IMPORTANT: This strategy may use a leveraged GLD position which may cause the total allocation of the strategy to exceed 100%. See more information in this article.

The 3X Universal Investment Strategy (UISx3) is a leveraged version of our core Universal Investment Strategy (UIS), an evolved, intelligent version of the classic 60/40 equity/bond portfolio that can adapt to current conditions, shifting portfolio weight away from stocks in difficult markets and adding weight to equity in bull runs.

The 3x leveraged version of the strategy employs SPXL and TMF, which are the leveraged versions of the S&P 500 ETF, the Treasury 20+ year ETF. Since there is currently no leveraged gold ETF the strategy uses a triple position in GLD. Unlike the base UIS, the leveraged version only uses TMF and GLD to hedge SPXL exposure.

The UISx3 is appropriate for investors who are comfortable taking on higher risks in exchange for the potential for of higher returns. Because leveraged ETFs are used, we recommend allocating no more than 15% of your total portfolio to this strategy.

- SPXL - Direxion Daily S&P 500 Bull 3X Shares ETF
- TMF - Direxion Daily 30-Year Treasury Bull 3x Shares ETF
- GLD - SPDR Gold Trust

'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:- Looking at the total return of 139.5% in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively higher, thus better in comparison to the benchmark SPY (80%)
- Looking at total return, or increase in value in of 9.5% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (31.8%).

'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 performance (CAGR) of 19.1% in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively larger, thus better in comparison to the benchmark SPY (12.5%)
- During the last 3 years, the compounded annual growth rate (CAGR) is 3.1%, which is lower, thus worse than the value of 9.7% from the benchmark.

'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.'

Using this definition on our asset we see for example:- Looking at the historical 30 days volatility of 26.3% in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively higher, thus worse in comparison to the benchmark SPY (21.3%)
- Compared with SPY (17.6%) in the period of the last 3 years, the volatility of 22.8% is higher, thus worse.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (15.3%) in the period of the last 5 years, the downside deviation of 18.7% of Universal Investment Strategy 3x Leverage is greater, thus worse.
- Looking at downside deviation in of 16.3% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (12.3%).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (0.47) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.63 of Universal Investment Strategy 3x Leverage is higher, thus better.
- Compared with SPY (0.41) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.02 is lower, thus worse.

'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:- Looking at the excess return divided by the downside deviation of 0.89 in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.66)
- Looking at excess return divided by the downside deviation in of 0.03 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.58).

'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 (9.43 ) in the period of the last 5 years, the Ulcer Ratio of 16 of Universal Investment Strategy 3x Leverage is larger, thus worse.
- Compared with SPY (10 ) in the period of the last 3 years, the Ulcer Index of 19 is greater, thus worse.

'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:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -38.4 days of Universal Investment Strategy 3x Leverage is lower, thus worse.
- During the last 3 years, the maximum DrawDown is -38.4 days, which is lower, thus worse than the value of -24.5 days from the benchmark.

'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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Applying this definition to our asset in some examples:- Looking at the maximum days below previous high of 436 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively lower, thus better in comparison to the benchmark SPY (480 days)
- Looking at maximum days below previous high in of 436 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (480 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.'

Which means for our asset as example:- Looking at the average days below previous high of 107 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively lower, thus better in comparison to the benchmark SPY (119 days)
- During the last 3 years, the average days under water is 144 days, which is lower, thus better than the value of 174 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 Universal Investment Strategy 3x Leverage 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.