The Universal Investment Strategy (UIS) is one of our core investment strategies. It is an evolved, intelligent version of the classic 60/40 equity/bond portfolio. Much like the classic portfolio, UIS holds both the S&P 500 index and bonds. However, UIS can intelligently adapt to current conditions by shifting weight away from stocks in difficult markets and adding weight in bullish markets.

Instead of using simple bond ETF, UIS uses a sub-strategy, called HEDGE, which can choose between different types of safe-heaven ETFs.

The equity/bond (or in our case equity/HEDGE) pair is interesting because most of the time these two asset classes profit from an inverse correlation. If there is a real stock market correction, usually ETFs included in the HEDGE strategy (Treasuries, Gold, etc) are the 'safe' assets where money flows to, providing crash protection.

'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.'

Applying this definition to our asset in some examples:- Looking at the total return, or performance of 59.6% in the last 5 years of Universal Investment Strategy, we see it is relatively lower, thus worse in comparison to the benchmark SPY (80.9%)
- Looking at total return, or performance in of 39.4% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (54.7%).

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Which means for our asset as example:- Looking at the annual return (CAGR) of 9.8% in the last 5 years of Universal Investment Strategy, we see it is relatively lower, thus worse in comparison to the benchmark SPY (12.6%)
- Looking at annual performance (CAGR) in of 11.7% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (15.7%).

'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 volatility over 5 years of Universal Investment Strategy is 5.8%, which is lower, thus better compared to the benchmark SPY (13.3%) in the same period.
- During the last 3 years, the historical 30 days volatility is 5.4%, which is lower, thus better than the value of 12.8% 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:- The downside volatility over 5 years of Universal Investment Strategy is 6.4%, which is lower, thus better compared to the benchmark SPY (14.8%) in the same period.
- Looking at downside volatility in of 6.3% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (14.8%).

'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:- Looking at the ratio of return and volatility (Sharpe) of 1.26 in the last 5 years of Universal Investment Strategy, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.76)
- During the last 3 years, the Sharpe Ratio is 1.7, which is larger, thus better than the value of 1.03 from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (0.68) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.14 of Universal Investment Strategy is larger, thus better.
- Looking at downside risk / excess return profile in of 1.46 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.89).

'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.'

Which means for our asset as example:- Looking at the Ulcer Index of 1.7 in the last 5 years of Universal Investment Strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (3.97 )
- Compared with SPY (4.1 ) in the period of the last 3 years, the Ulcer Index of 1.58 is lower, thus better.

'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.'

Applying this definition to our asset in some examples:- Looking at the maximum DrawDown of -5.7 days in the last 5 years of Universal Investment Strategy, we see it is relatively larger, thus better in comparison to the benchmark SPY (-19.3 days)
- Compared with SPY (-19.3 days) in the period of the last 3 years, the maximum reduction from previous high of -5.7 days is larger, 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.'

Which means for our asset as example:- Looking at the maximum days under water of 166 days in the last 5 years of Universal Investment Strategy, we see it is relatively smaller, thus better in comparison to the benchmark SPY (187 days)
- Looking at maximum time in days below previous high water mark in of 139 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (139 days).

'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:- The average days under water over 5 years of Universal Investment Strategy is 39 days, which is smaller, thus better compared to the benchmark SPY (42 days) in the same period.
- Looking at average days below previous high in of 31 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (37 days).

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 Universal Investment Strategy 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.