**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%)
- World Top 4 Strategy (WTOP4) (0% to 50%)
- Global Sector Rotation Strategy (GSRS) (0% to 50%)
- Global Market Rotation Strategy (GMRS) (0% to 50%)
- NASDAQ 100 Strategy (NAS100) (0% to 50%)
- US Sector Rotation Strategy (USSECT) (0% to 50%)
- Universal Investment Strategy (UIS) (0% to 50%)
- US Market Strategy (USMarket) (0% to 50%)
- Dow 30 Strategy (DOW30) (0% to 50%)
- Short Term Bond Strategy (STBS) (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 over 5 years of Moderate Risk Portfolio is 170.5%, which is greater, thus better compared to the benchmark SPY (72.2%) in the same period.
- During the last 3 years, the total return, or increase in value is 84.6%, which is higher, thus better than the value of 48.3% 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:- Looking at the compounded annual growth rate (CAGR) of 22% in the last 5 years of Moderate Risk Portfolio, we see it is relatively higher, thus better in comparison to the benchmark SPY (11.5%)
- During the last 3 years, the annual performance (CAGR) is 22.7%, which is larger, thus better than the value of 14.1% from the benchmark.

'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 (13.2%) in the period of the last 5 years, the 30 days standard deviation of 9.6% of Moderate Risk Portfolio is lower, thus better.
- Looking at volatility in of 9.3% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (12.4%).

'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:- Looking at the downside deviation of 10.9% in the last 5 years of Moderate Risk Portfolio, we see it is relatively smaller, thus better in comparison to the benchmark SPY (14.5%)
- Looking at downside deviation in of 10.7% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (14.1%).

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Which means for our asset as example:- The Sharpe Ratio over 5 years of Moderate Risk Portfolio is 2.03, which is larger, thus better compared to the benchmark SPY (0.68) in the same period.
- Compared with SPY (0.93) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 2.17 is larger, thus better.

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Which means for our asset as example:- The downside risk / excess return profile over 5 years of Moderate Risk Portfolio is 1.8, which is larger, thus better compared to the benchmark SPY (0.62) in the same period.
- Compared with SPY (0.82) in the period of the last 3 years, the downside risk / excess return profile of 1.89 is greater, 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.'

Which means for our asset as example:- The Ulcer Ratio over 5 years of Moderate Risk Portfolio is 1.89 , which is smaller, thus worse compared to the benchmark SPY (3.95 ) in the same period.
- Looking at Downside risk index in of 1.86 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (4 ).

'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 drop from peak to valley of -9.1 days in the last 5 years of Moderate Risk Portfolio, we see it is relatively higher, thus better in comparison to the benchmark SPY (-19.3 days)
- Looking at maximum reduction from previous high in of -7.6 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (-19.3 days).

'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.'

Which means for our asset as example:- Looking at the maximum days under water of 106 days in the last 5 years of Moderate Risk Portfolio, we see it is relatively smaller, thus better in comparison to the benchmark SPY (187 days)
- During the last 3 years, the maximum days below previous high is 106 days, which is lower, thus better than the value of 139 days from the benchmark.

'The Average 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. 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 20 days in the last 5 years of Moderate Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (41 days)
- During the last 3 years, the average days below previous high is 21 days, which is lower, thus better than the value of 36 days from the benchmark.

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

Allocations and holdings shown below are delayed by one month. To see current trading allocations of Moderate Risk Portfolio, register now.

()

- "Year" returns in the table above are not equal to 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.