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.'

Which means for our asset as example:- The total return, or increase in value over 5 years of Universal Investment Strategy 3x Leverage is 190.9%, which is larger, thus better compared to the benchmark SPY (102%) in the same period.
- Looking at total return in of 34.4% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (31.5%).

'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.'

Using this definition on our asset we see for example:- The annual performance (CAGR) over 5 years of Universal Investment Strategy 3x Leverage is 23.8%, which is higher, thus better compared to the benchmark SPY (15.1%) in the same period.
- Compared with SPY (9.6%) in the period of the last 3 years, the annual return (CAGR) of 10.4% is larger, 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:- Compared with the benchmark SPY (20.9%) in the period of the last 5 years, the 30 days standard deviation of 27.2% of Universal Investment Strategy 3x Leverage is higher, thus worse.
- During the last 3 years, the volatility is 24.9%, which is higher, thus worse than the value of 17.6% from the benchmark.

'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:- Compared with the benchmark SPY (14.9%) in the period of the last 5 years, the downside volatility of 19.1% of Universal Investment Strategy 3x Leverage is larger, thus worse.
- Looking at downside risk in of 17.2% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (12.4%).

'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 (0.6) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.79 of Universal Investment Strategy 3x Leverage is larger, thus better.
- Compared with SPY (0.4) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.32 is lower, thus worse.

'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.'

Applying this definition to our asset in some examples:- The downside risk / excess return profile over 5 years of Universal Investment Strategy 3x Leverage is 1.12, which is greater, thus better compared to the benchmark SPY (0.84) in the same period.
- Looking at excess return divided by the downside deviation in of 0.46 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.57).

'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.'

Applying this definition to our asset in some examples:- Looking at the Ulcer Index of 16 in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively greater, thus worse in comparison to the benchmark SPY (9.32 )
- During the last 3 years, the Ulcer Index is 20 , which is greater, thus worse than the value of 10 from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Looking at the maximum DrawDown of -38.4 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively lower, thus worse in comparison to the benchmark SPY (-33.7 days)
- Looking at maximum DrawDown in of -38.4 days in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (-24.5 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). 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'

Using this definition on our asset we see for example:- Looking at the maximum days under water of 525 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively greater, thus worse in comparison to the benchmark SPY (488 days)
- Looking at maximum days below previous high in of 525 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (488 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.'

Applying this definition to our asset in some examples:- Looking at the average time in days below previous high water mark of 139 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively larger, thus worse in comparison to the benchmark SPY (123 days)
- Compared with SPY (177 days) in the period of the last 3 years, the average days under water of 194 days is higher, 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 Universal Investment Strategy 3x Leverage are hypothetical and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.