**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.'

Using this definition on our asset we see for example:- Looking at the total return, or performance of 120.2% in the last 5 years of Moderate Risk Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (77.1%)
- Looking at total return, or performance in of 71.5% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (51.7%).

'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 annual return (CAGR) of 17.1% in the last 5 years of Moderate Risk Portfolio, we see it is relatively higher, thus better in comparison to the benchmark SPY (12.1%)
- Looking at annual return (CAGR) in of 19.7% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (14.9%).

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Which means for our asset as example:- Looking at the volatility of 6.7% in the last 5 years of Moderate Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.3%)
- Looking at historical 30 days volatility in of 6.6% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (13%).

'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 risk of 4.4% in the last 5 years of Moderate Risk Portfolio, we see it is relatively smaller, thus better in comparison to the benchmark SPY (9.6%)
- Compared with SPY (9.4%) in the period of the last 3 years, the downside deviation of 4.4% is smaller, thus better.

'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:- Looking at the risk / return profile (Sharpe) of 2.19 in the last 5 years of Moderate Risk Portfolio, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.72)
- Looking at risk / return profile (Sharpe) in of 2.61 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.96).

'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:- Compared with the benchmark SPY (1) in the period of the last 5 years, the downside risk / excess return profile of 3.29 of Moderate Risk Portfolio is higher, thus better.
- Looking at excess return divided by the downside deviation in of 3.87 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (1.32).

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (3.97 ) in the period of the last 5 years, the Downside risk index of 1.35 of Moderate Risk Portfolio is smaller, thus better.
- Looking at Downside risk index in of 1.11 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (4.1 ).

'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:- The maximum drop from peak to valley over 5 years of Moderate Risk Portfolio is -6.2 days, which is larger, thus better compared to the benchmark SPY (-19.3 days) in the same period.
- Looking at maximum drop from peak to valley in of -6.2 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (-19.3 days).

'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 147 days, which is lower, thus better compared to the benchmark SPY (187 days) in the same period.
- During the last 3 years, the maximum time in days below previous high water mark is 54 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.'

Which means for our asset as example:- Looking at the average time in days below previous high water mark of 23 days in the last 5 years of Moderate Risk Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (42 days)
- During the last 3 years, the average days under water is 13 days, which is lower, thus better than the value of 37 days from the benchmark.

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 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.