thus better in comparison to the benchmark SPY (-33.7 days)
- During the last 3 years, the maximum reduction from previous high is -11 days, which is greater, thus better than the value of -24.5 days from the benchmark.

'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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Which means for our asset as example:- Compared with the benchmark SPY (488 days) in the period of the last 5 years, the maximum days under water of 370 days of Top 3 Strategies is lower, thus better.
- During the last 3 years, the maximum time in days below previous high water mark is 370 days, which is lower, thus better than the value of 488 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:- Compared with the benchmark SPY (123 days) in the period of the last 5 years, the average time in days below previous high water mark of 78 days of Top 3 Strategies is smaller, thus better.
- Looking at average days below previous high in of 111 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (177 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 Top 3 Strategies are hypothetical and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.