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.

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Applying this definition to our asset in some examples:- The total return over 5 years of US Market Strategy is 101.4%, which is greater, thus better compared to the benchmark DIA (76%) in the same period.
- Looking at total return, or performance in of 33% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to DIA (31.5%).

'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.'

Using this definition on our asset we see for example:- The compounded annual growth rate (CAGR) over 5 years of US Market Strategy is 15.1%, which is higher, thus better compared to the benchmark DIA (12%) in the same period.
- During the last 3 years, the annual performance (CAGR) is 10%, which is higher, thus better than the value of 9.6% 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:- Looking at the 30 days standard deviation of 9.1% in the last 5 years of US Market Strategy, we see it is relatively smaller, thus better in comparison to the benchmark DIA (20.5%)
- Compared with DIA (14.7%) in the period of the last 3 years, the historical 30 days volatility of 7.7% is lower, thus better.

'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:- The downside risk over 5 years of US Market Strategy is 6.3%, which is smaller, thus better compared to the benchmark DIA (14.7%) in the same period.
- During the last 3 years, the downside volatility is 5.2%, which is lower, thus better than the value of 10.3% 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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (0.46) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.39 of US Market Strategy is greater, thus better.
- Compared with DIA (0.48) in the period of the last 3 years, the Sharpe Ratio of 0.98 is greater, thus better.

'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:- The excess return divided by the downside deviation over 5 years of US Market Strategy is 1.98, which is larger, thus better compared to the benchmark DIA (0.64) in the same period.
- Looking at ratio of annual return and downside deviation in of 1.43 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to DIA (0.69).

'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.'

Which means for our asset as example:- Compared with the benchmark DIA (7.67 ) in the period of the last 5 years, the Downside risk index of 2.78 of US Market Strategy is smaller, thus better.
- During the last 3 years, the Ulcer Ratio is 3.04 , which is smaller, thus better than the value of 7.09 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:- The maximum reduction from previous high over 5 years of US Market Strategy is -13.1 days, which is larger, thus better compared to the benchmark DIA (-36.7 days) in the same period.
- During the last 3 years, the maximum DrawDown is -9.2 days, which is greater, thus better than the value of -20.8 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.'

Which means for our asset as example:- Compared with the benchmark DIA (477 days) in the period of the last 5 years, the maximum days under water of 261 days of US Market Strategy is smaller, thus better.
- During the last 3 years, the maximum days below previous high is 261 days, which is lower, thus better than the value of 477 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark DIA (123 days) in the period of the last 5 years, the average days below previous high of 48 days of US Market Strategy is smaller, thus better.
- During the last 3 years, the average days under water is 68 days, which is smaller, thus better than the value of 170 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 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.