This portfolio has been optimized for achieving the highest possible return while limiting the historical volatility to 10% or less over the analyzed period with the involved assets. As a reference, the volatility limit of 10% is about two thirds of the volatility, or risk, of the SPDR S&P 500 (SPY).

As such it is a conservative Portfolio suited for risk adverse investors with moderate growth expectations.

Please note that this portfolio might use leveraged ETF and single stocks. Should these not be allowed in your retirement account please see our 401k and IRS compatible Conservative, Moderate, and Aggressive Risk Portfolios. Contact us for special requirements.

While this portfolio provides an optimized asset allocation based on historical returns, your investment objectives, risk profile and personal experience are important factors when deciding on the best investment vehicle for yourself. You can also use the Portfolio Builder or Portfolio Optimizer to construct your own personalized portfolio.

Assets and weight constraints used in the optimizer process:

- Bond ETF Rotation Strategy (BRS) (0% to 100%)
- BUG Permanent Portfolio Strategy (BUG) (0% to 100%)
- Global Market Rotation Strategy (GMRS) (0% to 100%)
- Global Sector Rotation Strategy (GSRS) (0% to 100%)
- Maximum Yield Strategy (MYRS) (0% to 100%)
- Universal Investment Strategy (UIS) (0% to 100%)
- Universal Investment Strategy 2x Leverage (UISx2) (0% to 100%)
- US Market Strategy (USMarket) (0% to 100%)
- US Market Strategy 2x Leverage (USMx2) (0% to 100%)
- US Sector Rotation Strategy (USSECT) (0% to 100%)
- World Top 4 Strategy (WTOP4) (0% to 100%)

'Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Applying this definition to our asset in some examples:- The total return, or performance over 5 years of Volatility less than 10% is 105.4%, which is greater, thus better compared to the benchmark SPY (62.7%) in the same period.
- During the last 3 years, the total return, or performance is 50.5%, which is larger, thus better than the value of 34.7% from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Looking at the annual performance (CAGR) of 15.5% in the last 5 years of Volatility less than 10%, we see it is relatively higher, thus better in comparison to the benchmark SPY (10.2%)
- Compared with SPY (10.5%) in the period of the last 3 years, the annual return (CAGR) of 14.6% is larger, thus better.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Applying this definition to our asset in some examples:- Looking at the volatility of 10.9% in the last 5 years of Volatility less than 10%, we see it is relatively lower, thus better in comparison to the benchmark SPY (20.9%)
- Looking at volatility in of 12.4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (24.1%).

'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:- Looking at the downside volatility of 7.9% in the last 5 years of Volatility less than 10%, we see it is relatively smaller, thus better in comparison to the benchmark SPY (15.3%)
- Compared with SPY (17.6%) in the period of the last 3 years, the downside risk of 9.2% is lower, 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.'

Applying this definition to our asset in some examples:- Looking at the Sharpe Ratio of 1.2 in the last 5 years of Volatility less than 10%, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.37)
- During the last 3 years, the risk / return profile (Sharpe) is 0.98, which is larger, thus better than the value of 0.33 from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Looking at the excess return divided by the downside deviation of 1.64 in the last 5 years of Volatility less than 10%, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.51)
- During the last 3 years, the ratio of annual return and downside deviation is 1.32, which is greater, thus better than the value of 0.45 from the benchmark.

'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:- The Downside risk index over 5 years of Volatility less than 10% is 2.73 , which is lower, thus better compared to the benchmark SPY (7.71 ) in the same period.
- Compared with SPY (9.08 ) in the period of the last 3 years, the Ulcer Index of 3.25 is lower, thus better.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum DrawDown of -16.9 days of Volatility less than 10% is greater, thus better.
- Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum drop from peak to valley of -16.9 days is larger, thus better.

'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:- The maximum days below previous high over 5 years of Volatility less than 10% is 93 days, which is lower, thus better compared to the benchmark SPY (189 days) in the same period.
- Looking at maximum days under water in of 82 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (189 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 days below previous high of 21 days in the last 5 years of Volatility less than 10%, we see it is relatively lower, thus better in comparison to the benchmark SPY (46 days)
- During the last 3 years, the average days below previous high is 20 days, which is lower, thus better than the value of 45 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 Volatility less than 10% 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.