**Recommended for:** Capital accumulation, savers and investors 10-20 years from retirement.

The Moderate Risk Portfolio is appropriate for an investor with a medium risk tolerance and a time horizon longer than five years. Moderate investors are willing to accept periods of moderate market volatility in exchange for the possibility of receiving returns that outpace inflation by a significant margin.

To be compatible with most retirement plans, this Portfolio does not include our Maximum Yield Strategy and leveraged Universal Investment Strategy. If you are using a more flexible account you can choose from our unconstrained portfolios in the Portfolio Library.

We also offer a version for 401k plans which do not allow individual stocks. See details here.

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 50%)
- BUG Permanent Portfolio Strategy (BUG) (0% to 50%)
- Global Market Rotation Strategy (GMRS) (0% to 50%)
- Global Sector Rotation Strategy (GSRS) (0% to 50%)
- Hedge Strategy (HEDGE) (0% to 40%)
- Short Term Bond Strategy (STBS) (0% to 50%)
- Universal Investment Strategy (UIS) (0% to 50%)
- US Market Strategy (USMarket) (0% to 50%)
- US Sector Rotation Strategy (USSECT) (0% to 50%)
- World Top 4 Strategy (WTOP4) (0% to 50%)

'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.'

Using this definition on our asset we see for example:- The total return over 5 years of Moderate Risk Portfolio is 107.6%, which is larger, thus better compared to the benchmark SPY (61.9%) in the same period.
- Looking at total return, or increase in value in of 73.3% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (79.4%).

'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 annual performance (CAGR) over 5 years of Moderate Risk Portfolio is 15.8%, which is greater, thus better compared to the benchmark SPY (10.1%) in the same period.
- Looking at annual performance (CAGR) in of 20.1% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (21.5%).

'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:- Compared with the benchmark SPY (21.5%) in the period of the last 5 years, the 30 days standard deviation of 9.4% of Moderate Risk Portfolio is smaller, thus better.
- During the last 3 years, the volatility is 9.8%, which is lower, thus better than the value of 21.2% 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:- The downside risk over 5 years of Moderate Risk Portfolio is 6.7%, which is smaller, thus better compared to the benchmark SPY (15.5%) in the same period.
- During the last 3 years, the downside volatility is 6.6%, which is lower, thus better than the value of 14.1% 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.'

Which means for our asset as example:- Compared with the benchmark SPY (0.36) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.42 of Moderate Risk Portfolio is greater, thus better.
- Looking at Sharpe Ratio in of 1.8 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.9).

'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.'

Using this definition on our asset we see for example:- The downside risk / excess return profile over 5 years of Moderate Risk Portfolio is 1.99, which is larger, thus better compared to the benchmark SPY (0.49) in the same period.
- Looking at excess return divided by the downside deviation in of 2.66 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (1.35).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (9.15 ) in the period of the last 5 years, the Ulcer Ratio of 2.62 of Moderate Risk Portfolio is smaller, thus better.
- During the last 3 years, the Ulcer Ratio is 2.77 , which is lower, thus better than the value of 9.78 from the benchmark.

'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:- Looking at the maximum drop from peak to valley of -14.3 days in the last 5 years of Moderate Risk Portfolio, we see it is relatively greater, thus better in comparison to the benchmark SPY (-33.7 days)
- Compared with SPY (-24.5 days) in the period of the last 3 years, the maximum DrawDown of -9.5 days is higher, 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.'

Applying this definition to our asset in some examples:- The maximum days under water over 5 years of Moderate Risk Portfolio is 198 days, which is smaller, thus better compared to the benchmark SPY (305 days) in the same period.
- Compared with SPY (305 days) in the period of the last 3 years, the maximum days under water of 198 days is lower, thus better.

'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 (65 days) in the period of the last 5 years, the average days under water of 32 days of Moderate Risk Portfolio is lower, thus better.
- During the last 3 years, the average days under water is 39 days, which is lower, thus better than the value of 80 days from the benchmark.

Historical returns have been extended using synthetic data.
[Show Details]

Allocations and holdings shown below are delayed by one month.

Register now to get the current trading allocations.

- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Moderate Risk 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.