The U.S. Market Strategy was designed as an alternative to our Universal Investment Strategy which allocates between SPY (S&P 500 ETF) and TLT (U.S. Treasuries ETF). The equity component of this new strategy switches between SPY (S&P500), QQQ (Nasdaq 100), DIA (Dow 30) and SPLV (S&P 500 low volatility) so it can take advantage of different market conditions. The addition of SPLV provides a good defensive option in times of high market volatility.

In addition to U.S. equities, the strategy utilizes a hedge strategy that switches between TLT, TIP, UUP and GLD.

The strategy's backtests performed substantially better than a simple SPY-TLT investment. All of the component ETFs are very liquid with small spreads making them easy to trade with negligible costs.

'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 over 5 years of US Market Strategy is 110.7%, which is larger, thus better compared to the benchmark DIA (63%) in the same period.
- During the last 3 years, the total return is 32.3%, which is larger, thus better than the value of 18.7% from the benchmark.

'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:- Compared with the benchmark DIA (10.3%) in the period of the last 5 years, the annual performance (CAGR) of 16.1% of US Market Strategy is greater, thus better.
- During the last 3 years, the annual return (CAGR) is 9.8%, which is greater, thus better than the value of 5.9% from the benchmark.

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Using this definition on our asset we see for example:- The 30 days standard deviation over 5 years of US Market Strategy is 8.9%, which is smaller, thus better compared to the benchmark DIA (20.6%) in the same period.
- Compared with DIA (14.7%) in the period of the last 3 years, the historical 30 days volatility of 7.1% is lower, thus better.

'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 risk over 5 years of US Market Strategy is 6.2%, which is lower, thus better compared to the benchmark DIA (14.8%) in the same period.
- Compared with DIA (10.3%) in the period of the last 3 years, the downside risk of 4.8% 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.'

Using this definition on our asset we see for example:- The Sharpe Ratio over 5 years of US Market Strategy is 1.52, which is larger, thus better compared to the benchmark DIA (0.38) in the same period.
- Looking at risk / return profile (Sharpe) in of 1.03 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to DIA (0.23).

'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.'

Which means for our asset as example:- The downside risk / excess return profile over 5 years of US Market Strategy is 2.2, which is larger, thus better compared to the benchmark DIA (0.52) in the same period.
- Looking at excess return divided by the downside deviation in of 1.53 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to DIA (0.33).

'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.'

Using this definition on our asset we see for example:- The Ulcer Ratio over 5 years of US Market Strategy is 2.74 , which is lower, thus better compared to the benchmark DIA (7.69 ) in the same period.
- During the last 3 years, the Ulcer Ratio is 2.94 , which is lower, thus better than the value of 7.08 from the benchmark.

'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.'

Using this definition on our asset we see for example:- Looking at the maximum reduction from previous high of -13.1 days in the last 5 years of US Market Strategy, we see it is relatively greater, thus better in comparison to the benchmark DIA (-36.7 days)
- During the last 3 years, the maximum reduction from previous high is -9.2 days, which is greater, thus better than the value of -20.8 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) in days.'

Applying this definition to our asset in some examples:- The maximum days under water over 5 years of US Market Strategy is 261 days, which is lower, thus better compared to the benchmark DIA (477 days) in the same period.
- During the last 3 years, the maximum time in days below previous high water mark is 261 days, which is lower, thus better than the value of 477 days from the benchmark.

'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:- The average time in days below previous high water mark over 5 years of US Market Strategy is 49 days, which is smaller, thus better compared to the benchmark DIA (123 days) in the same period.
- Compared with DIA (168 days) in the period of the last 3 years, the average days under water of 68 days is lower, thus better.

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 US Market Strategy 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.