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, TMF and UGLD, which are the leveraged versions of the S&P 500 ETF, the Treasury 20+ year ETF and the Gold ETF. Unlike the base UIS, the leveraged version only uses TMF and UGLD 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
- UGLD - VelocityShares 3x Long Gold ETN

'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:- The total return, or increase in value over 5 years of Leveraged Universal Investment Strategy is 1477.1%, which is higher, thus better compared to the benchmark SPY (81.7%) in the same period.
- Compared with SPY (54.7%) in the period of the last 3 years, the total return of 458.4% is larger, thus better.

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Applying this definition to our asset in some examples:- Looking at the annual performance (CAGR) of 73.7% in the last 5 years of Leveraged Universal Investment Strategy, we see it is relatively greater, thus better in comparison to the benchmark SPY (12.7%)
- Compared with SPY (15.6%) in the period of the last 3 years, the annual return (CAGR) of 77.3% is higher, thus better.

'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 98% in the last 5 years of Leveraged Universal Investment Strategy, we see it is relatively larger, thus worse in comparison to the benchmark SPY (13.3%)
- Compared with SPY (12.8%) in the period of the last 3 years, the 30 days standard deviation of 106.3% is higher, thus worse.

'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 deviation of 29% in the last 5 years of Leveraged Universal Investment Strategy, we see it is relatively greater, thus worse in comparison to the benchmark SPY (14.8%)
- During the last 3 years, the downside risk is 30.9%, which is higher, thus worse than the value of 14.8% from the benchmark.

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (0.76) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.73 of Leveraged Universal Investment Strategy is smaller, thus worse.
- Looking at ratio of return and volatility (Sharpe) in of 0.7 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (1.03).

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Which means for our asset as example:- Looking at the downside risk / excess return profile of 2.45 in the last 5 years of Leveraged Universal Investment Strategy, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.69)
- During the last 3 years, the downside risk / excess return profile is 2.42, which is larger, thus better than the value of 0.89 from the benchmark.

'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 Index over 5 years of Leveraged Universal Investment Strategy is 13 , which is greater, thus worse compared to the benchmark SPY (3.97 ) in the same period.
- Looking at Ulcer Ratio in of 14 in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (4.09 ).

'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.'

Which means for our asset as example:- The maximum reduction from previous high over 5 years of Leveraged Universal Investment Strategy is -40.5 days, which is lower, thus worse compared to the benchmark SPY (-19.3 days) in the same period.
- During the last 3 years, the maximum drop from peak to valley is -40.5 days, which is lower, thus worse than the value of -19.3 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days under water of 390 days of Leveraged Universal Investment Strategy is greater, thus worse.
- During the last 3 years, the maximum days under water is 390 days, which is higher, thus worse 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:- Compared with the benchmark SPY (42 days) in the period of the last 5 years, the average days under water of 108 days of Leveraged Universal Investment Strategy is greater, thus worse.
- Compared with SPY (37 days) in the period of the last 3 years, the average days below previous high of 120 days is greater, thus worse.

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 Leveraged 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.