**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%)

'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:- The total return, or performance over 5 years of Moderate Risk Portfolio is 98.5%, which is larger, thus better compared to the benchmark SPY (97.7%) in the same period.
- During the last 3 years, the total return is 23.1%, which is smaller, thus worse than the value of 26% 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.'

Which means for our asset as example:- The compounded annual growth rate (CAGR) over 5 years of Moderate Risk Portfolio is 14.7%, which is greater, thus better compared to the benchmark SPY (14.6%) in the same period.
- Looking at annual return (CAGR) in of 7.2% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (8%).

'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.'

Which means for our asset as example:- The historical 30 days volatility over 5 years of Moderate Risk Portfolio is 9.3%, which is lower, thus better compared to the benchmark SPY (20.9%) in the same period.
- Compared with SPY (17.5%) in the period of the last 3 years, the volatility of 7.9% is lower, thus better.

'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:- Compared with the benchmark SPY (15%) in the period of the last 5 years, the downside volatility of 6.7% of Moderate Risk Portfolio is smaller, thus better.
- During the last 3 years, the downside risk is 5.6%, which is lower, thus better than the value of 12.3% 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 (0.58) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.31 of Moderate Risk Portfolio is higher, thus better.
- During the last 3 years, the Sharpe Ratio is 0.59, which is larger, thus better than the value of 0.32 from the benchmark.

'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:- Compared with the benchmark SPY (0.81) in the period of the last 5 years, the excess return divided by the downside deviation of 1.83 of Moderate Risk Portfolio is higher, thus better.
- During the last 3 years, the downside risk / excess return profile is 0.84, which is larger, thus better than the value of 0.45 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.'

Applying this definition to our asset in some examples:- The Ulcer Index over 5 years of Moderate Risk Portfolio is 2.68 , which is lower, thus better compared to the benchmark SPY (9.32 ) in the same period.
- Compared with SPY (10 ) in the period of the last 3 years, the Ulcer Index of 2.83 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.'

Which means for our asset as example:- Looking at the maximum reduction from previous high of -14.3 days in the last 5 years of Moderate Risk Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (-33.7 days)
- During the last 3 years, the maximum drop from peak to valley is -9.5 days, which is larger, thus better than the value of -24.5 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.'

Which means for our asset as example:- The maximum days below previous high over 5 years of Moderate Risk Portfolio is 256 days, which is smaller, thus better compared to the benchmark SPY (488 days) in the same period.
- Compared with SPY (488 days) in the period of the last 3 years, the maximum days under water of 256 days is smaller, 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:- Looking at the average days below previous high of 44 days in the last 5 years of Moderate Risk Portfolio, we see it is relatively smaller, thus better in comparison to the benchmark SPY (123 days)
- Compared with SPY (179 days) in the period of the last 3 years, the average days below previous high of 60 days is lower, thus better.

Historical returns have been extended using synthetic data.
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Allocations and holdings shown below are delayed by one month.

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