This portfolio has been optimized to provide the highest Sharpe Ratio, which is a metric that compares the amount of return versus the amount of risk, based on historical data. Return is based on CAGR and risk is based on volatility. The portfolio is well suited for risk adverse investors with moderate growth expectations.

Please note that this portfolio might use leveraged ETF and single stocks. Should these not be allowed in your retirement account please see our 401k and IRS compatible Conservative, Moderate, and Aggressive Risk Portfolios. Contact us for special requirements.

While this portfolio provides an optimized asset allocation based on historical returns, your investment objectives, risk profile and personal experience are important factors when deciding on the best investment vehicle for yourself. You can also use the Portfolio Builder or Portfolio Optimizer to construct your own personalized portfolio.

Assets and weight constraints used in the optimizer process:

- Bond ETF Rotation Strategy (BRS) (0% to 100%)
- BUG Permanent Portfolio Strategy (BUG) (0% to 100%)
- Global Market Rotation Strategy (GMRS) (0% to 100%)
- Global Sector Rotation Strategy (GSRS) (0% to 100%)
- Maximum Yield Strategy (MYRS) (0% to 100%)
- Universal Investment Strategy (UIS) (0% to 100%)
- Universal Investment Strategy 2x Leverage (UISx2) (0% to 100%)
- US Market Strategy (USMarket) (0% to 100%)
- US Market Strategy 2x Leverage (USMx2) (0% to 100%)
- US Sector Rotation Strategy (USSECT) (0% to 100%)
- World Top 4 Strategy (WTOP4) (0% to 100%)

'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 over 5 years of Max Sharpe Portfolio is 103%, which is larger, thus better compared to the benchmark SPY (67.8%) in the same period.
- During the last 3 years, the total return, or increase in value is 48.3%, which is higher, thus better than the value of 44.5% from the benchmark.

'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:- The annual performance (CAGR) over 5 years of Max Sharpe Portfolio is 15.2%, which is larger, thus better compared to the benchmark SPY (10.9%) in the same period.
- Looking at annual performance (CAGR) in of 14.1% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (13.1%).

'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.'

Using this definition on our asset we see for example:- The 30 days standard deviation over 5 years of Max Sharpe Portfolio is 11.7%, which is lower, thus better compared to the benchmark SPY (21.4%) in the same period.
- During the last 3 years, the volatility is 11.4%, which is lower, thus better than the value of 18.8% from the benchmark.

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

Which means for our asset as example:- Compared with the benchmark SPY (15.4%) in the period of the last 5 years, the downside deviation of 8.4% of Max Sharpe Portfolio is lower, thus better.
- Compared with SPY (13.3%) in the period of the last 3 years, the downside deviation of 8.3% 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.'

Applying this definition to our asset in some examples:- Looking at the risk / return profile (Sharpe) of 1.09 in the last 5 years of Max Sharpe Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.39)
- Compared with SPY (0.56) in the period of the last 3 years, the Sharpe Ratio of 1.01 is larger, thus better.

'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 Max Sharpe Portfolio is 1.51, which is higher, thus better compared to the benchmark SPY (0.55) in the same period.
- Looking at ratio of annual return and downside deviation in of 1.39 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (0.79).

'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:- The Downside risk index over 5 years of Max Sharpe Portfolio is 3.17 , which is lower, thus better compared to the benchmark SPY (9.46 ) in the same period.
- Compared with SPY (10 ) in the period of the last 3 years, the Ulcer Index of 3.12 is lower, thus better.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -18.2 days of Max Sharpe Portfolio is larger, thus better.
- During the last 3 years, the maximum drop from peak to valley is -10.7 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) in days.'

Applying this definition to our asset in some examples:- Looking at the maximum time in days below previous high water mark of 159 days in the last 5 years of Max Sharpe Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (352 days)
- During the last 3 years, the maximum days below previous high is 159 days, which is lower, thus better than the value of 352 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.'

Which means for our asset as example:- Looking at the average days below previous high of 29 days in the last 5 years of Max Sharpe Portfolio, we see it is relatively smaller, thus better in comparison to the benchmark SPY (78 days)
- Compared with SPY (102 days) in the period of the last 3 years, the average days below previous high of 33 days is smaller, 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 Max Sharpe Portfolio 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.